CRN Interview: Tech Data's New CEO Speaks Out

The search is over: Tech Data has picked Robert Dutkowsky as its new chief executive, effective Oct. 2. Dutkowsky, the former CEO at J.D. Edwards and two other high-tech firms, will be just the third CEO in the $20 billion distributor's history, following Steve Raymund -- who held the post for 20-plus years -- and his father, Edward C. Raymund, the Clearwater, Fla.-based company's founder.

CMP Vice President and CRN Editor Heather Clancy and CRN Distribution Editor Scott Campbell spoke with Dutkowsky and Steve Raymund, who remains Tech Data's chairman, about the CEO search process, the transition and what VARs can expect under the new regime. Here is an excerpt of the discussion.

Dutkowsky

CRN: What do you see as your respective roles?

DUTKOWSKY: First of all, I think any well-run company today has a governance process that puts as much oversight capability in the company as possible. The company has asked Steve to stay on as chairman, take advantage of his years not only at Tech Data but also in the channel and to continue in that important role of leading the governance of the company and splitting the day-to-day management of the company apart into a different executive, called the CEO, and they've asked me to join and take that role.

There's enough work to be done at Tech Data for two capable executives and two experienced executives with different experiences like Steve and I have.

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My goal is to be totally engrossed in the day-to-day operations of the company and as equally engrossed in the strategy and direction that the company has embarked on. What the board has asked Steve to do is stay focused on continuing to have Tech Data to be one of the best-governed, publicly listed companies.

CRN: What do you envision as the transition plan?

DUTKOWSKY: Steve and I have been in dialogue now about the opportunity at Tech Data for a while. And once Steve got comfortable with me as a potential candidate to join the company and I got interested in the company, we very quickly started to talk about how might this work. From my point of view, it feels like we've been talking about transition for a long time, and we're really comfortable with the plan that we laid out.

That plan includes logical handoffs for relationships between Steve and myself on the outward side of the business: partners, customers, vendors, shareholders. And then internally, I'm going to dive in and understand the strengths and weaknesses of the organization and then be able to go back to Steve and say, 'Hey Steve, I looked at this organization, and this is my assessment.' And for Steve to say, 'Yes, that's on the mark' or 'You ought to look at this or that or another thing.' That's why we think we're going to make a real great team. We have experience in transitions, and Steve has deep experience in running Tech Data.

CRN: Did you know each other before the search process?

RAYMUND: I can tell you that I didn't know Bob prior to the search process -- I think probably because he left IBM some number of years ago for companies that didn't have so much contact at that point in time with the channel.

DUTKOWSKY: Although Steve and I had never met, you can't be part of this industry and not know of a small cadre of visionary executives, and certainly when you think of the channel, you think of Steve Raymund. He's one of those forces that loom over the industry. So, when we first got to chat, we quickly could connect the dots -- you know this guy, I know that guy. I think we got pretty comfortable with each other quickly from that point of view, in terms of presence in the industry.

RAYMUND: I would concur. It wasn't too hard to check Bob out, given his 20 years at IBM. He certainly made a great name for himself there based on his many accomplishments in the company and since, which from our point of view lowered the risk and increased the comfort level that we had a guy with a lot of mutual acquaintances, No. 1, and with lots of experience in one of the best-run companies in the world, IBM, and considerable executive and industry experience beyond that. And [he has experience] in ERP companies, which is certainly helpful in aiding his understanding of how systems work and IT, which is so important in a distribution context. And of course, you know, the executive experience, where Bob has been CEO of three companies, two of which were public companies. So really, [it's] an extraordinary breadth of experience.CRN: How long ago did you connect?

DUTKOWSKY: We've been in dialogue for a while. I don't know if we want to talk about the absolute particulars of how the company picked me. But it was a dialogue that evolved over a period of time and it got intense at the end, as you would suspect. [It was] intense in that we spent a lot of time together and, therefore, I think that's why we have the mutual comfort level that we have.

Raymund

CRN: What attracted you to the position?

DUTKOWSKY: The company that I work at today, Egenera, is a very good company with a very bright future. So anything that was going to attract me away from Egenera had to be a better opportunity than that. What I see at Tech Data is a company that's got the strength, scale and presence in the market to really lead an important segment in the IT space and a company that really, really has some focus and energy to get right back on top of its game in a quick period of time.

It's a different business from what I've been involved with in the past. But the company that I work for today is not profitable yet. So if you want to talk about a company that watches every single penny that's spent on everything, go to a pre-IPO, privately run company, and I guarantee you we count pennies tighter [there] than we count them at Tech Data. So I have experience and skill in squeezing every ounce of energy in every penny that is spent and managing in a very complex, competitive marketplace.

That's another thing that attracted me to Tech Data, the idea of just how competitive the market is that Tech Data plays in. Some people shy away from that, and some people radiate toward that. I happen to be one that radiates toward competition. I love to be in the midst of a fight, and I love to be on a team that wins. And I think Tech Data is positioned to be a team that can win a lot in this industry.

CRN: Looking at your resume, a couple of things stand out. Most of your experience, at least post-IBM, has been very enterprise-focused, whereas a lot of Tech Data's customers are very SMB-focused. Do you envision challenges in that regard? What's the learning curve for you?

DUTKOWSKY: I would say that my most current SMB experience was at J.D. Edwards, and if you remember that company, almost 80 percent of its revenue came from SMB. In fact, J.D. Edwards was the leading SMB ERP company in the world before PeopleSoft/Oracle happened.

So, from that perspective I feel like I know and am very current with the challenges and issues of smaller companies. Secondly, if you really want to be able to connect with a prospect and be able to say that you walked in their shoes, then I think anybody would agree Egenera is the classic SMB company -- fast-growing, tough market conditions, competing against some of the biggest, most ornery companies in the world. So not only have I supported SMB, but most recently, I am SMB. And then, lastly, when I started my IBM career, for seven years, I was an SMB sales rep. I've been in the SMB space for a long, long time and like it and think I can bring some skills to Tech Data that can help us grow our business in that space.

CRN: J.D. Edwards and GenRad, two of the companies where you served as CEO, were part of acquisitions in a fairly short period of time after you joined. That might lead one to ask whether Tech Data will increase its MandAmp;A activity going forward.

DUTKOWSKY: Well, that's a great question and one that Steve asked me early on when we chatted. He said, 'Is your real skill set just to buff up companies and sell them?'

My response to him was two things. The first is, my real skill set is to analyze the strengths and weaknesses of a company and put it into the best position it can be from an operating and performance point of view. Secondly, my next skill set is to create shareholder value. In those two companies' cases, it just so happened that the right thing to do was to execute mergers with those other companies. I'm not certain that that's the right thing for Tech Data, a $20 billion company in a position of leadership in the industry. I would say, without a doubt, my job is to come here and join Tech Data and help it improve its performance and help create shareholder value. And that's what its focus is going to be.

RAYMUND: I would say that if we wanted to sell the company, we would have hired Goldman Sachs, not Bob Dutkowsky.

CRN: A question for Steve: What were the key criteria in the CEO search?

RAYMUND: A number of things. As you might imagine, we developed a fairly comprehensive list of attributes we were looking for to help guide our search. Off the top of my head, among them would be relevant experience, particularly in IT. To the extent that IT experience was buttressed by specific channel experience and capability, so much the better. Global experience with a larger company was a real asset. Looking at the quality of the individual, somebody who's a clear leader, who is good with strategy and at same time also with execution. That also means [the person] can work with the board or business partners in crafting strategy and then work with our management team in executing it effectively. Bob has an outstanding record in both of those regards.

CRN: Bob, you were good enough to speak to CRN back in 2002. At the time, you said, 'I don't consider myself a hardware or software guy. I consider myself an applications guy, a solutions guy.' I'm wondering how that philosophy will apply to your role at Tech Data.

DUTKOWSKY: Go back to your question about SMB and the smaller customers that we have the privilege to serve in the channel. They're all looking for a broader array of things other than hardware and software to offer to their end-user customers. I've lived in the hardware business, I've lived in the software business, I've lived in the operating systems business, I've lived in the application software business, I've lived in the services business. Think about what those customers are trying to bring to their customers. It's a broad array of solutions, not just hardware and not just software. The fact that I've been in all those, I can help Tech Data see where we need to go to support those 70,000 customers that we have in the [various] geographies.

CRN: When do you plan to start meeting customers and vendors?

DUTKOWSKY: I've joined four different companies in the CEO role. The things you need to do are pretty basic. You need to spread out and talk to customers, employees and vendors and listen very carefully to why customers do business with us and why don't they do business with us; talk to employees and understand why they chose to work at Tech Data and whether Tech Data has continued to deliver on the commitments that they look for; and talk to our important vendors and make sure they think of Tech Data first when they're going to bring new products into the market and how can we help them grow their businesses.

The last variable you want to focus on is the senior management team, the people that really lead the company every single day and figure out how you can make sure the team is in a position to grow at a level that the board and the shareholders expect. You try to do all of that in about 100 days. I'll be ultra hands-on for the first 100 days to really understand the company and where it executes well and where it doesn't and figure out how to put plans in place to leverage the strengths and address the weaknesses.

CRN: Steve, looking back on your career, is it a difficult process for you to get ready to hand the keys over after more 20 years in this job?

RAYMUND: After so much time, it's understandably a bittersweet moment. On the one hand, I've got a lot of great friends here and in the industry and a lot of my heart and soul invested in the company. So yes, that part of it makes it hard to leave.

On the other hand, I have to look realistically at what's involved in a CEO job in 2006 going forward with a global enterprise like Tech Data. Do I really want to do that for the next 25 years, or maybe try some other things on for size? That's clearly the decision that I and my family have made. Over the last couple of years, really, we were moving to the point where we are today. It's not an easy thing to do, but I've been ready for a while to close the chapter of a very exciting portion of my life and see what happens next.

CRN: Did the fact that the governance of a large public company has changed so dramatically over the last few years influence your decision that this really needs to be two jobs?

DUTKOWSKY: It influenced my decision to join the company. I've been chairman, CEO and president of two public companies, and I'm on the board of another public company. You can see how complex the day-to-day operations of the company has become. And then contrast that with the operations of a public board, and it's almost that it's becoming two different skill sets: To be a really good chairman or a really good CEO are almost two different things. Tech Data is executing in a visionary role by splitting those two roles. I think you're going to see a lot of public companies do this as time goes on.