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Tech Data admits it lost some market share in the third quarter while dealing with an SAP implementation in the U.S., but the distributor is confident it will regain the business without getting into a price war with competitors, said CEO Bob Dutkowsky.
Tech Data's sales fell 8 percent in the third quarter ended Oct. 31, including 15 percent in the Americas, and said the SAP project was a big part of that drop.
"When you install a system the magnitude of SAP in a business the size of Tech Data, that's huge," Dutkowsky said. "There are two big tasks. One is the technical side of the deployment. Does the system actually work? Can you make the applications and networking and storage and databases function reliably? That part is done. SAP at Tech Data works," Dutkowsky said.
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But, the other big task is getting employees to be productive using the new system, Dutkowsky said. Tech Data's previous system had been in place for 20 years.
"That's the part that takes some time. I can't tell you how fast it will happen or how long it will take for people to get productive on the new system. The old system was second nature to them. And all of our customers, using e-commerce, our website, or any electronic connection with us, that all changed. That doesn't catch up in a consistent rate," Dutkowsky said. "Our people aren't able to do as much work."
One large customer in the U.S. told Tech Data that it fell significantly behind other distributors over the last several months in service levels, so the large VAR shifted business to Tech Data's competition. Now those service-level numbers are increasing again, and Tech Data expects to win back the share it lost, Dutkowsky said.
"We told them to give back the business again, now that we can give you reliable service. Think of that [customer] as one little microcosm [of Tech Data's large customer base]. That's the impact of the productivity that all of our customers had to go through. We're well on our way to recovering. Some people are already back up to pre-SAP productivity standards. Others are nowhere near where they need to be. It's going to take [several] quarters to work way through that."
Dutkowsky didn't say how many customers were impacted by the SAP implementation but said the majority likely saw no disruption.
"We do business with 50,000 VARs in the U.S. in any given period. Many of those customers saw no change in Tech Data. The systems work, the EDI feeds work. I've spoken to customers, said they didn't even realize we changed systems. Others were impacted more directly. My comment to customers and vendors is thank you for your patience. We want to earn all your business. We want to be a reliable source of product and support. I met with one customer in the past week who committed $5 million a month to us. We used to have that and lost it in the summer time."