GTDC CEO: Small Solution Providers Are Where The Action Is

The numbers show it -- distribution sales as a whole are accelerating, driven by an improving economy and strong solution provider businesses, Tim Curran, CEO of the Global Technology Distribution Council, said in his keynote address Wednesday at the annual GTDC U.S. Vendor Summit in San Jose, Calif.

"The good news, and no surprise to everyone here, is the strong are getting stronger," Curran said.

According the study Curran referenced, conducted by independent research firm the NPD Group, distribution sales rose steadily over the past four years, with an 8.2 percent compound annual growth rate. As a whole, Curran said distributors presented strong financial and growth numbers. That remained true even during the recession, where Curran said the study found no members stumbled and instead remained stable despite a rocky economy.

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These statistics were compiled from GTDC members, which account for more than $135 billion in collective sales and cover 95 percent of the globe in more than 187 countries.

There wasn't growth across all levels of financials, Curran said, with the study finding that operating margins for many distributors were down. However, Curran said that this isn't necessarily a bad sign as many distributors saw those drops due to investments such as acquisitions. Those investments "put gas in the car" for future growth, he said.

On a global scale, Curran highlighted growth in Europe as the economies, in particular in southern European countries, improved. Starting with the fourth quarter of 2013 and ending with the second quarter in 2014, Curran said the collective numbers show 4 percent, 8 percent and 10 percent year-over-year growth for distributors in the region.

"Europe for the last several years has been weak. The good news is Europe has turned a corner ... at least for the short term the news has been better than in the past," Curran said. "Europe, such a big factor, is not a dead weight anymore and is actually going to contribute to global growth in a better way," he said.

While the U.S. was not as hard hit as Europe by the recession, according to Curran, growth in the U.S. also is starting to pick up, with an all-time high of $12.76 in collective sales across distribution in the fourth quarter of 2013. While Curran said that 2013 was still slightly "anemic" for growth, with year-over-year growth rates for distribution as a whole struggling to hit 2 percent, he said that beginning in September of last year the industry saw distribution growth numbers move up to 3 percent, hitting 5.4 percent by the end of the year and 7.4 percent as of most recent numbers for the 13-week period ended Aug. 17.

The key to the growth and stability of the U.S. market, he said, is the strength of small solution providers, which he defined as those with less than $100 million in annual revenue. Those solution providers are what is "driving the engine" of growth, he said. They represent a combined $20.9 billion segment of the market, and distribution has a key role in helping train, certify, service and connect those companies with the vendors they need.

"[Small solution providers are] where the market action is taking place, that's where the growth is taking place and that’s distribution's sweet spot," Curran said.

As the U.S. economy has started to pick up, Curran said other channels have started to pick up growth as well, including large solution providers, DMRs, retail and more.

"It's another sign of the stability of the recovery ... the market overall is growing and doing well," Curran said.

Curran said that while 2013 saw particular growth driven through tablet sales, 2014 has turned into the year of the PC, driven in particular by the Windows XP support expiration refresh cycle. In addition to those categories, Curran said that storage and networking have proven stable categories across the years.

Going forward, Curran predicted that as technology continues to evolve, driven by new products such as Chromebooks, by mobility and by the Millennial generation's demands for more and better technology, distribution will play an even more crucial role. In particular, he said as more vendors and solution providers move into the cloud, distribution has a role to help both of those parties make the move a successful one through training and education.

PUBLISHED SEPT. 11, 2014