New Technology, SMB Driving Distribution Growth

"It is a resurgence of distribution. The thing that's driving all this is a real focus on the channel from vendors," said Tim Curran, CEO of the GTDC, a group of 13 distributors worldwide. "There's lots of new technologies. We have the integration of voice, video, data, wireless. All these technologies are multivendor, particularly in SMB, and the channel's role of integrating these products into solutions is what's driving the market. That's what vendors are finally understanding."

U.S. notebook sales increased 18 percent in the six-month period from October 2006 to March 2007, compared to the same period a year ago, according to The NPD Group Distributor Track, which aggregates sales through GTDC members.

Storage systems, RISC-based systems and communications products all grew between 10 and 20 percent during the same period, according to Distributor Track.

Many new vendors are turning to distribution -- and solution providers, in turn -- to get their products to market, Curran said. In the October-March period, 88 new vendors began doing business with GTDC members, he said.

Much of the overall growth is also spurred by a mobility boom, Curran said. More and more people are connected to corporate networks outside the office.

"Clearly, we are entered into a new era of computing. You get on any plane or train and everybody has a Blackberry or a notebook. And they're connected. And it's not just handsets and notebooks growing. That's why Internet pipes are also growing," he said.

Much of the gain has come at Dell's expense, Curran said. While distribution sales worldwide have increased 8 percent -- and higher in the United States -- revenue for Dell has been stagnant, increasing just 1 percent in its first fiscal quarter.

"Dell doesn't have total solutions," Curran said. "At the SMB level, they don't have the feet on the street to integrate multivendor solutions. You can buy a system, but the need to install it with a Cisco router or an F5 network device is there. You need a channel to do that. The growth of SMB is what creates growth in the channel and distribution."

Some data from GTDC members shows that a typical technology solution is made up of six to 10 vendors, with two to three times that number in individual SKUs from those vendors, Curran said.

"A small business that doesn't have an IT person depends on a reseller to sort through all that. Otherwise, which one of the six to 10 vendors do you call?" Curran said. "It's the multivendor nature of solutions. That's where the channel adds enormous value and why new technologies are driving the growth."