QandA: Arrow's Bryant Dishes On HP-CDW, Dell, The Economy

Do you still call yourselves a value-added distributor, or how do you define yourselves these days?

I think the VAD model is alive and well. Going forward, channel management will be a big part of our future. I look at that as evolution of the value-add model. When I got into this business, around 1978, we were called industrial. We sold single-board computers, monitors. Then we evolved to the technical model. The buzz around technical was the Unix era, leading up to the Y2K and dot-com bust. Now you'll hear channel management from us, which is three things. It's channel development, market development, and services that makes those programs attractive to resellers and profitable to resellers.

What initiatives do you have around channel management?

We're swinging the bat pretty hard right now around MPower. That's the essence of our offering. We help solution providers deliver infrastructure to the midmarket, giving them the tools, training and data analytics to do so. We're looking for resellers who want to commit to demand generation and#91;for MPowerand#93;. We signed more than 100 VARs to it. Our portal gets 2,000 hits a quarter and about 40 percent the customers are net new to Arrow. In terms of our overall business, it's focused again on four verticals: health care, industrial, finance and manufacturing. We're wrapping around that, Internet security and security in general. It's not a product strategy, it's a customer strategy.

Four months into the job, what have been your impressions?

I really miss the industry. I miss the pace, the constituents, the resellers. I'm delighted to be back. I've always had a real passion for the value-add distribution model, based on my past. I came in with no pre-conceived notions. And then the market threw a curveball to everyone in the first quarter. We had to step back and think, 'Is it a trend?' In 2Q, it seems the market has slowly recovered. The first 100 days have been a whirlwind. The thing I look forward to, as we come out of the summer and head towards the end of the year, is knowing a lot more about the market. I'm optimistic about where IT spending could be going.

What is one thing different about resellers now?

They are more focused on profitable transactions on a higher-value added porposition when they call on their end user. They're interested in financial services that we can assist them with in their transactions. I think the resellers realize that you can't knock on a CIO's door and say 'I want to talk to you about your server.' Resellers realize they need to be offering security, virtualization, storage management, something in high demand within that end user base.

What's one thing you think resellers need to improve upon?

Closed-loop demand generation follow through. There's never been more opportunity for resellers to get leads in this midmarket and enterprise customer space. The distributors, in particular Arrow ECS, look for this as a way to motivate and guide them to profitable transactions. This whole lead generation model is still critical to a reseller's go-to-market business model.

How far can you expand your product line?

We're still pretty selective on our line card. It's still based on the server platform. We added storage management players. Then we moved to security and added more lines that helped us deliver security solutions, and of course virtualization. When you look at Arrow's portfolio today, more than $1 billion is in software and over $1 billion is in storage. We're still very targeted in how we look at the line card.

There seems to be one big hole in your line card, infrastructure. Are you looking at networking?

We continue to look at it. The dynamics of that market and how the channel works in that market have kept us more on the storage management side than the networking side. If the opportunity arises, we would not be shy to get into that play.

Have you looked at software-as-a-service? Is that something that would fit your model?

I've met with a couple of players in that space. It's early. It reminds me of the application service provider wave of the late '90s and early 2000s. There are many players emerging in this market delivering software solutions at a competitive price. I think it's going to grow in popularity. Our role could be they are a customer of ours or an alliance partner of ours in lieu of a traditional packaged software offering.

What is your reaction to Dell's foray into the channel? Do you worry about them?

Obviously, they're a worthy competitor to all of us. We continue to do this channel management piece through our core of resellers offering much higher value solutions to that end user than gets offered through the desktop/departmental midmarket offering. The differentiation is our field sales touch with our VARs and their field sales touch through their reseller base. So far we don't see a lot of crossover there.

What is your impression of Hewlett-Packard adding 110 sales people inside CDW? Did that come as a surprise and what impact will it have on both Arrow and your solution providers?

It speaks to the richness of the and#91;SMBand#93; target in the minds of the supplier base. Of course, HP is a valuable vendor partner of and#91;Arrowand#93; ECS and CDW is a valuable customer of ECS. We have a lot of programs running with them also. The CDW model is a very good model that's serving a lot of areas of that midmarket customer today. I don't see it as the same thing that we're doing in the midmarket, where we create bundles of solutions and data analytics. That's how you lead the VAR to the opportunity, to the right end user with the right solution. Those things will differentiate us in the market.

Do you think their deal will impact any HP purchases that CDW makes through Arrow?

It's hard for me to speculate on that. That program will have to be launched and be measured over a period time

You mentioned four vertical market areas before? What's your strategy regarding vertical-specific solutions for those markets? Are you going after ISVs or hardware manufacturers specific to those vertical markets?

We've been down this path of ISV alliances. It has its pros and cons. Those partnerships happen today more because the VAR has a partnership with an Oracle or an SAP, and#91;who in turn has a relationship with the ISVand#93;. We're mostly focused not on the application in the vetical market, but on what are the infrastructure challenges around security, storage and virtualization, and the management of that server farm. We are not focused heavily on an ISV that specifically serves that vertical.

Is that because it's not a nice return on investment for you?

It's not about the ROI. It's more about the sales cycle. It's more about how the product gets sold. The ERP decision is a big decision. It's not always something that can be bundled through various value-added resellers.

Have you guys considered a hardware-as-a-service model? I can certainly see that happening. I don't see it replacing the onsite server demand. There's still a tremendous amount of customers that want that infrastructure under their control. They want their software on it, their security. Security is big reason why customers don't' want to outsource everything.

Give us some tips for your solution providers struggling to manage their business.

Three come to mind. The first one is always: know your value proposition, be able to articulate it and make sure your business is organized around it. It's never been more critical for VARs to have a value proposition and be able to deliver it.

Two, continue to pick your supplier partners strategically and build long-term relationships with those suppliers.

Three, know thy pipeline. We're heading into the end of the year and we've heard about the pushouts. We're in a status-quo market. We're looking for this surge. You really have to get underneath the pipeline and ask is this project going to go or not going to go?