Tech Data Cloud Business Strikes $700M Annual Run Rate Thanks To 10X Growth In SaaS Seats

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Tech Data's cloud business now accounts for $700 million of the company's overall sales as big data center vendors increasingly embrace a software subscription approach.

The Clearwater, Fla.-based distributor reported Tuesday that it expects to have three million paid Software-as-a-Service seats under management in the 2018 fiscal year, which ends Jan. 31, 2018, according to Joe Quaglia, president of the Americas. That's up dramatically from just 1.2 million paid SaaS seats under management in fiscal 2017 and 400,000 seats in fiscal 2016.

"This is a key measure of our growth and value proposition and success as we go forward," Quaglia said.

[Related: Tech Data CEO: Our Footprint, Skills Depth Are On 'Completely Different Level' Than Competitors]

The growth has been driven by companies such as the large European vendor that flipped the switch and moved its entire business from on-premises software to subscription-based software served through Tech Data's cloud practices, according to Rich Hume, executive vice president and COO. Although most software suppliers are not moving at that pace, Hume said they're still making the switch.  

"This is not just an Office 365 story," Hume said. "All of the software providers in our value portfolio are also going through this journey and adding Software-as-a-Service capabilities or licenses to each of their portfolios."

Tech Data's combined SaaS and Infrastructure-as-a-Service businesses have now achieved an annual run rate of $700 million (roughly 2 percent of overall sales), up from a reported $500 million run rate in May and $200 million in November 2015.

The company's $2.6 billion acquisition of Avnet Technology Solutions in February brought a new set of value-focused software relationship that will be incorporated into Tech Data's Software-as-a-Service engine, Hume said. Conversely, Hume said Tech Data's longstanding relationship with Microsoft Azure can now take advantage of Technology Solutions' pre-existing capabilities around hybrid cloud.      

Before the deal, Hume said Tech Data's cloud platform was optimized around SaaS while the Technology Solutions platform was optimized around Infrastructure-as-a-Service. As a combined company, Hume said Tech Data excels in both of those motions and can now provide functionality in a very competitive way.  

"We absolutely expect the cloud growth to stay on that rocket ship as we move forward, taking advantage of both Software-as-a-Service and Infrastructure-as-a-Service," Hume said.   

Tech Data said its key next-generation technology areas – cloud, security, analytics/IoT, and services – account for between $1.5 billion and $2 billion (4.2 percent to 5.6 percent) of topline revenue. Each of those technologies has a specialty business unit focused on doing business development work and driving go-to-market activity through channel partners, Hume said.  

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