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CRN Exclusive: ScanSource CEO On How Consolidation Is Impacting Distribution

Value-added distributors are in many ways becoming more like broadline distributors, even as broadline distributors are becoming more like value-added distributors, ScanSource CEO Mike Baur told CRN.

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Broadline distributors seem to be pushing into the value-add distribution market that has been ScanSource's' mainstay. In the last half-year or so, Tech Data acquired Avnet's Technology Services business, and Ingram Micro acquired The Phoenix Group. Are you seeing more competition from the broadline distributors?

When I look over the 25 years that ScanSource has been in business, we've always selected markets that have been underserved by traditional distribution. [As we] entered new markets, even when we entered Latin America and Europe 16 years ago, and when we bought Intelisys two years ago, we have a track record of entering growth markets ahead of other traditional distributors. And that's really why we started ScanSource, to go after underserved markets for distribution. And it requires a different agility, a different distribution model, than the one that you would normally find at the broadline distributors.

How so?

[Our] model brings higher growth margins, but also higher SG&A [sales, general, and administrative expenses]. And that's been the history of ScanSource. We have higher margins, but we also have higher costs to serve. And this particular quarter, with the additional cost to serve, we've added even more resources ahead of some of these growth opportunities paying off because we believe they're leading us down a path of better returns and better results for our investors.

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