Dan And Michael Schwab: D&H Is Scaling Up To Capture ‘Tidal Wave of Opportunity’

D&H Co-Presidents Dan and Michael Schwab say the SMB and midmarket distribution stalwart is scaling up to capture a ‘tidal wave of opportunity.’

Michael Schwab: D&H Poised To ‘Gain Share’ In Wake Of Distribution Consolidation

D&H Co-President Michael Schwab said the fast-growing distributor will inevitably “gain share” as its scales up in the wake of the blockbuster Tech Data-Synnex merger.

‘We are very fortunate to be in the position we are in: The market is growing, businesses are reopening, the economy’s growing and we are selling technology products that are inherently essential to our personal and professional lives,” said Schwab in an exclusive interview with CRN. “We are in a great time in a great industry. Whether you are a manufacturer, vendor or reseller, we all depend on each other in such a strategic way I think inevitably D&H will gain share because of the way the market is evolving. There are fewer distributors, but our relevance is perhaps as meaningful as it has ever been.”

Just four months into its new fiscal year, D&H Distributing is investing heavily in new hires and providing additional credit to partners to drive robust SMB and midmarket growth.

The Harrisburg. Pa.-based distributor, which last year delivered 19 percent growth in U.S. sales in the midst of the pandemic and crossed the $5 billion mark, has recently added 50 employees and upped its credit limits by an additional $75 million.

“When you think about when you go from four broadline distributors to three, we believe the onus is on us to step up and continue to invest ahead of the curve on behalf of our customers and vendors,” said D&H Co-President Dan Schwab. “That is how we look at this. We already were having tremendous success, and I think we offer a differentiated level of value. Just four months ago, we talked about hiring 100 people; now we have hired 150. With credit we were going to add $300 million, we are now on pace for $375 million in credit per month.”

Can you talk about what kind of opportunity you see for D&H in the current distribution landscape in which Tech Data just completed its blockbuster merger with Synnex?

Michael Schwab: Think about all the mergers, acquisitions and consolidation that have happened during our tenure in the IT industry. When we started early on there were maybe 30 to 40 distributors that we competed against. There was Merisel, SED and so many others. You could go on and on with regard to all the consolidation that has happened over many decades. Every time there was assimilation of distributors, those that remained saw benefit. That was because the overall market was continuing to grow and the fact that the reliance on the distribution model for channel consumption of technology products became even more relevant.

I would argue that at this moment in time there is not a better year to be in IT distribution than there is today.

We are very fortunate to be in the position we are in: The market is growing, businesses are reopening, the economy’s growing and we are selling technology products that are inherently essential to our personal and professional lives.

We are in a great time in a great industry. Whether you are a manufacturer, vendor or reseller, we all depend on each other in such a strategic way I think inevitably D&H will gain share because of the way the market is evolving. There are fewer , but our relevance is perhaps as meaningful as it has ever been.

What impact will the consolidation in distribution have on partners and vendors?

Michael Schwab: Manufacturers and distributors now have a more aligned strategy to influence how we move the business forward. Now you have fewer distributors. You have got a a group of very influential manufacturers. Ultimately, we all the have same goal of moving the business forward, growing the total available market, and foundationally building profitable growth for the ecosystem that we call the channel.

I think the alignment will never get better perhaps than what we will see this year with marketing initiatives and sales initiatives. We talk a lot about D&H putting the customer first. To us it is all about customer service.

From day one we have always talked about the customer. I am not sure that other distributors have ever put them front and center from that vantage point, but we certainly have. I think it has evolved.

It is not just about customer service anymore, it is about how do you create customer value. We are doing that by our hiring, by our marketing initiatives, with our presales support, with our professional services, with our as-a-service model. We are creating value that perhaps has never been seen to this level. For those reasons, we expect to grow.

I don’t know if the other distributors expect to grow, but we expect to grow, which is foundational in our Built For Growth model.

Dan Schwab: When you think about when you go from four broadline distributors to three, we believe the onus is on us to step up and continue to invest ahead of the curve on behalf of our customers and vendors. That is how we look at this. We already were having tremendous success and I think we offer a differentiated level of value. Just four months ago, we talked about hiring 100 people; now we have hired 150. With credit we were going to add $300 million, we are now on pace for $375 million in credit per month.

We have had a 150 percent jump in sales reps focused on emerging technologies. That puts an exclamation point on the fact that D&H isn’t interested in a revolution. We are looking to accelerate our evolution of offering differentiated value. In the consolidated marketplace, we believe it will stand out even stronger.

We believe that not being public or private-equity-owned lets us really invest on behalf of vendors and partners for the next three to five years—not driven by any external factors.

How is D&H different than a private equity or publicly owned distributor?

Dan Schwab: We are different than public entities. We really run our business differently. Whatever our budget is for the year, it changes throughout the year. When there are smart investments for pivots in the business, we respond. So it is less about a specific budget for growth. It is more about making sure we are making all the right foundational investments to support growth for three to five years. It is a dichotomy with regard to how we have the ability to think of things differently as a private company.

You have dramatically increased VAR staffing with a 35 percent increase in resources for helping partners drive sales growth. How big a differentiator is that for D&H?

Dan Schwab: That is really key for us. We see our sales reps as a primary differentiator. The average tenure of our inside sales reps before this fiscal year began was over nine years. We really have incredible D&H co-owners that are part of the D&H family. They all own shares in the company. So they share in the success of the company. I believe they have a passion that complements our expectations and goals for this differentiated service.

What we have done to support them is to hire additional sales staff, but we are also supporting them with sales support and technical teams that can train partners and help partners with more complex solutions. It is not just a sales motion. It is all the things that go into that with an incredible Everything-as-a-Service tool, having a robust cloud platform, training our partners, helping our partners to migrate to become MSPs. It is all about how do we give them that blueprint and help them evolve their business.

What new partner-oriented groups are you looking at bringing to bear to help partners like you have done with the Education Advisory Group?

Dan Schwab: We have been planning for the last two years our partner community and now we are launching it. The goal in launching it is how do we make it different than the other distributors. They do what they do and they are very successful. Our goal is not to replicate it. We are building it really from the ground up based on reseller and vendor feedback. We will be announcing that in October.

Michael Schwab: Think of that partner community as a next-generation consortium. It is not going to be what exists today. We’re putting a lot of thought into what is valuable not only today but as we move forward in the IT community.

How unique an opportunity is there for D&H to break out with this Built For Growth initiative?

Michael Schwab: We see ourselves being able to scale up. We were coming off a record year of reseller breadth, growth and top-line revenue. It is in our DNA to continuously strive for constant improvement, helping our resellers grow and solving the next challenge in their business,

I would say foundationally we are investing ahead of the curve because we see that tidal wave of opportunity coming.

How much growth are you seeing with regard to adding partners to the D&H roster?

Dan Schwab: We open up over 100 reseller partners per month. That has been that way for over six years on a monthly basis. That is due to the fact that there are a lot of born-in-the cloud partners and customers changing business models who appreciate our focus on training, education, support and even a dedicated sales rep for even the smallest of partners. That’s the reason why we are such a destination for someone who is looking to get into the channel, dramatically grow or change their business model.

What are you doing to go after some of the larger midmarket partners?

Dan Schwab: It is investing in services and tools, whether it is a larger partner or smaller partner. We survey them to understand their pain points and how can we differentiate them within the distribution channel on behalf of our vendors. So sales support is critical, as are timely answers. Ease of doing business is critical. Electronic communications and pushing information to our partners for key requests is critical. It is not just the investment in salespeople. A lot of the investment is in sales and operational support that complements the salespeople.

How optimistic are you as you look out into the future for the business?

Michael Schwab: I have never been more bullish on the opportunity. In my 30 years in the business, I have never seen technology products be more relevant to our personal and professional lives than I see today. It is just remarkable to me. You can really look pre- and post-pandemic and see what has transpired over the last 18 months. The biggest difference I see is obviously is health and safety are top of mind in almost every aspect of our lives. But perhaps the silver lining of being in the IT industry is the fact that the technology products we bring to market and help deliver solutions around are the foundation of what keeps people connected and productive in an environment where perhaps people cannot be together to have an in-person day-to-day experience.

What distinguishes the D&H model in the current distribution landscape?

Dan Schwab: I think our model really stands out. That is the key point. The partners we are doing business with are, for the most part, family- and privately-owned. So culturally I think there is good alignment. When we look at our business, they look at their business very similarly. Not that there are not large partners that are not public or owned by third parties, and they are very successful partners and we do great business with them. But I do think that when you look at the landscape that is one of the key differentiators for us.

Think about the 150 employees we just added: After 90 days they will all be part owners of D&H. When our employees join the D&H family and become co-owners, they have skin in the game. That is very different than other [distributor] organizations. That is why we are selective in our hiring. We want people who are interested in long-term, differentiated service.

Michael Schwab: It is that privately owned and employee owned combination that makes us unique. You can see that in our leadership style. You can see it in our management approach. You can see it in our decision-making, and you can see it in the motivation of all of our employees. In those four areas, it is omnipresent. It proliferates across the entire company.