GTDC’s Frank Vitagliano On Digital Transformation, Presidential Tech Priorities And M&A

‘I think now what‘s happened is, companies have realized, one, how good the technology is, and two, how significant it is in improving productivity. And so the overall digital transformation in my mind has accelerated significantly, and that’s been very good,’ says GTDC CEO Frank Vitagliano.

Distributors Help Build Digital Transformation

Global Technology Distribution Council CEO Frank Vitagliano praised IT distributors for forging a path through the disruption caused by the COVID-19 pandemic, and outlined tech-related priorities for a likely new U.S. administration in an interview with CRN.

The GTDC, which brings IT distributors and vendors together to research channel issues and look at better ways to help channel-focused companies, this week held its annual GTDC Summit. As has been the case for nearly all IT events since the March start of the COVID-19 coronavirus pandemic, GTDC Summit 2020 was a virtual event.

Vitagliano opened the conference noting that GTDC members worldwide account for about $150 billion in annual revenue, making them a vital part of the channel and a source of technology and support as solution providers navigate changing business environments, whether it is getting past the changes forced on them by the pandemic or the changes pushed by businesses looking to advance their digital transformation agendas.

“The distributors that make up the membership of the GTDC have remained as critical as ever in providing the products, services, support, and overall value to enable the entire global IT supply chain,” Vitagliano said. “Our GTDC members are the best in the world at what they do. No two are really alike. Each serve different market spaces in different ways. Sometimes overlapping, of course, but all deliver unique value.”

Vitagliano also spent time this week discussing the IT distribution business with CRN, with discussions focused on the importance of distribution in a business environment buffeted by the twin winds of the pandemic and digital transformation. He also talked about the “smart money” chasing distributors as investors look hungrily at this part of the channel, and looked at impacts from the trade wars and even the U.S. presidential election.

For an inside look at this very key part of the IT channel, click through our slideshow.

What’s the key message that from the GTDC this fall?

Distributors in 2020 really stepped up, and they did an outstanding job in quickly transforming their business, first of all, in order to support the solution provider community. They had to transition a lot of inside sales and support people to work from home just about overnight. And that was very significant because traditionally they weren’t that way. And they did it so quickly and effectively that they kept the kind of support in place that solution providers had become used to.

In addition, they also transitioned their businesses or their folks that weren‘t able to work from home, like all the logistics and the warehouse people. They had to quickly figure out how to get them to be effective with obviously their health being the biggest concern. And they did that. ...

Certainly in the beginning of the pandemic, we heard of supply chain issues everywhere: paper goods, food supplies, a number of different areas. Yet the global IT supply chain really kept flowing pretty well. There’s a few delays now with maybe some endpoint devices, laptops, or iPad-kind of devices. But for the most part, it’s been amazing how well the IT supply chain has flowed throughout 2020 in spite of the pandemic.

You talked about how well distributors did, and it is pretty amazing, but were there any hiccups in those moves? Were there any issues in the response to the pandemic?

While there were occasional minor glitches due to where products are being manufactured and various supply chain types of concerns, there really weren‘t any major hiccups. And in terms of how the business reacted to it, we haven’t seen major hiccups. Now, from a marketplace standpoint there are certain aspects of the market that have probably slowed down a little bit. For instance, I think people probably delayed major data center refreshes and those types of things for obvious reasons. But on the other side of it, what’s really been pretty amazing is that the digital transformation the industry is going through accelerated significantly through this pandemic.

What happened was a couple of things. One, people realized how good the technology really is, you know, the collaboration tools and those types of things. Two, people like the distributors and solution providers put in place a lot of things like work from home bundles that that included hardware, software, and training. They hosted online seminars and panels to support partners who were then supporting their customers. And those types of things really helped. I think now what’s happened is, companies have realized, one, how good the technology is, and two, how significant it is in improving productivity. And so the overall digital transformation in my mind has accelerated significantly, and that’s been very good. And the distributors have been right in the middle of that, and they’ve been driving a lot of that.

Obviously, there’s all of the pain associated with what we’ve gone through, the personal pain, the people who have experienced family members who’ve been sick, business associates, etcetera. So it’s been a terrible time from that standpoint.

GTDC typically focuses on the trends related to distributors and the vendors who work with them. What are some of the key trends that you’re seeing on the solution provider side that are impacting distribution or vice versa?

One of the things that that clearly impacted the solution providers, as I mentioned, is the way the distributors reacted to the pandemic. Absolutely, it made a huge difference in the solution provider marketplace. The solution providers rely on distribution in many, many areas. From a financial standpoint, distributors were able to leverage their balance sheets and really help solution providers from a cash flow standpoint, certainly in the middle of the pandemic, and still as we go forward. So many distributors, in fact probably all of our member companies, have unique financial programs in place where they’re being very liberal in terms of looking at typical financial fees, and trying to help as much as possible because one of the things that typically happens when business starts to slow down is a cash flow crunch for solution providers. We know that’s been happening. I think they’ve handled it extraordinarily well, but the distributors had to step up and provide that. ...

The second thing is the investments that the distributors are making in the area of digital transformation and in overall support and services. The distributors’ customers are the solution providers. So everything they do, it’s on behalf of the solution providers. So when I talk about the work that distribution has done and what an awesome job I think they did in 2020, that matters a lot to the solution provider. [The way distributors] responded and the way they’re continuing to make investments matters tremendously because in times like this the solution providers need partnerships that they can depend on. And so they have it with distribution. And I think that’s a big deal. And it will continue to be a big deal. And I think it’s getting recognized. I think, honestly, there are times when I feel like distribution gets taken for granted because they do a lot of things very, very efficiently.

We’re seeing some big mergers and acquisitions in the distribution community, such as Tech Data’s acquisition by Apollo Global Management or the rumored acquisition of Ingram Micro by an investment firm. There seems to be a lot of private equity coming into distribution. Why all the interest in distribution?

I think the marketplace really understands the value and the opportunities that distribution going forward provides. And so, as I said a number of times, the work that they do, the role that they play, in enabling and driving the overall global IT chain is extraordinarily significant. And I think people realize that. And smart money realizes that. So when you have major companies, big private equity firms like Apollo, wanting to buy and invest in a distributor, and then have Berkshire Hathaway, Warren Buffett’s organization, jumping in and also making a bid, you have to step back and look at it and realize, Wow, there’s smart investment dollars that really are beginning the value distribution and the opportunity going forward. And the reason for that is, as the overall technology space gets more and more complex, the distributors are the ones pulling together those solutions. And they’re the ones that the marketplace is looking toward to pull together those solutions and support the solution providers as they go to market. And so, they become very attractive companies from a financial standpoint. So over time, we’ll probably see that type of thing continue.

Given that China is the primary source of commodity and not-so-commodity hardware to the U.S. IT market and to the distributors, how is the trade war between the U.S. and China impacting the distribution community?

I don’t think it’s really impacted it that much. I think there was clearly some supply chain concerns, but I think they were more around the COVID time frame and the implications from COVID than they were from trade wars. And it’s tough to say going forward now. It’s anybody’s guess, with everything that’s happening in the political environment. The only thing I will tell you is, if history is any indicator, what the distributors have been able to do is develop really excellent relationships with the vendor partners. And they’ve really become close to each other relative to being able to figure out how to work together in order to get product into the marketplace for both solution providers and ultimately end users. So it’s really hard to say. I don’t have a crystal ball as it relates to the trade piece. We may have a new administration coming in 2021. It certainly looks that way, based on where we are today. Who knows what’s going to happen tomorrow, but based on where we are today. That could change things. Who knows? So it’s really hard to say, and I’m probably not qualified to look into the crystal ball because most likely I’m going to be wrong.

Let’s assume that there’s going to be a change in the administration and that Joe Biden will be the next President of the U.S. even though Donald Trump hasn’t yet conceded. What are some of the key things that the distribution community will be looking at?

This is not a political statement at all, because in my mind, it really doesn’t matter who’s in charge. The same things are going to matter regardless of whether it is Biden or Trump or anybody else, right? I think trade relations will be really important. Obviously, the continued response to and eradication of the pandemic will be extraordinarily important. There is some good news on the potential for a vaccine. So that’s going to be really important going forward in terms of what’s going to impact the overall business. And that all leads to the overall economic environment and the growth that hopefully we’ll continue to see from the GDP standpoint. And that’ll enable businesses to keep flowing. That’ll enable the distributors to continue to provide the service and support that they have. So, I think it’s the same. I don’t think it has anything to do with whether there was an election or not. I think if we were looking at 2020 and we’re saying, OK, what are the key drivers? What are the key things that that are going to matter? I think it’s really the same, albeit we’re coming out of an extraordinarily unique year in 2020 going into 2021. But to me, if anything, there should be optimism. And the optimism should be predicated on the way the industry handled 2020 and the way the industry was able to respond to it and the opportunities that we now can see that’ll come from it.

OK, let me ask you this way: What does the distribution community want to see from the next administration?

I just answered it, Joe.

OK, fair enough. I was hoping to get a little more specific, but you’re going to be careful on that one.

Yeah. No kidding. Good try, though.