Tech Data CEO Dutkowsky On Avnet TS Integration, Changing IT Landscape And New Roadmap

Dutkowsky On "The New Tech Data"

Tech Data has been making headlines lately thanks to the company's $2.6 billion acquisition of Avnet Technology Solutions. Earlier this month the deal, announced in September of 2016, finally came to a close, and the two former competitors are now working out the logistics of their integration.

A little more than a week after completing the acquisition, Tech Data executives released the company's fourth quarter earnings and held a call with analysts to discuss the financial impact of the deal.

Following that call, Tech Data CEO Bob Dutkowsky spoke with CRN to discuss what the Avnet TS deal means for channel partners, how quickly the integration will happen and how the future Tech Data will be addressing the constantly changing IT marketplace.

Read on to find out what he had to say.

Tech Data recently closed the acquisition of Avnet TS and started its new fiscal year. How would you characterize this moment for Tech Data?

This is kind of a monumental moment in time for Tech Data. We really do believe that the combination of TS and Tech Data is laying a foundation for a different model of success in the IT channel at the distributor level.

This idea of being an end-to-end distributor with deep skills and capabilities is a different model than what the traditional distributor has gone to market with.

Although we are proud of what we have created, we are even more excited about the future that this represents and our abilities to support vendors and channel partners than what has happened in the past.

What do your channel partners have to look forward to as the integration process begins?

What they have to look forward to today is exactly what they had to look forward to yesterday, we are trying very hard not to disrupt what Avnet TS did and what Tech Data did all over the world. We are trying to keep it consistent to show customers and vendors that non-disruptive approach.

H ow long will the integration of the two companies take?

Under the covers, we are putting the pieces together to support the customers and support the vendors more effectively and efficiently. And that will role out over the next few quarters, it won't be tomorrow. It will roll out over time, geographically, by product segment, by vendor relationship. We are taking the best from TS and the best from Tech Data and we are creating this new end-to-end distributor with a different value proposition…

The back office [integration] will happen faster, the vendor-facing pieces and the customer-facing pieces will take longer, IT is going to take longer. Every effort that we have is geared to make this integration happen as fast as we can. We now have a full-time manager who is in charge of the integration of the two companies. She has an array of people matrixed [to] her to build the integration out and we have more resources there than ever before.

What excites you most about the integration?

The thing that gets us so excited is that all the pieces are there, so we are able to pick the best of the best in places where we think we need more strength, skills, relationships.

We have teams of people whose jobs it will be to build [those skills and relationships] very quickly and again, because of the breadth and scale of the new company, we will have the ability to make those kinds of investments in value that will impact the customer and vendor business.

Can you give an example of technologies that will be improved?

Well, our cloud offering, which is called StreamOne, … we have invested more in StreamOne than we have invested in anything else, and it still isn't enough. But now, by combining our cloud with Avnet's cloud - and remember that Avnet made some real substantial investments and have some tremendous offerings in the cloud – we will be able to leap forward but also continue to make the investments necessary to continue as the cloud evolves.

The IT channel should look for more of the same from us. But as we put together these pieces – even faster deployment, even more support, and built around that excellence in execution we have called our hallmark.

Can you elaborate on what that "different model of success" looks like? What changes in IT are creating a need for a different model of success?

What we see in the market, there is a total blurring of the lines of the silos that have traditionally existed in IT and certainly in the channel.

Historically, there has been two brands of distributors, a value distributor, which focused on the data center and a broad line distributor that focused on all the rest of technology…

We see that blurring of the lines as a real opportunity to bring that end-to-end distributor to the market and be able to serve channel partners and vendors in an end-to-end fashion. And I don’t just mean products. That is important, not only is it a line card, it is a line card supported by skills and capabilities that bring all that to life in the office of the reseller and then in their customer environments.

What does the future of the IT market look like?

We believe that computing is not shrinking and, in fact, it is still growing.

Therefore, growth in computing represents growth in the creating, managing and sharing and protecting of data. They just come hand-in-hand.

So the traditional silo components, the server, the storage, the network, the software, the end-user device, the desktop, all of that comes together to create a different computing environment than what we have historically grown up with. So you will continue to see pockets of growth in that continuum as workloads move and shift and the places that data is stored and maintained and protected shift.

Tech Data has seen changes in the market before and it adjusted its business plan. How will the company adjust to these current shifts?

If you look at all of the sea changes that have happened during the life of Tech Data, we have been able to flourish. All computing used to be done on the mainframe, then it went to minicomputers, then it went to client-server, then it went to desktop, then it went the internet, then it went to mobile, now it is in cloud, and throughout all of that, Tech Data has been able to flourish.

Now our feeling is, in the future, all those computing environments are still going to be viable and important and Tech Data will be engaged in all of those. So we will be a one-stop shop for the IT ecosystem to come for a broad array of products and solutions…

I think the key to the Tech Data that we are bringing to market is that it is end-to-end and that it has a proven track-record of being able to adjust to these sea changes that happen.

What aspects of this acquisition will help Tech Data navigate the changing IT landscape that you are describing?

There are two things that are important for distributors during times of transition like this. The first is to have relationships with vendors leading those transitions in the market. And then the second, distributors have to have the skills to be able to take those products to the channel.

The combination of Tech Data's relationships and skills and Avnet TS' relationships and skills position us really well to navigate those sea changes. The move from converged to hyperconverged, the move to solid-state flash storage. Combined, we are now better prepared to deal with those than either was able to do alone.

During the company's earnings call, you mentioned that up until last week you were competing with Avnet TS. Is there anything that you saw about the company while competing with them that you are happy is now a part of Tech Data?

We have been competing with them for decades and they have been a respected competitor. We have especially respected the skill that they brought around products, technologies and architectures that were important.

We have always looked at what they do and admired it - we still tried to beat their brains in every single day, that is just the nature of what we do. But the skills of their team attracted us and we are now very happy to have those skills here.

During the call, you said that Tech Data has been focusing on the SMB space and has seen positive results in the North America business. Is this acquisition expected to improve Tech Data's SMB business?

The SMB space is one of Tech Data's core spaces. However, it is not one of Avnet's.

About a year ago, we moved our [customer operations] coverage model from Costa Rica to Clearwater [Fla.] and it has helped us solidify our position in that market.

Initially, when we picked Costa Rica, it was because they were two time zones to the west and it gave us more time to cover the US market. We lost that when we moved to Florida. But now, Avnet has offices in Arizona and we once again have a facility that is open while the entire US market is open.

What importance does the SMB market have for Tech Data moving forward?

SMB is very important to Tech Data. It is where the job creation is happening, it's where the growth is in the US. [SMBs] are using technology that will give them an edge when going up against larger companies.

Back in the day, smaller companies didn’t use technology. Now, they are generally at the edge of new technologies just to stay competitive and that is a space we feel comfortable supporting with our new capabilities.