Before COVID-19, most of us understood that print volume and margins were declining. But we also believed the ride down would be a slow and steady one. As businesses started to ramp up their digital transformation initiatives, they would still need print, and the channel would dutifully — and profitably — oblige them. With COVID-19, businesses have closed and many people have stopped going to their offices even if they are open. Yet, some verticals are printing more than ever — making print volume markedly unstable. That slow and steady ride downward now looks more like a ride on the Tower of Terror.
Based on the current uncertainty, you’d think that businesses would be hesitant to invest money in new technologies. But that’s not how this story is unfolding. The Global Technology Distribution Council (GTDC), a worldwide industry association dedicated to defining and promoting the role of wholesale distribution in a successful and healthy information technology channel, recently released a report titled Thriving in the New Normal: How Distribution Partners are Making a Difference in the Digital Era. According to the report, only 18% of CFOs plan on slowing down or canceling their digital transformation investments because of the pandemic.
In reality, businesses are starting to double down on digital transformation. Half of those same CFOs in the abovementioned survey said that they are accelerating their investments in automation projects and other initiatives that can transform the way their organizations operate. The technology that many business owners saw as a nicety in 2019 is a necessity in 2020.
Even though the GTDC report says that overall IT spending is expected to dip by 8% YoY, cloud computing is primed to grow by nearly 20%, and businesses are now spending twice as much on SaaS applications per employee as they are on laptops. A company with 50 employees tends to use about 40 different applications, while a large business (500 employees or more) can rely on up to 100 applications.
For dealers interested in expanding their businesses to where the money is flowing, distributors are showing a lucrative pathway.
How can distributors help?
The transition to selling XaaS, IoT and other information and communications technology solutions isn’t easy, or cheap. Thankfully, dealers don’t have to go it alone — they can lean on IT distributors for some help. Distributors serve two primary purposes. For upstream vendor partners, distributors provide an efficient route to market with logistical, financial and administrative capabilities at scale. For downstream channel partners, distributors provide expertise, financial assistance and marketing support all over the globe. The supply chain flows from the vendor to the distributor, and then from the solutions providers to end customers.
We were intrigued by the implications of the GTDC report, so we spoke with the head of the organization, Frank Vitagliano. According to Vitagliano, distributors can provide a wealth of support to dealers, aiding small solutions providers that don’t have the scale, bandwidth, or financial infrastructure to support all the transformation happening in the marketplace.
Vitagliano knows firsthand just how helpful distributors can be. Earlier in his career, Vitagliano used to run a business that would do things like build data centers and provide managed IT services for SMBs. “One of our biggest customers was so pleased with the way we were supporting their data center that they asked us for help with leveraging IoT equipment,” he recalled. Of course, Vitagliano couldn’t tell those customers that he didn’t actually have a way to help them. Luckily, he knew that he could lean on distributors.
Initially, he worked with some experts from one of his go-to distributors for the first project, but he knew that it wasn’t a long-term fix. So, Vitagliano started his own IoT practice with a funding model that still relied upon those distributor relationships. “I didn’t want to reach out to my bank contacts or sell more stock and dilute the company,” he said. “Instead, I worked out a very unique financial offering, where the distributor allowed me to borrow against my own contracts at a very low interest rate.” Without the distributor supporting and funding Vitagliano’s IoT play, it might have never happened.
“No one can bring complex technology together better than the distributors,” said Vitagliano. “Any activity in the IT space requires a series or set of products that become a solution. It’s not just one vendor’s product. You don’t just get a public cloud — you get desktop support, product support. The distributors bring it together better than anyone else. And they augment the work the solution providers are doing in the marketplace.” This places IT distributors at the nexus of enabling vendor partners and the channel ecosystems that get their products into the hands of end customers. They are the glue that keeps everything together.
In many ways, COVID-19 has turned out to be the great accelerator. It accelerated the growth of cloud and XaaS products, the decline in print, and the urgency for office equipment dealers to expand their businesses beyond print. The good news is, there are multiple pathways to achieving that goal, and while distributors may be the road less traveled, they are certainly worth considering as a partner when taking the leap.
Patricia Ames is president and senior analyst for BPO Media, which publishes The Imaging Channel and Workflow magazines. As a market analyst and industry consultant, Ames has worked for prominent consulting firms including KPMG and has more than 15 years experience in the imaging industry covering technology and business sectors. Ames has lived and worked in the United States, Southeast Asia and Europe and enjoys being a part of a global industry and community.