Opinion: Arrow Electronics' acquisition of Alternative Technologies sets a new bar for value-added distributors looking for room to grow.For years there has been rampant speculation concerning the possible acquisition of one of the value distributors, given the limited number of solution providers in this space and the ongoing efforts of vendors to either drive solution providers out of Fortune 1000 accounts or service the solution providers that support that class of customers directly.
As a result of these vendor moves, distributors such as Arrow, Avnet or GE Access have focused their efforts on the midmarket segment, where they choose to support a limited number of vendors selling products aimed at solution providers servicing customers that have enough users to build a data center, but not enough users to warrant direct support from IBM, HP or Sun.
For anything beyond those products, Arrow or Avnet typically call Tech Data, Ingram or Synnex and ask them to deliver the required products on behalf of Arrow or Avnet.
The problem with this model is that in terms of ongoing growth, it's pretty much limited to keeping pace with the economy, and should one of the major vendors in this space falter, their distribution partner would suffer disproportionately. And to make matters more interesting, volume distributors such as Tech Data and Ingram Micro continue to see the higher end of the midmarket space as an area ripe for expansion.
Given all that, Arrow's decision to acquire Alternative Technologies is a welcome breath of fresh air in a space that could definitely use it. Alternative specializes primarily in leading edge networking products and has attracted a loyal group of solution providers customers by focusing on high-margin products coupled with a technical support team that solution providers can call in to help deploy products that remain unfamiliar to all but a few.
Much of the culture at Alternative reflects company CEO Bill Botti, who will hopefully stay on post-merger with Arrow. Botti used to be a VAR, which gives him insights into the way solution providers think about which products to carry and sell aggressively.
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The vast majority of the products that Alternative carries are complementary to Arrow's lineup, but Arrow has the ability to push those products out to market at a scale that Alternative could never hope to approach.
For solution providers that have come to rely on high-margin products to make up for the raft of popular mainstream products that typically sport razor-thin margins, the fact that Arrow is about to pick up more than 30 high-margin products with a single stroke of the pen is good news.
It's also good news for vendors because it reinforces the role of the channel as the bridge that brings news products across the proverbial chasm.
As far as Arrow's rivals are concerned, the acquisition of Alternative Technology sets a new bar they will soon need to match.
Michael Vizard is editorial director of Ziff Davis Media's Enterprise Technology group. He can be reached at michael_vizard@ziffdavis.com.
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