CDW Sets Sights on Cloud, Mobility

By Jessica Davis  |  Print this article Print

New CEO Thomas Richards unveils aggressive plans to push into IT services.

The technology industry has shifted sharply to consumer electronics such as smartphones, tablets and mobile applications—even as many analyst firms slash their PC forecasts. Today’s business travelers often leave their laptops at home, preferring to carry just a tablet and a smartphone.

The advent of mobility, consumer electronics and cloud computing in the enterprise is changing how the technology industry—and business in general—works. When any client device can access information in the cloud, why do we need PCs?

You may think that a company once known as Computer Discount Warehouse is worried about this trend, but that’s not the case. Instead, direct-market reseller CDW is experiencing strong product sales at the same time that it’s making inroads in the technology services business.

Now, with new CEO Thomas Richards at its helm, CDW plans to put more investment dollars into building up those services.

"There are a lot of opportunities for growth," Richards told eWEEK and Channel Insider. "There are opportunities in other services we can offer customers. The world of technology is about change—dynamic change."

CDW is on the right track with its services strategy, according to analyst firm Gartner. Vice President of Research Tiffani Bova told eWEEK and Channel Insider that direct resellers, much like IT distributors, are in an ideal position to serve as cloud services brokerages. They have the vendor relationships, the long lists of customers in markets that are interested in cloud computing and the capital to pull it all together.

"Cloud service brokerages will be the ideal role for direct marketers to consider while they continue to maintain their existing retail business and decide how to remain relevant in new delivery models as telcos and others move into those businesses," she said.

Reassessing Strategy

Richards joined CDW as president and COO in 2009, and was the heir apparent to then-CEO John Edwardson. In October, Richards moved into the top job.

Though Richards has spent his 33-year career in technology, many of those years were not at a PC maker or an IT distributor. In fact, he spent 19 of the early years of his career at a very different kind of company: Bell Atlantic, a local telecommunications carrier.

One might argue that Richards’ compute and telecommunications experience gives him the right combination to tackle an IT market that is changing to embrace services and managed services in addition to product resales. Richards pointed out that the convergence of compute and telecommunications has been going on for quite some time. He said that several older technologies, such as shared resources and virtual private networks, are the predecessors to modern services such as cloud computing and virtualization.

After becoming CEO, Richards immediately embarked on a reassessment of CDW’s strategy, looking to expand the company’s resources in IT services, cloud computing and mobility. Though he admitted to the reassessment, Richards downplayed it. He said that it’s been more of an evolution than a revolution, as the changes have been going on for quite some time.

Gartner’s Bova seems to agree. She said that CDW and other direct resellers, such as Insight and PC Mall, made initial moves in the services direction through acquisitions a few years back, with Insight buying Calence, PC Mall buying Wareforce and CDW buying Berbee. But those were just initial moves, she added, and none of the direct resellers has really taken the ball and run with it on managed services.

However, Bova pointed out that these resellers don’t necessarily have to switch over from product sales to service sales. "Direct marketers are highly tied to volume rebates, co-op funds and other incentives that manufacturers provide based on the large number of products they touch," she said. "They’ve been expanding that for a long time with close-to-product services such as support, maintenance and warranty."

Now these companies need to decide where they want to take their business. "What percentage of revenues do they want to have coming from different businesses?" she asked. "What do they want to be when they grow up?"

With the accelerated interest in and adoption of cloud services, it will become more and more important for the channel to invest in skills and capabilities that will ensure they can remain relevant in this new supply-chain model.

In fact, CDW has already hired close to 300 people this year, with most of them tied to sales or expanding service delivery capabilities in the cloud computing and mobility markets. CDW also resells Apple products, including iPads, so there’s money to be made in both sales and services around these devices, Richards said.

"We are clearly seeing more demand for iPads," he added. "It was pretty amazing to watch the growth go from zero to 100, so to speak, as iPads became part of what people bring to work."

Are tablets a fad? Not according to Richards, but the CEO does believe there are two distinct classes of users: individuals who consume information and ones who create it. Tablets are loved by people who consume information, he said. Maybe that’s why Richards leaves his iPad at home when he goes to the office and takes it with him only when he travels.

Clearly, there is still a reseller market for IT products. "Will the resale model go away any time soon? Absolutely not," Gartner’s Bova said. "They don’t need to go all the way over to the cloud." However, she added, if resellers want to take that direction, they are in a great position to do so with their existing real estate, data centers, SMB (small and midsize business) and enterprise relationships, as well as their vendor ties.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com