Credit and Financing Fuels the ChannelBy Chris Gonsalves | Print
Riding a wave of growing revenues and renewed confidence among customers, Tech Data's Bob Dutkowsky tells Channel Insider he'll use the distributor's credit clout, a growing roster of VAR services, and continued global expansion to maintain momentum.
Q: You’ve mentioned credit and financing several times in the course of TechSelect. How big is that in the spectrum of what Tech Data supplies to the channel?
BD: Credit is huge. When I was outside of Tech Data trying to understand if I wanted to join, I had no concept of how powerful credit is in terms of a recruiting tool for VARs and a retention tool. If the VARs are going to grow, they have to have credit from the distributors. They typical VAR is like any small business. It doesn’t have an unlimited credit line. So we really do deliver do deliver the credit that delivers growth potential for them. It’s fundamental to their business model.
I didn’t understand that when I was on the outside. In any given day, Tech Data has about $3 billion worth of credit outstanding in the channel. Think about that. We’re a bank.
Q: Is the current global credit crisis affecting VARs ability to secure financing?
BD: Our data would say, at least for right now, it’s not. We’re getting paid in a timely fashion and we don’t have a lot of bad credit risks. I think part of the reason is we’re pretty conservative on the credit side as a company. We’re not on the leading edge in every case when it comes to offering credit, so our caution allows us to use that cash a little more intelligently.
But the other side of that coin is that if there’s a VAR that has a business opportunity and needs credit, we do step up pretty reliably. We met with a customer yesterday who has a $7 million deal and we’re going to extend that guy’s credit, even though the model wouldn’t necessarily tell us to.
When it comes to credit and financing, we’ve been doing this for 30 years so we know all the tricks. When a VAR comes to us and says he needs credit, we’re able to look at their financials and say here are a number of ways you can extend your credit. You can do flooring, you can give us a letter of credit. If you’re going to sell this to a government agency maybe you can get guaranteed payment. There are all kinds of things that we can do.
Q: How many of your 70,000 solution-provider customers have some open credit going with Tech Data right now?
BD: I’d say around 50,000.
Q: Do you think that VARs fully understand all that’s available to them in terms of credit options?
BD: They don’t. Generally they don’t take advantage of it until they really need and then it’s often too late. We’re really trying to get in front of that. If credit is going to get tighter and tighter over the next three quarters, we want to make sure we add credit dialogs and make sure all customers are positioned to keep their businesses running. We try to use forums like this to educate them. And we use webinars and conference calls and any number of ways to get the message out and try to educate our customers on financing and credit.
In fact, I just now got an instant message from a customer I met at dinner last night. Now we’re pen pals. He said he’s in the financing break out and its standing room only. He’s out in the hallway trying to get in. So they’re interested. They know that credit and financing is the engine that fuels their growth.