VAR Renaissance Has Arrived

By Jessica Davis  |  Print this article Print


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New numbers from a distribution trade association show the strength of the indirect channel.

Distribution strength indicates a renaissance in the world of indirect sales as new technologies provide solution providers with the opportunity to combine them into solutions.

Distributors reached record sales in fiscal 2006 that ended in the summer of this year to reach an all-time high that exceeded the previous record set in 2000, before the dot-com bust.

That's according to the Global Technology Distribution Council (GTDC), a trade association that represents the 14 largest IT distributors in the world including Ingram Micro, Tech Data, Arrow and Avnet.

What technologies were the hottest through distribution? Click here to find out.

In 2004 and 2005 distribution sales growth exceeded vendor sales growth, said GTDC CEO Tim Curran, indicating that many vendors returned to distribution after experimenting with other go-to-market strategies.

"HP went direct following the crash," he said. "But they've shifted their business back to distribution. "Even Dell today is trying to build an indirect strategy."

And distributors have built greater efficiencies into their own infrastructures. For example, as a whole, distributors reduced sales, general and administrative expenses (SG&A) from 7 percent to an all-time low of 5.8 percent, Curran said.

"They've been able to lower total inventory levels at the same time they've been able to increase customer fill rates," Curran said. "They have done careful and strategic analysis of demand patterns so they order the right thing and place it in the right warehouse."

The number of distributors worldwide has also increased. Over 200 new vendors have joined the distribution community in the last 3 years, according to Curran.

"The first run up of distributors' explosive growth happened in the late 1990s," he said. "Business was very focused on the desktop PC space.

"Growth today is very broad based," he added, and includes "multiple technologies like telecom, VOIP, wireless networking, flat screen monitors, consumer electronics, handheld devices and navigation equipment. The market is being driven by the channel integrating multiple vendors and technologies into a workable solution. Customers don't buy technology. They buy solutions."

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

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