kritchanut - Fotolia

News Stay informed about the latest enterprise technology news and product updates.

Value-added distribution a key focus of Tech Data-Avnet deal

Tech Data's plan to acquire Avnet Technology Solutions for $2.6 billion would bring together both broadline and value-added specialty distribution models.

Tech Data Corp.'s pending purchase of Avnet Inc.'s Technology Solutions group could bring together the advantages of broadline and value-added distribution -- if the combined company can pull off the integration task.

That's the initial analysis of industry executives commenting on the deal, in which Tech Data, based in Clearwater, Fla., has agreed to purchase Avnet Technology Solutions for about $2.6 billion in cash and stock. The transaction, which would expand Tech Data's international footprint to 35 countries, is expected to close in the first or second quarter of 2017.

Tech Data, considered a broadline distributor along with other global firms such as Ingram Micro, and Avnet Technology Solutions, viewed as a more specialized firm and one that has made progress in cloud distribution, represent two styles of distribution that could successfully operate together.

"The proof is in the pudding, and the details need to be worked out, but I think it has the potential to be a really solid merger ... of two different models," said Mark Melillo, founder and CEO at Melillo Consulting, a technology solutions integrator based in Somerset, N.J.

Melillo, who serves on the Avnet Advisory Council, said the deal comes at a time when he and other members of the reseller community have been taking a hard look at the value-added distribution model. He said he has been looking at other distributors that provide a bigger inventory.

I think it has the potential to be a really solid merger … of two different models.
Mark Melillofounder and CEO, Melillo Consulting

Many channel partners tend to work with one broadline distributor that holds a lot of products and one or two specialty distributors that pay more attention to "overall solutions" and provide value-added services, said Diane Krakora, founder and CEO at PartnerPath, a consulting firm based in Menlo Park, Calif., that focuses on partnering in the channel. She questioned whether one firm can deliver on both approaches, noting it may prove difficult for Avnet Technology Solutions to preserve its value-added distribution characteristics under Tech Data.

"I think it will be hard to maintain that," she said. 

Krakora said distributors that offer a broadline card could lose focus on specific technologies that fit together for their reseller partners.

"It is really much more of a 'come and shop and buy what you want' versus a trusted advisor making recommendations to the partner," she said.

Challenges, opportunities ahead

Krakora said channel partners will watch to see how the deal unfolds in the coming months.

"Hopefully they [the combined company] will be able to hold on to the specialization and the services and the solutions focus," she said.

Amy Kardel, chairwoman of CompTIA board of directors and co-founder of Clever Ducks, a managed service provider in San Luis Obispo, Calif., views the combination of distributors favorably. She said a move on a distributor's part to strengthen its business model is good for the channel.

"We see distributors as a key partner for us," she said. Kardel said her MSP taps distributors for hardware, software and sales engineering services. She said she has seen a decline in the latter, however, noting that such services are expensive for distributors to provide.

But while Tech Data will have some integration challenges ahead, it can also look forward to additional vertical market and cloud distribution capabilities. The transaction, when completed, will include Avnet Government Solutions, which offers products from such vendors as Cisco, Hewlett Packard Enterprise and NetApp on its General Services Administration schedule.

As for cloud, Avnet Technology Solutions is ahead of other value-added distributors when it comes to cloud offerings and provisioning, according to Krakora. Avnet launched its Cloud Marketplace in 2015.

Kardel said such cloud offerings will help Tech Data "stay in the chain" as more end customers seek cloud-based services.

Transition plan yet to be defined

At this early stage, there's no word on Tech Data's plans to transition channel partners currently sourcing IT gear from Avnet Technology Solutions, or whether it will need to sort out potential overlaps in IT vendor relationships.

A spokesman for Tech Data said the company can't comment on transition plans, since the transaction won't be complete until next year.

"I can say that we view the combination of Technology Solutions and Tech Data as complementary -- both in terms of vendor partners and customers, as well as employees," the spokesman said.

Avnet Inc., meanwhile, is looking toward the future as a distributor solely focused on electronics components.

"Avnet believes that as a pure-play components distributor moving forward, it can provide more focused attention and value to its customers and suppliers," a company spokeswoman said.

Specifically, Avnet, based in Phoenix, Ariz., will zero in on design chain and supply chain services. In design chain services, the company makes part recommendations early in its customers' design cycles. The company has 10 design centers around the world that maintain specializations in such areas as power supply; automotive; industrial; LED lighting; field programmable gate arrays; radio frequency technology; and multimedia.

Overall, the Tech Data-Avnet deal fits into an overarching trend of industry transition.

"Distribution is an industry of transformation and distributors continually adapt to changes in the market," said Tim Curran, CEO at Global Technology Distribution Council. "They make dynamic moves to reflect innovations in technology and business, and consolidation has always been a part of that mix."

Next Steps

Find out how distributors are adopting more of a services orientation

Learn how AVG Business incorporates value added distribution in its channel strategy

Get insight into how distributors provide a gateway to the GSA schedule

Read about Rackspace becoming a Microsoft cloud distributor

Dig Deeper on IT Distributors-Wholesale Providers

PRO+

Content

Find more PRO+ content and other member only offers, here.

Join the conversation

1 comment

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

Is the value-added distribution model still relevant? Why or why not?
Cancel

-ADS BY GOOGLE

MicroscopeUK

SearchCloudProvider

SearchSecurity

SearchStorage

SearchNetworking

SearchCloudComputing

SearchDataManagement

SearchBusinessAnalytics

Close