This week’s mega-merger between SYNNEX and Tech Data is sure to have implications of many kinds for the channel in the months and years ahead. Its implications for another leading distributor, however, are decidedly more modest. Much as it has for over a century, D&H Distributing plans to stay true to its current strategic roadmap.
“We’re very long-term focused,” says Dan Schwab, the company’s co-president. Though D&H’s business models and initiatives evolve over time, they don’t change dramatically in response to the latest headline.
“That creates a lot of whiplash in organizations,” Schwab says. “You see that a lot within big public entities, and we don’t like that. We know our customers and vendors don’t like that.”
Aside from which, he adds, while the combined entity that emerges from the SYNNEX-Tech Data merger will be a $57 billion giant, battling giants is nothing new for D&H. “We’re used to competing with very large entities,” Schwab notes.
That said, he continues, there’s no denying that everyone in IT will feel the consequences of this deal to some extent.
“Whenever you have a macroeconomic event like this, it tends to have a ripple effect that affects a lot of people differently,” Schwab observes. “There really were four broadline distributors in North America, and the combining of two of them really changes the landscape in many respects and for a lot of constituents—for resellers, for vendors, for distributors, for MSPs, for basically the entire ecosystem.”
Though he won’t speculate on the specific changes likely to occur in this case, Schwab says M&A transactions that involve private equity firms, as this one does, tend to have predictable repercussions.
“More often than not they’re doing it for financial reasons,” Schwab says of outside investors in M&A deals. “They’re looking to take costs out of the equation, which often means reductions in personnel.”
Should staffing cutbacks, service slowdowns, or tightened credit result from SYNNEX and Tech Data joining forces, D&H plans to be ready. “We’re trying to think out a couple moves ahead, just to make sure that we’re best positioned to help our partners,” Schwab says.
D&H sees potential advantages for itself as a sort of reverse image alternative to its much larger rival. For example, where SYNNEX and Tech Data will offer lots of everything, Schwab says, D&H will continue to specialize in a smaller set of core vendors and technologies.
“Many distributors are the supermarket,” Schwab says. “They offer everything to everybody. We like to have a line-limited focus so we can help our partners win greater than average market segment share.”
Should the sheer size of the post-merger SYNNEX and Tech Data entity make personalized attention difficult, he continues, D&H’s emphasis on long-term relationships could give it an edge as well.
“I think a lot of our partners look at us as a trusted advisor as much as anything else,” Schwab says.
D&H has maintained that kind of relationship with its partners despite a top line currently on track to exceed $5 billion (all from the U.S. and Canada) during the current fiscal year, Schwab contends, because it makes a point of operating like a smaller company even as it gets bigger.
“As we’ve scaled our business, we’ve tried to scale our culture and our go to market in parallel so that we remain nimble,” he says. “We want to have very long-term alignment with our customers and vendors.”
For the same reason, he adds, D&H has no intention of joining the growing list of distributors and vendors bought by private equity or executing IPOs.
“We’ve been privately owned for 104 years. That’s not changing,” Schwab says, noting that employees control 36% of that private ownership. “I think it just gives us the ability to have a longer time horizon for all of our decisions.”
As they have for some time, cloud computing, pro AV, e-sports, and everything-as-a-service all loom large on that horizon. Adding outsourced professional services capacity remains a priority as well.
“It’s what we heard from our partners is missing, or that they need to complement their efforts,” Schwab says.
Nearer term, D&H sees growth continuing for itself and its partners, particularly in markets like digital signage, collaboration, and videoconferencing, as well as work-from-home and remote education gear.
“For many categories, demand is still outstripping supply,” Schwab reports.
The steady return of home-based employees to the workplace should fuel additional purchasing in the next couple of quarters as well, Schwab predicts, as businesses ready themselves to meet the challenges of supporting a hybrid onsite/offsite staff.
“We see the back office within small business and the mid-market being a tremendous opportunity, people upgrading their server environment, people upgrading their wireless and their networks and their security,” he says. “They are running a more complex model where not everyone is in the office.”
That’s 2021, however. Schwab is more circumspect about 2022 and beyond.
“I always will use a line that economists were invented to make weathermen look good,” Schwab says. “There’s all sorts of prognostications of what the market’s going to look like in a year or two years, and I think it’s really very challenging to try and pinpoint that.”
Even so, he notes, it’s no coincidence that money is pouring into distributors like SYNNEX, Tech Data, and Ingram Micro at present.
“I believe the IT industry continues to be in a really healthy spot,” Schwab says. “Maybe that’s why people are looking to invest in this market.”
