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Like before but with added ESG

David Watts is confident about the technology channel’s prospects for the year ahead, despite persistent challenges, reports James Goulding

Can you be buoyant and concerned at the same time? You can if you are David Watts, Managing Director UK & Ireland at Tech Data, who shares the concerns everyone has about inflation, the price of fuel and the broader cost of living crisis, but who also presides over a business that continues to outperform the market in key areas and which serves an industry that has proved to be remarkably resilient to past recessions and more recent shocks such as Covid.

So, while Watts is concerned about the possible effects of high prices and rising interest rates on businesses that have built their foundations and achieved growth when inflation has been very low or which became highly leveraged, often for very good reasons, when money was cheap, he is also confident that Tech Data customers in the reseller and MSP community will be able to survive a business downturn.

“We know from previous recessions that the number of liquidations in the IT channel, or the number of businesses that just stop trading, is tiny in comparison to general business liquidations. One of the reasons for that is the vast majority of channel businesses are small and quite nimble. Nor should one forget that they provide solutions that their customers need. If a customer is looking to reduce their operating costs, IT is often part of the solution.

“The channel did very well during the pandemic because it was able to react to the needs of customers very, very quickly in a way that was often the difference between a business existing or not. When the end customer has to react to a new economic environment, IT might be part of the solution. For example, if you want to change the way your workers work or if you want to close some offices to save costs, your IT systems need to support that.”

That is one reason why Tech Data’s enterprise business has bounced back strongly in 2022, after a slow-down during the pandemic when budgets were constrained and enterprise offices were shut, while its endpoint solutions business (PCs, printers, mobile phones, peripherals) has generally declined from its pandemic peaks – albeit by less than the overall market because of Tech Data’s focus on the B2B channel rather than the consumer space were demand has been hardest hit.

“A lot of companies spent a great deal of money to enable people to work from home and now they’ve got much needed projects to complete in their offices, which are probably not prepared for hybrid working. A lot of budget has moved to updating the network, updating collaboration devices, which is probably why the enterprise market has been up over the last six months.”

Opportunity 1: Hybrid working

Watts believes that this will continue to drive growth and present opportunities for Tech Data vendors and customers over the next 12 months.

“End user customers are coming back into environments that are not fit for hybrid working, yet that is what most of their employees want. That means a fundamental rethink and a re-spend to make those offices fit for purpose – and not just the offices. Even when you’re in the office you may be spending half your time in a virtual environment because plenty of people you’re dealing with within your own company or other companies will be working from home. That requires different collaboration spaces, IT, microphones, audio; it probably needs a much bigger network, a much more capable network, different security and so on.

“Shoring up the hybrid workplace and adapting the hybrid workplace is a massive opportunity and we’re working with partners across those product sets all the time to ensure they can bring those solutions to market.”

Plus ca change

Hybrid working aside, Watts believes that many of the problems IT is solving today are the same ones it was addressing before the pandemic, which are continuing to drive demand for Tech Data’s advanced solutions.

“Security continues to do very well. That was a feature pre-pandemic, and it needs to be again post-pandemic. The feeling generally is that security spend didn’t keep up with general spend during the pandemic, so there is a catch-up on security, and that market was already doing well. Cloud, particularly around the public cloud providers Microsoft, Google, AWS, continues to be very, very strong, double-digit growth for us and the market. And then anything IoT or anything that makes sense of data. Analytics vendors continue to do very well.

“What’s interesting is that though we’ve had a global crisis, those things were all doing really well pre-pandemic. I don’t think the needs that IT addresses have changed particularly. The problems that IT is solving now are the same ones it was tackling three years ago.”

Opportunity 2: cloud

Watts sees the move from on-premises solutions to cloud as the second really
big opportunity for the channel, which it is helping resellers/MSPs to tap into through its Practice Builder programme.

“We take our customers on that journey. If they are ready for it, we will assess them moving through it, we help them make their first sales in cloud, for example, or in security or in IoT, when they move to an adjacent business. A lot of partners need to widen the profile of how they do business and we can support them in that. That’s a big priority for us.”

Watts points out that it is also a priority for more and more Tech Data customers.

“There are around 10,000 trading resellers in the UK in any given month. They’re not the same resellers trading every month, so there’ll be a higher number overall, but there’s about 10,000 resellers trading in the UK every month. A couple of thousand of those went very quiet during the pandemic – consulting businesses, small businesses that were servicing what was in place and didn’t need to buy anything more for their customers. They’re all back.

“And there is a renewed urgency among some of those partners to move into understanding adjacent technologies. It may be if you were very much accredited to sell hardware, storage, networking, server technology, you would have moved some of that strategy very fast to the cloud during the pandemic. And now you probably need to ensure your salesforce and your technical team really understand those technologies.

“If you weren’t selling a lot of security before, or maybe you were but it was just device-based security to secure people working from home, you may need to secure that on-premise position better now that workers are back, and maybe your teams aren’t accredited to do that. So we are seeing a lot of people coming through our education programmes on those sorts of topics and technologies.”

ESG

Over and above these technology-related trends, Watts says the topics that always come up in conversations with peers, vendors and customers, aside from the skills shortage, are sustainability and Diversity, Equity and Inclusion (DEI).

“Everyone is fast wising up to the fact that their businesses and the supply chains they work in need to be moving towards net zero carbon aims very quickly. The government wants it. Everyone’s partners want it; if you want to carry on supplying partners, at some point you’re going to have to be hitting those carbon goals to be a supplier to them. It’s appearing in our tenders. And actually for businesses of a certain size, it’s now going to have to appear in our statutory accounts as well. So, there is this pressure now to make a move.

“What’s good about it is no one’s looking for a competitive advantage. They are saying what are you doing? Can you help? Have you got any interesting ideas? Some partners are saying, if I’m going to hit my Scope 3 greenhouse gas emissions targets, I need you to hit your Scopes 1 and 2. There’s this pressure for everyone to get their house in order.”

As well as starting to address its own carbon footprint, Tech Data is working with Arete Zero Carbon to supply its carbon assessments and carbon reduction plans as a service so that resellers can fast-track their ability to respond to questions about their sustainability strategy. The service includes personal assessments, help with data gathering, measurement of a business’s carbon footprint and, if required, a bespoke carbon reduction plan based on Arete’s assessment and knowledge of the IT industry.

So, what is Tech Data itself doing beyond entry-level initiatives like installing electric car chargers, LED lighting and solar panels and recycling waste?

With nearly half of its Scope 3 emissions coming from transport and distribution, Watts says Tech Data is liaising with its carriers to find out about their roadmaps for reducing the carbon footprint of their fleets and journeys to see whether there are more sustainable options. It is also planning to work with partners and vendors to identify whether there are any steps in the distribution/delivery process that can be removed.

“At the moment, after a product has left China, for example, it arrives at a port in the UK, it comes to a hub, it comes to us, then out to a reseller, then to an end user. It’s not beyond the wit of man to cut out some of those journeys. We are starting those very complex conversations with our vendors and our customers now.

“The other thing we’re doing is upgrading our buildings. In Basingstoke, we’re moving to a new building on our existing business park that has much higher environmental credentials than the one we’re in. Sustainability’s not the only reason we’re moving, but when we worked with our consultants on finding
a new property, it was the number one criterion on our list. And then we have an office in Bracknell that was coming up for lease-end, where we have decided
to stay, on condition that the landlord upgrades the environmental credentials of the building.”

DEI

The momentum that has propelled sustainability up the corporate agenda
is having the same effect on DEI, which has become a real focus for Tech Data. Although people aren’t necessarily looking for statistical evidence of the effectiveness of DEI programmes, Watts says that they want to see that you are doing something about it and that you believe in its value.

“I think pre-pandemic, we were a little bit behind the curve for a business of our size, but during the pandemic, we set up a DEI Council within the UK. We have a Business Resource Group called Elevate, which is around women in leadership; we have one representing LGBTQ+; we have one called Embrace, to make people of all races, religions and cultures feel welcome; and soon we will have one around disability.

“We just think it is the right thing to do. That’s what our teams tell us and certainly what our younger team members tell us. And secondly, we are pretty sure we don’t look exactly like the communities we hire from, and we want to. We want all the talents working in our offices and when they get here, we want them to be comfortable. Having a really strong DEI strategy has been great for us, and we’re only just at the start of that. As with sustainability, I talk about these things with humility; there’s so much more for us to do.”

It has been a topsy-turvy couple of years and there are still major problems, from product shortages, inconsistent supply and backlogs to skills shortages, rising fuel costs and inflation. At the same time, as Watts says, there continue to be big opportunities for the channel as enterprises adjust their offices and IT to support new ways of working and to create fairer, more sustainable businesses.

ESG makes its mark

Confidence in the future of the Technology Channel has reached a record high amongst UK industry decision-makers, with the overall confidence score reaching 7.8 out of a possible 10, according to a new report from channel services provider Agilitas IT Solutions.

The EVOLVE Technology Channel Confidence Index 2022 – The Journey to a Sustainable Future highlights a steady rise in confidence about the future of the Technology Channel to 7.8, compared to 7.4 in 2021.

The 250 senior leaders from UK-headquartered, £5m+ turnover channel businesses surveyed by Agilitas were even more confident about the prospects of their own companies over the next 12 months, with a combined confidence rating of 7.9.

When asked how important building local supply chains and ecosystems across global markets will be to their business in the next 12 months, respondents generated a mean score of 7.7 (where 10 was ‘very important’). More than half (59%) gave a globalocal approach scores of 8, 9 or 10.

Other findings include:

  • 7% of decision-makers state their organisations measure sustainability targets quarterly;
  • The level of confidence in delivering customer experiences saw a return to pre-pandemic scores, climbing back to 7.9;
  • Confidence in the channel’s ability to form collaborative partnerships that balance profit with purpose scored 7.9;
  • Company culture was highly important to this year’s respondents, sitting at 8.2; and
  • Technology Channel leaders showed strong confidence in attracting and retaining talent at 7.8, with 64% scoring 8 or above.

Agilitas CEO Shaun Lynn said: “As the first Agilitas market report of the post-pandemic era, there is no surprise that the first EVOLVE Technology Channel Confidence Index would offer up such a diverse mix of results, full of lessons learned, progression and disruption. The vision to act with impact extends to all corners of the Technology Channel to build an environmentally, socially and economically sustainable future. Now, the true value of success is no longer determined by financial gain alone, as many channel players seek to re-evaluate the way they do business to find the right balance between profits and purpose.”

https://www.agilitas.co.uk/agilihub/initiatives/ channel-confidence-index-2022/

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