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About Tech Distribution 2025

The GTDC commissioned
The value of this report amidst rapidly changing channels...
Vation to research and develop I’ve been close to technology distribution throughout my career – yet from the perspective of vendor partners,
this report due to the firm’s unique perspective on key leading channel business, and as CEO of a large solution provider. In these capacities, I learned how
participants in the IT value chain, from venture capitalists distribution functions, what makes mutually favorable or even extraordinary outcomes possible.
and OEMs – including emerging and established vendor Coming to the GTDC as CEO adds greater depth to my own insights about the world’s most successful
partners – to the central role of distributors, the solution distribution companies. Our organization’s members are at the forefront of the technology distribution
providers they serve and, of course, end customers. industry…something that never ceases to change.
This is the GTDC’s first report to look at all of these What’s hot – and not – now changes faster than ever. We all know this. On the other hand, when looking at
dimensions to channel business and what to expect from distribution as a whole, as an industry and in microcosms and subset markets that partner with or leverage
distributors in the years ahead. distribution, a much more profound story emerges. We commissioned Distribution 2025 based on extensive
surveys of key ecosystem participants to more deeply understand the value of this industry today and how
In addition to conducting in-depth interviews with it’s evolving in the years ahead. This report delves into:
leaders from all dimensions of the technology ecosystem, • Why distributor ecosystems are delivering deeper end-to-end value, from VCs and OEMs to
Vation gathered detailed survey responses from more solution providers as well as end users
than 50 top executives on the most important drivers for
• How distribution’s role and services are expected to evolve and grow while building on
distribution partnership success today and expectations traditional advantages
over the next five years.
• What vendor partners can do to capitalize on emerging markets by unlocking the channel’s
full power through distributors
Many channel “insiders” like us have first-hand knowledge of distributor competencies, value,
Quick Links to Key Content proof points and aspirations. Those outside these circles can easily miss out on the story
Decades of Progress................................................................................3 beneath the surface – and not realize pick/pack/ship was the beginning, not an end.
Building Blocks of Distribution............................................................4 Distributors in the years ahead will be seen in a different light – including what they’ve
Upstream and Downstream Financial Analysis.............................5 already accomplished over decades. Their impact is deeper, engagement more
Current State of Distribution................................................................6 far-reaching. Service offerings are of increasingly higher value. Distribution 2025
Overview of Study Participants...........................................................7 will help you understand what’s in store.
A 360-degree View of Distribution.....................................................8
Exploring Growth Rates.........................................................................9
Living in a Virtual World...................................................................... 10
Future State of Distribution............................................................... 11 Frank Vitagliano
CEO, GTDC
Future State of Go-to-Market Services.......................................... 12
Summary/Conclusions........................................................................ 13
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Decades of Progress – and an

Increasingly Encouraging Outlook
Technology distribution dates back to the 1930s when
components business shaped those early formative years –
and ultimately as mainframes gave way to minicomputer
platforms and workstations, and as the PC revolution took
off. This era relied heavily on pick/pack/ship fundamentals
that have always been a mainstay of distributors, serving as
precursor to the increasingly dynamic role they are expected
to play in the years ahead.
The “digital era” is here, with cloud-based “XaaS marketplaces” 2018 -2025+
gaining ground amidst other industry advances feeding
1990 -2018
extraordinary new opportunities for distributors. All the
emerging developments and more widely entrenched 1930 -1990
technologies and products have common bonds in
leveraging the value and reach of distributors and the
solutions providers they serve.
Although the symbiotic role of distributors, vendors and the
channel now extends well beyond on-demand fulfillment
for infrastructure and equipment, including hundreds of
thousands of point products and leading-edge software,
the operative word remains “solutions.”

Distribution Value & Growth Through the Years

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Building Blocks Component and Systems Distribution

of Distribution The first era of distribution solved the upstream need for inventory and logistics management at scale. This extended
era witnessed many types of technologies utilizing the emerging go-to-market model of distribution. As noted, radio
Vation provides the following analysis to technology and parts were the first entrants, followed by computer systems and supplies varying from diskettes
position the evolution of distribution’s to printer ink. Those lines expanded as vendors needed distribution globally for subsystems and systems as the
decentralized compute era neared. Along with the key inventory management and logistics support from distribution,
strategic value to the high-tech ecosystem 1930 - 1990 core competencies of quote to cash were developed in distribution, including financing support for the flourishing
over time. We further analyze those values
high-tech channel. This era saw the emergence of distribution as a volume-based business model with operational
created by distribution against the Upstream excellence.
(OEM/Emerging Tech) and Downstream
(Reseller/SI/MSP) profit and loss statements.
Today’s global and regional distributors Solutions Distribution
drive value for their “Upstream” vendors The second era of distribution built upon the operational excellence of the first phase by creating cross-vendor
and “Downstream” resellers by creating solutions distribution. The era augmented the volume ability of the first era by building a value-based business model
economic scale that augmented the with technical excellence. In the Solutions Distribution era, distributors accented upstream vendors by integrating
income statements of both upstream and multi-vendor solutions, including data center offerings. In this era, distribution also added channel development and
downstream constituents. enablement to its value proposition to assist vendors in identifying the right reseller/SI/MSP fit for their solutions.
1990 - 2018 Once identified, the distributors focused on the channel enablement for the integrated solutions. The integration,
First, from a historical perspective, distribution development and enablement services all augmented the profit and loss statements of both the upstream and
has been a go-to-market partner in technology downstream constituents.
for over 80 years, begining in 1935 with
used radios and radio parts. Modern-day Digital Distribution
broadline distribution evolved in the 1970s
and through specialists that entered the The next era of distribution focuses on Digital. As the world digitizes everything, the technology needed to support
mix and grew over time. With this long the end users’ transformation will include investments in emerging technologies of Artificial Intelligence/Machine
history, there is a corollary core competence Learning, Cloud/XAAS, IoT and Security/Analytics for everything. The core value distribution solutions of data center,
of agility to market needs. Here you’ll see and integrations from the Solutions Distribution era, and the global logistics, quote-to-cash operational excellence
how Vation defines the phases of major from the Component and Systems Distribution era will continue to be core needs of both upstream and downstream
constituents. The evolution of the Component Era transactional support for recurring and subscription business
distribution business model adaptions over 2018 - 2025+
models is a key evolution to support the Digital Era. Similarly, the integration services created in the Solutions Era will
the years (as shown on the previous page).
need to evolve for the support of AI/ML and Data Analytics systems integrations within IoT solutions. Finally, how the
distribution industry monitors and accelerates the adoption of emerging technologies will be an added value for all
upstream and downstream constituents. With thousands of venture-funded firms in AI and Security solutions, the
upstream startups need an accelerated path to success, while the downstream resellers and MSPs need triaging of
these vast numbers of firms and solution categories to implement the best digital solutions for their customers.
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Upstream and Between the Balance Sheets

Downstream Financial During the Components Era, distribution’s ability to optimize the COGS through inventory management and logistics practices
Analysis enhanced the upstream and downstream constituent’s gross margins. The transactional support and financial services programs
built in the Components Era optimized upstream and downstream SG&A spends through distribution’s operational excellence.
These practices rendered improved EBITDA for all constituents.
As we analyze the financial impacts across
the simplified income statement, we see As the Solutions Era brought technical excellence, further optimization of COGS and SG&A, opportunities were developed by
the ongoing space for the distribution distributors to enhance their upstream and downstream constituent’s profit and loss statements. Enhanced global logistics
industry to thrive providing solutions support and hardware/software integration across vendors provided superior COGS optimization for both upstream and
in the digital era that neither upstream, downstream participants with distribution. Further, channel ecosystem development and enablement at scale drove improved
nor downstream, constituents would SG&A gains for all parties.
have the financial appetite to provide
themselves. Each value service was As we now enter the Digital Era for distribution, all parties can further improve their balance sheets. Appliance-based AI/Analytics
created to facilitate the manufacturer’s and security solutions will be enabled by distribution’s manufacturing and supply-chain capabilities to optimize upstream COGS.
supply chain and scale the go-to-market Cloud marketplaces will lower the SG&A expenses for rapidly providing, assessing and deploying SAAS and PAAS solutions
motion in a more economic manner than through distribution. Integration of emerging technology vendors into broader OEM solutions will benefit all parties in the
the manufacturer could build internally. Digital Era.
Similarly, the distributor’s solutions provide
augmentation to the downstream resellers,
MSPs and SIs. The analysis represents the
Historic high-tech income statements across the value chain can be summarized as follows:
impacts on the upstream manufacturer’s
and downstream constituent’s simplified Upstream Manufacturer Distributor Downstream Reseller
income statement of partnering with the
Revenue $100 $100 $100
distributor for the various services.
- COGS 35 92 84
Gross Margin 65 8 16
- SG&A 35 5-6 8
EBITDA 30 2-3 8

Note: Figures shown are based on aggregate industry averages for respective sectors.
Actual ratios will vary based on the type(s) of business models employed.
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Global Buyout Deal Value (Including Add-On Deals) • Bain & Company
Current State of Distribution
The current state of the distribution industry is similar to the overall high-tech
industry in several dimensions.
1. The major technology trends are:
a. Migration to the Cloud
b. XAAS solutions (Software, Platform, Infrastructure)
c. Artificial Intelligence/Machine Learning
d. Big Data/Analytics
e. Blockchain
f. Internet of Things (IoT)
g. Mobility
h. Security
Rising deal value in 2018 capped the strongest five-year stretch in history, while deal count reflected
2. The acceleration of investments stiff competition and rising asset prices.
Notes: Excludes loan-to-own transactions and acquisitions of bankrupt assets; based on announcement date; includes
a. Venture Capital Investments announced deals that are completed or pending, with data subject to change; geography based on target’s location
b. Private Equity Investments
c. Strategic OEM Investments
3. Go-to-Market US Venture Capital Investment Reached $130.9 Billion
a. Early-stage direct and agency sales strategies in 2018, Surpassing Dot-Com Era
b. Mid-stage channel strategies
c. Mature global distribution strategies
These technology trends have driven the enterprise and commercial markets With the acceleration of technology and investment, the go-to-market strategies have
over the past decade and will continue to do so through 2025. The list above is accelerated as well towards more scalable models. The initial go-to-market for many firms is
reflective of the data aggregated for this report. a direct sales motion to capture logos of new customers. Once the initial capture reaches
50 clients, many tech firms begin to scale through utilization of the channel, and as the
At the same time, the acceleration of investments from the venture capital needs globalize, distribution becomes a key component in go-to-market. The go-to-market
community, private equity firms and strategic OEMs has fueled rapid growth approach seeks to capture clients, then scalable revenue and finally margin optimization.
of innovation. Bain & Company, for example, reports that 2018 capped an
amazing five-year acceleration in private equity, as shown in their Global The distribution industry will need to continue to evolve with these trends. Distribution
Private Equity Report (top of next page). has successfully evolved with the industry over the past decade, and is expected by the
survey respondents to continue to evolve and become even more strategic by 2025.
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Background/Overview of Study Participants

Vation surveyed and interviewed key constituents from distributors and their Original
Equipment Manufacturer (OEM) vendor partners in 2018. This study determined that the
industry continued to see value in distribution, though recommended the GTDC evolve
many components of its services to meet emerging needs of OEMs as well as distributors.
In this Distribution 2025 study, Vation surveyed and interviewed a wide range of segments Venture Capital Firms
to establish the current distribution value components and projected needs through 2025. As they invest in up-and-coming tech companies, venture capitalists view
Vation collected viewpoints from the entire high-tech value chain including venture capital; reaching distribution as a defining moment for corresponding products.
emerging tech companies; OEMs; distributors; resellers/systems integrators; and end users. It’s the best and most efficient way for companies in their portfolios to scale.

Vendors: Legacy and Emerging

Distributors Leading technology vendors leverage distribution in a multitude of ways
beyond “pick/pack/ship.” Emerging companies are also a healthy aspect 
Value-added services define today’s of the overall mix, with hundreds of new players in distribution each year.
technology distributors across the
globe. GTDC members, the world’s
most successful distribution
companies, drive approximately Solution Providers/System Integrators
$150 billion in annual revenue while Distributors fuel channel business models with unparalleled proficiency,
serving 95% of the planet. including fast access to comprehensive solutions, financing, pre- and
post-sale support, training and other complementary services.

End Users
Although distributors help preserve the bonds that solution providers forge
as “trusted advisors” to businesses of all sizes, their solutions and services
are essential to end-user satisfaction wherever the channel goes – and grows!
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A 360-degree View of How long have you been in a position that has interacted
Distribution Through 2025 with distribution?
Distributors have always been solution experts, vetting
the “best of the best” in what’s today becoming a vast
sea of rapidly unfolding breakthroughs – already evident
with artificial intelligence, machine learning, analytics
integration and much more.
Value-chain executives surveyed and interviewed for
this report see distribution playing a pivotal role in their
growth aspirations as well as in making adoption of new
offerings both possible and pervasive across SMB markets
as well as enterprises of all sizes.
The 360-degree view of Distribution 2025 provides a
compelling perspective in total and within specific industry
segments. The majority of study participants – nearly 69% –
possess greater than a decade of experience working
with technology distributors. Those new to distribution
also represented a sizable 10% of the respondents, and
approximately 21% indicated between five and 10 years
of distribution-related experience.

Source: Vation research, Distribution 2025 report.

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On an annualized basis, how much do you anticipate your Exploring the Growth Rates
distribution business to grow between now and 2025?
Distribution 2025 study participants all confirmed they
anticipate growth through distributors. More than half
(61%) anticipate greater than 10% growth through 2025.
In many cases, based on industry interviews, the various
sectors engaging IT distributors expect corresponding
indirect sales to outpace direct business, if applicable.
This represents a sea change where many companies
had previously emphasized going direct, yet ultimately

61% learned it was much more efficient and cost effective

to leverage distributors and their channel customers –
especially in reaching and serving small or midsize
businesses as well as larger enterprises in niche
vertical markets.

Source: Vation research, Distribution 2025 report.

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Living in a Virtual World How would you rank distribution supply-chain capabilities
With Physical Demands projected in the year 2025?
“Virtual warehouse” cloud solutions ranked highest in
importance among other distribution core competencies
that continue to evolve. Many longstanding distributor
core competencies will remain critical, according to survey
respondents, who cited the continued importance of
integration, logistics, inventory management and asset
lifecycle services, for example.
Manufacturing support and “reverse logistics” are also
expected to play a role as distribution models evolve,
the latter gaining attention due to environmental
concerns pertaining to the disposal or re-use/re-furbish of
equipment. In addition to supporting solution providers
in a broad range of ways, distributors also perform
numerous services supporting both hardware and
software companies.

Source: Vation research, Distribution 2025 report.

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Technology Trends in the Year 2025 Future State of Distribution

Survey respondents are expecting the distribution
industry to evolve with the high-tech industry and
Lesser Importance ............... Weighted Score ............... Greater Importance

serve an even more strategic role in 2025 than in

2019. The survey respondents ranked the need for
Security, Cloud and Artificial Intelligence practices
as the top three most important technology areas
in 2025. The Internet of Things and Big Data/
Analytics closely followed the top three, while
current-day solutions maintained a need for
continued competency in Data Center, DevOps and
Collaboration solutions. Blockchain and Robotic
Processes were scored lower in importance.

Source: Vation research, Distribution 2025 report.

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Future State of Given the technology trend expectations cited on the previous page, respondents ranked
the need for the following distribution go-to-market services.
Go-to-Market
Services

Lesser Importance ............... Weighted Score ............... Greater Importance

The top three services respondents
point towards for 2025 are current
core distribution services:
1. Partner Enablement
The respondents validate that the
current need for the channel to be
enabled will continue in 2025.
2. Partner Credit and
Financial Services
The respondents also validate this
current core function will continue
to be important in the future.
3. Partner Recruitment
The respondents also validate this
current core function will continue
in importance through 2025.

Source: Vation research, Distribution 2025 report.

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Summary/Conclusions
As we distilled all the Distribution 2025 interviews and survey results aggregated across
multiple industry sectors – from distributors, venture capital businesses and OEM partners
to solution providers, integrators and end users – a clear picture emerged:
1. Distributors have effectively evolved over the years to keep pace with the changing
requirements of the IT industry
2. Distributor core competencies will remain crucial in the future and cannot be easily
replicated, if at all, by any other IT ecosystem participants
3. Distributor value is on the rise and expected to thrive and gain momentum through
2025 as respective business models and portfolios transform
Distribution 2025 findings point to distributors as increasingly strategic partners. If
distributors continue to be agile and build new capabilities for the digital era, they will
continue to grow at an accelerated rate.

Building on Core Competencies, Driving New Value

Although distributors are continuously evolving through the creation of new and enhanced
services, survey responses underscored how core competencies developed over decades will
remain instrumental: from operational excellence in distribution volume – in the Components
and Systems Distribution era – to the Solutions Distribution era, which built upon the first era
by delivering integration services with technical excellence in value models.
The era of Digital Distribution is upon us now and will further capitalize on the “building
blocks” of previous eras. Through end-customer demand for digitizing their businesses, the
need for Artificial Intelligence, IoT, XaaS and security solutions, for example, will create and
fuel new waves of opportunity for distributors as well as their customers and partners.
Solution and service innovations will remain a central force, particularly given the historically
demonstrated agility and go-to-market value of distributors over the past 85 years. Both
upstream and downstream constituents agree on the needed services, and the distribution
industry is fast at work to deliver those services.
 Data for this report was collected, compiled and analyzed over
the course of five months (June - October 2019). Vation expresses
its gratitude for the candid responses shared online as well as in
personal interviews subsequently conducted. For more information
on Vation or the content of this study, please contact:
Dave O’Callaghan, Managing Partner, Vation Ventures, LLC
[email protected]
www.vationventures.com

Prepared by:

Dave O’Callaghan, Managing Partner

Jay O’Callaghan, Sr. Consultant
Adrian Zuniga, Project Manager

RESEARCH
Phone: (813) 412-1148
Email: [email protected] • Web: www.gtdc.org RESEARCH
© 2019 • Global Technology Distribution Council • All rights reserved