IT and Business Insights for SMB Solution Providers

Distributors Are Poised to Take Advantage of Soaring Cloud Sales

New report from GTDC underscores investments and capabilities of distribution companies By Frank Vitagliano

Everyone in technology knows cloud sales are booming. But did you know the world’s leading distributors are poised to take advantage of the rise of this important tech sector? It’s true.

Before I get to how, here’s a reminder of just how fast sales of cloud technology and digital services are growing.

In late July, Microsoft announced fiscal fourth quarter earnings. For the three-month period ended June 30, Microsoft’s cloud computing service grew 47% year-over-year. The month before, Zoom reported that its quarterly cloud sales jumped 169% compared to 2019. Even IBM, whose overall second quarter sales slipped by 5.4%, saw a 30% jump in cloud revenue year-over-year.

Little wonder that Gartner, which projected in late July a 7.3% drop in overall IT sales for 2020, nonetheless said the outlook for cloud is “rosy.”

Why is pretty obvious: Since the onset of COVID-19, tens of millions of displaced knowledge workers have moved from offices to work from home (WFH) settings. The most expedient way for businesses everywhere to provide these workers access to their data, applications, and colleagues was via cloud computing and digital services. And it will be for some time to come. Consider: After the pandemic passes, it is estimated that as many as 30% of displaced professionals will make WFH a part-time if not permanent arrangement.

Distribution has prepared for this digital transformation for a decade. In that time distributors, including members of the Global Technology Distribution Council (GTDC) that are responsible for more than $150 billion in sales annually, have made significant investments in cloud capabilities and services. This includes the marketplaces they have established, the technological platforms they have invested in, and the support and assistance they provide channel partners.

A new report from the GTDC, Thriving in the New Normal, highlights how. In the report, we share some updated data on the market. Consider the following:

  • From January through June, sales of platform-as-a-service technology sold through distributors in the U.S. grew 22% compared to last year, according to The NPD Group.
  • In mid-June 2020, cloud sales in Europe jumped 19% year-over-year, based on a four-week rolling average, as countries began to reopen.
  • What is more, overall information and communications technology (ICT) sales in Europe grew by a surprising 4.9% in the first half of 2020 compared to last year, despite country lockdowns, employee relocation, and business interruption.

In addition to these findings, Thriving in the New Normal also identifies six trends and realities that are shaping the ICT channel today. They are:

  • The growth of cloud coincides with distributor investment
  • SMBs cannot survive without digital innovation and the partners that provide it
  • ICT professionals and line of business (LOB) leaders need each other like never before
  • Tech innovators cannot thrive alone
  • No one brings complex technology together better than distributors
  • Distributors are aggressively addressing challenges to their business

Let me highlight one trend that especially details the value distributors provide at this critically important time: the growing complexity of running a business amid COVID-19.

On any given day, a typical knowledge worker may leverage six different applications to get his or her work done. Collectively, a small business that employs such a worker might utilize 40 or so different applications to achieve its work aims. There’s simply no way a company focused on a particular market or customer segment can manage all of its technological, regulatory, security, and/or organizational needs by itself.

That’s where channel partners come in. They are superbly positioned to help end customers with these challenges. But because every business runs a different mix of applications, infrastructures, and the like, individual channel partners need a single source where they can turn for help. More often than not, that source is their preferred distribution partner.

Distributors are particularly adept at helping technology advisers who cater to end customers with product selection and integration, pricing, deal financing, technology support, and other factors that are critical to solutions integration.

Distributors also play an important role when it comes to helping their upstream business partners, tech vendors large and small. “With the shift to the cloud and software-as-a-service, tax domains, jurisprudence, tax compliance and recovery — those things just don’t go away. In fact, they get more complicated in multi-vendor, complex environments,” says Paul Cunningham, the chief marketing officer at GTDC member Westcon-Comstor, in our new report.

If you’re looking to better understand the value that distributors provide amid the pandemic and the rise of cloud computing, be sure to check out Thriving in the New Normal.
You’ll be glad you did.

FRANK VITAGLIANO has served as the GTDC’s chief executive officer since April 2019. His focus is on strengthening partnerships between members and vendors by addressing industry-wide issues and opportunities related to the integral role of distribution in the IT channel.

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