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Nov 18, 2020

Distribution's Role in Helping Drive Digital Transformation

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Leading companies have recognized the importance of developing and implementing comprehensive Digital Transformation (DX) strategies; however, in many cases the pace of implementation has been slow and excessively deliberate. COVID-19 and the ensuing pandemic changed all of that; compressing literally years’ worth of operational, organizational and technological change into months or even weeks. Companies needed to fast track initiatives such as work-from-home at a moment’s notice, leaning heavily on the collective channel for expertise and the delivery of critical hardware, software and services.

Distribution Major Category Performance

In March with the workforce migration accelerating, momentum began building around select hardware and software categories directly aligned to Digital Transformation. According to NPD’s Distributor Track data (Jan.- Sept. 2020), while IT hardware sales declined overall in the U.S., notebooks and tablets generated strong year over year growth at a combined rate of 17% totaling $8.2B in revenue.  

From a Software perspective, revenue increased 3% to $13B with emphasis on supporting the newly configured remote workforce. The monitoring and management, gateway and firewall, and SIEM categories were the major drivers of growth resulting in a combined 16% increase in sales during the first half of 2020. With the likelihood of a hybrid work-from-home model emerging, security will remain a high priority in 2021 as companies look to replicate corporate level protocols operating within home based networks.

Cloud continued to see strong momentum through U.S. distributors as cost savings, flexibility and scalability drove Cloud based alternatives to on premise servers. Cloud revenue increased by 25% with Cisco, Amazon and Microsoft representing the top 3 in overall market share.

Data center and the broader hardware ecosystem continued to see compression with overall distribution revenue down 12% year to date. Much of the decline in data center hardware in 2020 was directly attributed to new construction projects and planned expansion plans put on hold due to the uncertainty of the pandemic. With the work-from-home migration and escalating IoT product expansion, data center capacity has been depleted considerably and the market will look to accelerate previously scheduled new construction and expansion plans in the near future. 

Distribution continues to play a vital role as the engine of the channel; providing a deep and broad assortment of products, software and services enabling VAR’s, DMR’s and MSP’s the opportunity to be infinitely more agile and focused on their own unique value proposition to the customer. Distribution remains a critical part of the overall channel advantage and this will be an important area of focus as we head into 2021.   

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