The true value of technology distribution was never more apparent than in 2020. Agility, efficiency, and scalability were three pillars that were foundational in helping to stabilize the channel in 2020 – and will enable the distribution engine to fuel broader channel recovery in 2021. While distribution serves a diverse portfolio of channels and partners, small businesses purchasing through VARs and resellers represent a significant portion of their business and their success will be critical to the broader economic recovery. Small VARs and resellers are also highly reliant on the types of support distribution provides including credit, logistics and access to solutions (hardware, software, and services).
2020 Distribution Performance Highlights
As referenced in NPD’s B2B Distributor Track (Jan.- Dec. 2020), Distribution revenue for 2020 was flat vs. the same period last year; however, the sales trajectory continued to improve in the second half of the year with December growing 10% year over year. December also represented the single largest revenue month for all of 2020. While hardware specific revenue for the year declined by 2%, total unit volume increased 6% fueled primarily by work from home (WFH) and educate from home (EFH) initiatives. Notebooks were a critical part of both initiatives in 2020 and increased dramatically with revenue growing by 25% and units up an astounding 44% driven mainly by the huge success of Chromebooks within the education sector.
Other categories reflecting strong growth in 2020 included servers, tablets, and docking stations. Peripherals also played an important role in providing a better overall experience with work and educate from home initiatives. PC Headsets increased by 67% and USB webcams increased by a staggering 434% and could have been much higher had supply been able to catch up to runaway demand. For hardware categories outside of WFH and EFH, the pandemic brought significant challenges with desktops, desktop server memory, and large format commercial displays all reflecting material declines of nearly 25%.
Software overall performed well in 2020 with revenue increasing by 3% and totaling 26% of distribution revenue. Strong areas of growth included identity / access management, monitoring / management, and SIEM all tied directly to supporting the remote workforce. Cloud infrastructure also continued its strong growth trajectory with infrastructure and platform as a service delivering a 26% increase as organizations looked to leverage the scalability and flexibility that cloud infrastructure provides.
2021 Distribution Market Outlook
As vaccine rates increase and the pandemic begins to slowly retreat, businesses are beginning to stabilize, putting pressure on a quick recovery and return to growth. The channel is poised to support these “return to growth” plans by providing strong financial support along with a robust portfolio of digital transformation focused technology products and services. With many sectors reflecting lower revenues in 2020, budgets overall are likely to be constrained until at least the second half of 2021 – especially for small businesses. Small businesses will focus on stabilization and recovery, prioritizing only critical hardware, software, and services due to their limited budgets and operating flexibility. For large/enterprise businesses, even with lower revenues across certain sectors, senior leadership is committed to the long game, investing incrementally into hardware, software, and services in support of their newly deployed remote workforce.
Education began the new year with some significant questions as to 2021 budgets as many states forward spent heavily in 2020 tied to remote learning and closing the significant technology gap that still exists today. Changes in budget priority at the federal level have renewed confidence in continuing efforts to deploy technology to not only support remote learning, but also the changing physical environments at schools with new protocols surrounding social distancing, contact tracing, and monitoring.
2021 will be fueled by digital transformation efforts as companies continue to evolve and optimize to the new landscape. Distribution will play a pivotal role by providing the necessary credit, technology, and services fuel to help deliver technology products and services to the broader channel and their customers.