Mumbai: Circa 2016 has panned out to be a year of major consolidation in the Information Technology industry with mergers and acquisitions ruling the roost. The channel business too has been impacted by these movements with the latest such news coming from the United States of America.
MNC distribution major Tech Data Corporation is buying Arizona based Avnet’s technology services business for a mammoth $2.6 billion, making it the third such deal in the distribution business during this year. Earlier this February, Chinese group Tianjin Tianhai acquired world’s largest ICT distribution company, Ingram Micro for approximately $6.0 billion. Exclusive Group, the global value-added services and technologies (VAST) group, bought Singapore based cyber security and infrastructure VAD, Transition Systems.
The mergers and acquisitions of technology companies were widespread this year, especially in the security domain. While Symantec strengthened its position in the security business by acquiring Blue Coat for approximately $4.651 billion, Avast bought over rivals AVG Technologies for $1.3 billion. Dell and EMC recently concluded their much talked about merger to create $74 billion entity. Once a rival, HP also announced their decision to buy Samsung’s printing business for $1.05 billion.
While acquisitions of small scale players and rivals help the big technology players become more powerful in the industry, it also gives new wings to prospering startups. The same trend is now visible in the distribution business. Big distribution houses are acquiring regional players to step into the new growth markets and expand their channel base. Avnet’s acquisition is a strategic step of Tech Data Corporation which aims to establish a foothold in the prospering Asia region.
The channel is always very sensitive to such consolidations. The mergers and acquisitions result in a massive reshuffle in the leadership of the company, most of the times, channels are not preparing for the transition. Similarly, such consolidations also lead to changes in the channel policy.
The Enterprise channel, which includes large system integrators and solution providers who handle large and strategic accounts, are most of the time in a fix due to changes in channel policies. This also impacts the long term relationship of channel partners with vendors as well as customers.
However, some partners believe that though there is disruption in the channel business in the short term, it brings a lot of advantages to partners in the long run with much defined channel strategy. In the case of recent acquisitions and mergers, there is still not a clear information from the vendors in the channel play. However, the partners hope that the policies will be cleared once the company completes the transition period.
The distribution business has evolved over the years and the industry experts say that the industry will witness further disruptions in the form of new tie ups and consolidations. These consolidations are very vital for the industry and expected to impact the entire distribution ecosystem in the coming months.
Aim to tap the Asian Market?
The deal is said to make sense because Avnet and Tech Data have different geographic, vendor, and technology strengths.“Tech Data is very strong in Europe, but not in Asia. Avnet is strong in the Americas and in Asia. Tech Data also has a huge ‘volume’ business in consumer gear, while Avnet is strong in data center equipment.”, reports Fortune magazine.
Tech Data stocks everything from Apple AAPL 0.16% iPhones, iPads, and MacBook Pros to other PCs and laptops, and it also has a data center equipment business. Avnet’s technology services unit focuses more on higher-end data center hardware.
What does it mean for Indian partners?
A market leader in Indian distribution industry told Channel Times that this is a global consolidation where cloud is killing the server and storage folks, both in the vendors and distribution categories. According to him, In Indian context, Currently Avnet will be replaced by Techdata. A year later they will be looking at growing both their volume and value business and further consolidation is likely to happen.
Avnet technologies firm is headquartered in Mumbai with operations across the key cities of India. Some of the selective key industry verticals the company is into are Virtualization, Security & Networking, Storage DR & BCP, Enterprise Systems Management, Collaboration & Mobility, Industry Solutions and Information Management.
Whereas, Techdata is into end-to-end IT distribution from consumables to accessories and from camera to software. Techdata also has in place online purchase within the distribution channel where any reseller or sub-distributor can place an order directly with the national distributor online and the entry of Techdata will be a shaker in the IT distribution market. Besides traditional logistics, Techdata also provides training, communication, partner enablement and credit services.
Also it is pertinent to mention here that Tech Data’s largest rival, Ingram Micro, is being acquired by HNA Group, the Chinese aviation and shipping conglomerate, for $6 billion. That deal was announced in February and has yet to close.
(Story reported by Priyanka Pugaokar with inputs from B. Swaminathan)