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Signs that life is getting back to normal

The UK boss of Tech Data has seen market conditions improve since the start of the year as customers grow in confidence

There are signs that paused projects and workplace infrastructure deals are coming back online as offices reopen and customers start planning for life after the worst of the pandemic.

That also means that some of the channel that hunkered down during the worst of Covid-19 are also starting to ramp up their trading and are beginning to place orders with distribution.

David Watts, managing director at Tech Data UK & Ireland, has seen the distributor’s business come through the peak of the pandemic in a strong position, and the market issues that caused some problems last year are starting to improve.

The channel player has seen demand for edge technology, security and cloud increase over the past year and those trends have been on display in the first half of 2021.

“We’ve diversified a lot over the last decade, particularly the last five years, so now 30-35% of our business is software and cloud and that business went through the roof for all the reasons that you would imagine,” said Watts. “The security business was stellar and global computing was through the roof as well. So we had many businesses performing really well.”

Obviously, those technologies that needed on-site installs and access to customer sites suffered, but Watts has seen that situation easing.

“That’s really changed and meeting rooms are back with a vengeance, because people are trying to work out their hybrid working and that’s a really big topic,” he said. “The other thing that has changed is that big infrastructure projects have come back online. If I take the calendar first half of this year, everything is performing really well.”

Watts said insecurity around customer budgets had started to ease from the first quarter onward and there was more demand for installations and on-site visits from the channel.

At the peak of the pandemic, Tech Data also saw some partners lowering their trading levels, but things were now improving on that front as well.

“The number of trading partners during lockdown was reduced in the UK,” he said. “It wasn’t every country, but it was significantly reduced, up to 15% at one point, fewer trading partners in a month. That is back to normal levels now pretty much and we have had no insolvencies during that period.

“Some of those customers just go quiet, or they go into their consultancy and they don’t buy a lot of hardware and software – but they’re all back.”

From Tech Data’s point of view, the distributor had the technology to allow staff to work from home and it made it clear that it was also safe for those who choose to go into the office. “Our commitment to staff is, if you’re going out, the safest place to be is in a Tech Data office,” said Watts.

Thanks in part to a strategy that CEO Rich Hume set years before the pandemic hit, the channel player’s determination to move to emerging technology areas that will deliver high margins and growth has put it in a good position.

“If you look at vendors, pre-pandemic and now, broadly speaking their strategies are the same, because the world’s problems that can be solved by tech are the same,” said Watts. “We’ve invested an enormous amount of money in developing tools that can manage billing and consumption in the cloud – our marketplace and our ability to orchestrate solutions on a platform. Security was a big investment for us, IoT [internet of things], analytics data management or big investments, and they continue to be the hot topics – the pandemic hasn’t changed that.”

The business is close to finalising the tie-up with Synnex and Watts does not expect any major changes in direction. “At some point in the next few months, hopefully the merger with Synnex will close, and their strategy was very similar,” he said.

Coronavirus was one external factor that the channel had to deal with and Watts is also sanguine about the ongoing components shortage, expecting it to continue into next year. But the firm has managed to navigate through that challenge, he said. “Not all manufacturers are affected equally. Some vendors are running with their full range in stock and distribution, not necessarily all the time but they have days and weeks like that, which is a very good sign.”

Concerns continue, inflation is not looking good and it’s hard to know what the true state of the market is without high levels of government support, but Watts is looking ahead to the rest of this year with a great deal of positivity.

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