President, Americas / TD Synnex
In 2021 Michael Urban witnessed, as President Worldwide Technology Solutions Distribution, the creation of the world’s largest IT distributor TD Synnex, through the merger of companies Synnex and Tech Data with a combined revenue of $59.8 billion in one of the world’s most dynamic sectors.
Urban was uniquely placed to observe the merger having himself come from Tech Data where he was corporate vice president for strategy, transformation and global vendor management.
At the time Synnex had a footprint in the United States, Canada, Latin America and Japan, while Tech Data had a global footprint albeit without the Japanese market, apparently in Americas a duplication of functions was seen.
“Even though we were bringing together two big companies we said from Day One that we will not be laying any people off,” Michael Urban, now TD Synnex’ President for the Americas, told NA CEO. “What we did is we said we like to have a focus on certain activities and with that we want to grow even bigger. And it worked very well. Since September 2021 we have a really communications with our vendor partners and we surprised them in a really good way.”
“One of the things that makes us different from our competitors is size, because we have the entire portfolio end-to-end … that is a big advantage we have as a global company.”
The $7.2 billion merger created a global behemoth with 150,000 customers, 1,500 vendors and 22,000 employees.
The company analyzed what the areas of overlap were, and though it saw there was an overlap of vendors, but that on both the Tech Data and on the Synnex side there were missing vendors. With the combination the company managed to get the missing vendors finally reaching the illusive goal of representing 100% of its key market.
“We had even three cultures in the organization because Tech Data had a previous acquisition from 2016,” added Urban. “We like to have the three cultures together because all cultures have certain strengths. And I think we did very well in bringing the three cultures together.”
The company still has continued strategic investments and merger and acquisition activity among its medium term capital allocation goals, as having bought back $115 million in stock in 1Q23.
As IT solutions become more complex the idea that a product is simply channeled from vendor to end-customer has become completely outdated.
“What you can clearly see now is that there is increasing specialization, the market is broader, the customer demand is much broader, but you have many partners that deliver a certain part of a broader solution,” observed Urban an engineer who graduated from Paderborn University in the German state of North Rhine-Westphalia. “In certain areas you have less partners than in the past mentioning for example Cisco, they are network environment, they play a role in security but also play a role in virtual conferences. But still they are relatively specialized. That is why you need all the vendor partners.”
As each customer becomes increasingly individualized, with a pallet of needs which needs to be uniquely addressed the role of TD Synnex becomes increasingly important through its ability to bundle compatible solutions offered by a variety of different vendors.
Currently the company has a range of 25-30 mission critical vendor partners, but as company which achieves growth by offering scale all vendors are important.
“HPE has worked with TD Synnex for over 30 years and we couldn’t be happier to have them as a global partner in our ecosystem. TD Synnex was recently named HPE Global Distributor of the Year for expertise & success in delivering value to customers on their digital transformation journey.”
Simon Ewington / Vice President/ WW Distribution
“We have specialized the areas of activity, for example we have a security division which only works on security bringing between 200 and 300 vendor partners to the market,” notes Urban. “Size matters in our case because we can have all these divisions and in all these division we have many people that can drive the delivery for the partner. So size matter but you also have to break down the organization to be most efficient. That is why we today have ten different business areas.
Each of these business areas has been 20 to 30 critical partners for that area, showing the crucial importance of mastery of scale for the company.
“We work with the who-is-who of the IT community, if anybody works in a certain channel we have them in the portfolio,” adds Urban.
IT has been evolving rapidly and one of the greatest challenges for the company is not losing a beat as new trends bubble up. Security is one of the areas which has grown explosively in the last five years, growing more than 10% a year and becoming a crucial component of any companies activities. Cloud computing has also been growing in double digits. But Urban identifies new areas of growth on the horizon.
“If you look at AI, for example it is not much in our channel today,” noted Urban. “But we are seeing more and more vendor partners in AI not going tot he end customers but coming to our channel asking for support to do business with the channel. That is an opportunity going into the future.”
“We are the masters of supply chain management but there is still so much potential.”
“Customers want different solution for different applications and that is the challenge.”
As a distributor the company usually has to deal with low margins making growing margins one of the companies principal goals. One way improving margins is partnering with vendors to bring end solutions to customers. Another is partnering with customers to offer added customer support, such as in the case with CommunitySolve, a customer which brought 1500 small and medium businesses with it. These required the support which TD Synnex could offer due to its size and expertise.
“As a reseller partner you need to understand how to bring a solution to the end customer and that is a complex environment,” says Urban. “Years ago we set up a division to work with our partners so we can support them even sometimes bringing them together so they can go jointly to the end customer together.”
The company is also taking its own medicine by creating digital platforms which end customers can use allowing resellers to lock in customers. But there are still other advantages to size. The companies massive revenue stream allows for the investment in its digital platforms crating more and more solution for reseller which can be used on the end customer side of the business.
“These are multi-million dollar investments and medium sized businesses just cannot afford them,” says Urban. “That is a big advantage we have as a global company with our size.”
It is clear that digital investments will drive much change the coming years in the business world. Digital already seems everywhere. But according to Urban many companies still have yet to embark on this journey.
“Digital is complex,” says Urban. “You can easily say as a CEO ‘We need to go digital’ but that doesn’t mean you deliver. Digital in my view is not technical. Digital is business operations. All that can be more effective in the future. Because digital will in the future divide which companies are successful and which companies will be unsuccessful.”