Tech Data: Business Model
Tech Data was established over 45 years ago. It is a technology distributor with a portfolio of end to end products, services, and solutions offered to channel partners for further distribution in native markets. The company has over 125,000 IT reseller customers and over 14, 000 employees operating in more than 100 countries worldwide. Annual sales for fiscal 2019 was $37.2 billion from over 150,000 IT products sold. Tech Data was ranked at number 83 on the Fortune 500 listing for the United States, and its estimated revenues for 2020 is $37.4 billion.
- Tech Data offers different value propositions to vendors and customers.
- The value proposition to vendors is to provide comprehensive services, assist with logistics management, serve as a cost effective and variable route to market, and to provide access to fragmented markets.
- The value proposition to customers is to provide services, training and technical support, financing and inventory management, logistics management, and end to end solutions.
- Tech Data serves a niche market. Products are distributed to corporate and value added resellers, as well as direct marketers, retailers, and managed service providers.
- Resellers are offered the option of a line of credit and can access marketing and technical services in addition to education and training for their staff.
- Tech Data distributes products to its resellers and direct marketers. The company's core business revolves around cloud, data center, mobility and supply chain services.
- For the cloud segment, Tech Data assists providers with positioning, selling and scaling its cloud offerings. Support is extended to its resellers via enablement, education, and the adoption of subscription-based services. Buying, selling, and other services are automated and offered to its global partners through the global IT platform StreamOne.
- Tech Data's data center services are targeted to data center and network infrastructure that can meet the demands of bandwidth intensive applications. The mobility market is serviced with products, carriers, and promotions through the solutions and account management portal, CellManage.
- For the supply chain, Tech Data offers traditional logistics services as well as opportunities for clients to reduce cost, simplify processes, improve the customer experience and grow the business. Physical, financial, and human capital is leveraged to provide solutions via consultations, business intelligence and analytics, and inventory management.
- Tech Data has over 1000 global vendor partners operating in more than 100 countries. The vendors are providers of endpoint and advanced solutions, as well as training and educational services provided in conjunction with Tech Data.
- Vendor partners include Apple, Acer, Cisco, IBM, Intel, Lenovo, Microsoft, Red Hat, Samsung, TrendMicro, and Quest. Products from Apple, HP inc, and Cisco each exceeded 10% of consolidated net sales.
- Partnerships were recently announced with Akamai to deliver performance and security services, and Carbon Black to offer cloud-native endpoint protection.
- Personal service at Tech Data is prioritized to provide premium value propositions to both vendors and customers resulting in a cost structure that is value driven.
- According to the annual report for fiscal year 2019, Tech Data's expenses, in declining order of value, are costs of products sold, then operating expenses. Operating expenses include sales, general and administrative expenses, acquisition, integration, and restructuring expenses, goodwill impairment, and interest expenses.
- The revenue stream for Tech Data is from the sale of technology products and services. Tech Data recognizes revenue at the point where control of the product is passed to the consumer at shipment.
- Product revenue is generated from the sale of technology products to resellers, and service revenues are generated from fees.
- The main channel for distribution of products is the Tech Data sales team. The team is comprised of field sales and inside sales representatives who are trained on company procedures and policies and on the technical specifications of the products sold.
- Field sales representatives are usually located in metropolitan areas and are supported by internal telemarketing teams for the specific territory.
- A secondary distribution channel is through the e-commerce website. Customers can remotely place orders, check on the availability of inventory, and on product pricing. Larger customers can conduct standard electronic data interchange transactions via access to the electronic data interchange.
To provide an overview of the business model of Tech Data, the research team consulted the Tech Data website. The website provided information on Tech Data's partners and on the key activities of the organization. A link on the website provided access to the annual report for fiscal year 2019, which in turn provided details on the value proposition, customer segments, cost structure, channels, and revenue streams of the company. Since all the research criteria were provided either on the website or from links available on the website, information to supplement the data sourced was also added from the article linked in the strategy document and from a general search of business information websites such as Reuters and Businesswire.