In some ways it’s been a banner year for Rick Reid.
Revenue will be at a record level for the year, he opened a new Western Canadian distribution centre and more Tech Data resellers are becoming members of the exclusive TechSelect program than ever.
“It’s been a good year,” he said entering his ninth term as president of Tech Data Canada.
“There was good year-over-year revenue growth, in the single digit area, which is down a bit from the year-over-year growth that we enjoyed last year, but still pleasant.
“Margin continues to be under duress, but our unit business, which is really the measure of work effort, is up considerably year-over-year.”
So, for example, notebook unit sales are up over last year, but revenue has increased only in single digits because average selling prices continue to drop.
“I keep saying each year it (prices) has probably gone as low as it can, but each year I get surprised.”
The highlights for 2006 he lists include the opening a a 7,240-sq. metre warehouse in Richmond, B.C., more than triple the size of the company’a old distribution centre.
“We have a bigger footprint in the West now,” Reid says. “We’re able to carry more product. In the past if we were physically able to only carry five of a product and the customer needed 10, then they went to the supplier who had 10.”
Sometimes, to meet a service level agreement, products had to be shipped west from the Toronto warehouse by air. That doesn’t happen any more.
It’s also a boon because a lot of the distributor’s growth in 2006 has come from British Columbia and Alberta.
Another move Reid believes was significant was the hiring of Gail Moorhouse as a TechSelect sales specialist to help serve and increase the number of partners in that program.
Reid reached his target of growing the number of Canadian TechSelect partners this year to 60 from 40. His new target is to increase that number to 75 members by next spring.
Also on his list of notable events was bringing online an Oracle software licensing program, announced at the end of last year.
“It proved that we have a very strong licence desk,” he says.
A “flex funds” program, which allows resellers more credit than they’re qualified for, was also brought in this year.
To help partners face the growing demand for laptops, a Canada-only deal was struck in January with notebook PC manufacturer Sabio Digital to expand the build-to-order offerings available to resellers.
To extend their range of options, in the middle of the year Tech Data Canada also became the first distributor in the country to sign on for Intel’s Verified By Intel laptop program.
Resellers can order custom-built notebooks on chassis from Asus, Compal Electronics and Quanta Computer with components approved by Intel
“It’s beginning to get good traction for us,” says Reid.
On the other hand, a three-year partnership with Seanix Technology to build white box desktop PCs so Tech Data resellers could compete with Dell quietly died in the fall.
“It was a good opportunity for us to grow incrementally outside the core desktop space,” Reid says.
But the arrangement “didn’t show the types of returns both in volume and profitablity that we anticipated.”
“All distributors make money on volume, and typically it has to be big [for a product] to be a successs. I would tell you the white box business is not nearly as big as it once was.”
Reid had few disappointments this year, but one of them was the filing for bankruptcy protection by national systems integrator NexInnovations. “I remain optimistic they’ll come through that successfully.”
Asked if there are more partners in trouble, he’s cautious.
“I believe there are a lot of very strong profitable resellers in the market, and there are several – many, in fact – that have a model that is no longer sustainable.
“The reseller that doesn’t have a lot of high-profit business to wrap around their potentially low margin product sales is in trouble, and some of them will not get into serious difficulties because they have low overhead and will continue operating. But there are some resellers that need to be watched.”
The year was also marked with a changing of the guard at Tech Data’s head office. Long-time CEO Steve Raymund stepped aside in October for former IBM, J.D. Edwards and EMC executive Robert Dutkowsky in October.
Reid said he has only had a short discussion with the new chief executive officer. A longer one will have to wait until an expected visit here next year.
“We do far less than 10 per cent of the overall corporate revenues, and I suspect if I were him he’d be focusing on areas that are a higher prirority” than Canada, Reid said.
Looking to next year, he forsees another year of mid-single digit revenue growth.
Partners should also look for new initiatives, including enhancing the TechSelect program and improving resellers’ ability to get credit.