‘In the past, we talked about partners born in the cloud. I’m betting on the fact that the new partners will be born in AI. And we’ve identified another segment of [partners] who will be more successful and impactful in the market: those who combine cloud, security and AI,’ TD Synnex CEO Patrick Zammit tells CRN.

Distribution has had an interesting year in 2024, particularly at the top.

The largest IT distributor, TD Synnex, this year saw the resignations of its CEO and North American president along with the promotion of longtime executives within the company to take over those roles.

Meantime, the second-largest distributor, Ingram Micro, last week completed its long-expected IPO.

[Related: GTDC CEO Vitagliano: Distributors Are Evolving To Be ‘Ecosystem Orchestrators’]

CRN recently had an opportunity to talk with Patrick Zammit, who in September took over as TD Synnex CEO about some of the key events in 2024 that are shaping distribution going forward. In that conversation, held during the recent TD Inspire conference but before Ingram Micro finalized its IPO, Zammit said that AI and how to help channel partners navigate the technology are becoming key focuses of the company.

“[Vendors are] coming up with product offerings and value props on AI, and all of them are basically asking the channel to convert those product portfolios into sales,” Zammit said. “So that continues to be clearly an open field. We think we are ahead with our Destination AI [program], so that’s clearly a priority we want to continue to accelerate in the SMB space so that continues to be a top priority for us.”

Zammit also welcomed the re-entry of Ingram Micro as a publicly listed company and said it is an opportunity to show just how healthy the distribution business is.

“Now you have access to the figures from Ingram, and you have access to ours, you see it’s a low-margin business, but it’s a consistent business,” he said. “You see that the level of indebtedness is absolutely under control. It’s an industry which consistently generates cash flows. So just looking at the financials, I would say, yes, it’s a healthy business.”

Here is more from Zammit’s interview with CRN.

The biggest news right now in distribution in 2024 is Ingram Micro going public. Does that shake up the IT distribution business at all?

When you look at the market today, you have competitive dynamics. I don’t think the fact that Ingram is going to go public will change the competitive dynamics. Ingram is doing a very good job. We believe that we have a very strong value proposition, and we are doing very well in this environment. So I don’t think that Ingram being public or private is changing anything. We’ve been private. Tech Data went from public to private, and it didn’t really change our behavior. We continue to fight for market share and increase our value proposition for the customers. So I’m not expecting any major changes.

If you look at IT distribution as a whole today, is it a healthy business?

Now you have access to the figures from Ingram, and you have access to ours, you see it’s a low-margin business, but it’s a consistent business. You see that the level of indebtedness is absolutely under control. It’s an industry which consistently generates cash flows. So just looking at the financials, I would say, yes, it’s a healthy business. And by the way, when you look at the bets the vendors are making on the limited number of players now, you need to have a lot of confidence. And I think our balance sheets speak for itself. We would not have a healthy balance sheet if the business was not fundamentally healthy, but it’s going to continue to be a low-margin business. That will not change. And one last thing: Distributors know how to deliver financial value with low margins. This is an expertise which is very unique.

You just presided over your first TD Synnex Inspire conference. What do you think the message to channel partners is?

I am positively surprised by the magnitude of the event and the attendance. We must have had more than 1,400 attendees between vendors, [partners] and our team. In terms of the messaging to the partners, it’s about enabling them so they can continue to be successful in the market. And when I say ‘partner,’ I include the vendors and the [channel] partners, to be very clear. For me, our vendors are also customers. And so basically, when you look at the message from every speaker, it’s not about, ‘OK, how can we help transact better?’ That’s important. But it’s not differentiating anymore. It’s a must-have. We will do the investments.

It’s how are we going to help you navigate the changes in the market and help you win in the market? AI is a good example. How can we help you build the practice and then go to the end users, position your value proposition, and win the deal and support the end users in implementing the solution? And I think our obsession about enabling the partners to grow is our key message. And on the vendor side, it’s about accelerating the adoption of their technology by the market. In addition to the enablement of the partners, recruitment is absolutely critical. That’s why I insist that we commit to continuing to expand our partner base in total, but also expanding the partner base by vendor so that they can accelerate their go-to-market.

The second message is the culture of the company. We have a brand campaign around ‘Make IT Personal.’ If you speak to TD Synnex people, that’s the way they live daily in their interaction with vendors and [partners]. They want to build very close, trusted relationships because the exercise of understanding the needs of the partners and developing a plan together is so critical.

When it comes to channel partners, how do you expand that base at a time of distribution and channel consolidation, which means fewer distributors competing for the same number of or fewer channel partners?

I think you’re right that the partner base is relatively stable, but I think what you see is some partners disappearing while new ones are coming in. In the past, we talked about partners born in the cloud. I’m betting on the fact that the new partners will be born in AI. And we’ve identified another segment of [partners] who will be more successful and impactful in the market: those who combine cloud, security,and AI. The partners who combine this expertise are winning faster and growing faster in the market than others. So maybe the total number of partners is stable. But in fact, we constantly need to make sure that we are recruiting new partners.

The second thing is, on a vendor basis, we continue to find a lot of opportunities to increase their [channel] partner base. At Inspire, when Dan [Campbell, president of North America] from Palo Alto [Networks] spoke, he asked, ‘Who doesn’t have a security practice?’ And many raised their hands. It’s true that today when you’re in infrastructure, the obvious adjacent technology to offer is security, and that’s where we need to continue to play a role. So by vendor or by technology, we need to continue to expand.

Another initiative I wanted to speak about is SMB. We continue to expand our SMB customer base. We have a dedicated sales team for that. And on top of the people we have working on it, we are also leveraging the data we have in that space. We also have our PACE [Personalized Active Customer Engagement] initiative. The role of the PACE initiative is to recruit new partners, or, I would say, re-engage with partners we may have lost contact with. That has been a successful program.

So we have three ways to expand the [partner] base, and it’s happening. We are making a lot of progress, and the investments we are making are going to accelerate it.

You just mentioned seeing a lot of partners looking at cloud, AI and security together. Is that something that TD Synnex is encouraging its partners to do?

We’ve created a segment, a sales org, focused on those types of partners. It’s actually an initiative. Basically, we are going back to [partners] who specialized in one or two of the three, and showing them that by adding other expertise, they are going to have more impact with the end users. Our approach is customized because if a [partner] is specialized in security, we need to bring to that [partner] cloud and AI expertise. If it’s an AI specialist, we are going to show them that adding cloud and security expertise is going to make them more successful.

A general comment: At least once a year, we look at the profiles of our [partner] base. We have all this data, and we are constantly looking at the value segments we support. And most segments are evolving because of technology. We are fine-tuning the segments all the time to make sure our value proposition evolves with the segments we identify.

What are some key initiatives and strategic priorities TD Synnex is looking at going into 2025?

One of the initiatives is AI. We will continue to work there. [Vendors are] coming up with product offerings and value props on AI, and all of them are basically asking the channel to convert those product portfolios into sales. So that continues to be clearly an open field. We think we are ahead with our Destination AI [program], so that’s clearly a priority we want to continue to accelerate in the SMB space. We want to continue to accelerate our [federal] business. We are today the largest distributor when it comes to state and education, but [federal] is also a big priority for us.

How do you plan to expand your SMB partner base?

We are going to continue to add salespeople, and we are going to continue to leverage the PACE methodology. PACE looks at the life cycle of a partner, the combination of human interaction and the data, so that the campaigns are personalized to really get the partner to have interest engaging with us. So that’s how we are going to do it. I cannot share with you the growth we have in that space, but it’s double digits.

And how about expanding the federal space?

In the [federal] space, we are investing in lead generation. We will have more resources going to the agencies and identifying growth opportunities for our partners. That’s how we want to expand in that space.

The big theme at the TD Synnex Inspire was AI. What do you expect for next year? Have you started thinking about what the theme for Inspire 2025 might be?

If you go back three, four years ago, Metaverse was the big theme, but that one didn’t last. There was a lot of hype, but unfortunately the market then didn’t really follow up on it and it disappeared. AI is not new, but GenAI is new. And GenAI created all that hype because of all the capabilities it brings to the market. I expect AI will continue to be a theme, because while the solutions are coming, we still have to have a breakthrough in the enterprise. How do we convert that technology into business outcomes today? Hyperscalers are investing billions to train their language models and convert that into business. Inference is going to be the big theme. So that’s why I think AI will continue to be a theme, but probably more focused on inference, and more focused on enterprise rather than hyperscalers, where it sits at the moment.

When it comes to the channel, TD Synnex is an exception because we have Hyve where we serve the hyperscalers. The channel usually doesn’t serve the hyperscalers. It serves the enterprise. So I can see that the channel is going to play a bigger role in the enterprise AI space. And everybody’s looking at the right go-to-market. So I would not be surprised if AI continues to be a theme.

We see ourselves as a collection of specialists. You have technologies which are emerging and bring hyper growth, and we need to work on the right value prop to be ahead of the market. But other technologies are also going to bring growth. And AI is going to impact those technologies: PCs, servers, switches, software, you name it. And so we are going to continue to upgrade our capabilities in all those technologies to make sure our partners are enabled and can win in the market. I believe that positioning an AI PC is going to be different than positioning PCs in general. So a very mature technology thanks to AI is probably going to need to deliver new messages to the end users. That’s just an example. AI will be a theme that’s going to be embedded in all those technologies. We need to continue to be very focused on all those technologies because they will continue to be critical for the end users.