Ecosystems Matter, Even in Distribution

| November 6, 2015 | 0 Comments
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launchpoint_430110Ecosystem, the buzzword for the wireless communications world popularized by Apple and Google but since avidly embraced by many other enterprise executives, is entering the lexicon of the electronics components distribution world. Continuing their evolution from middlemen to critical partners, top distributors are at pain to demonstrate that not only do they still offer their traditional services but that they have been trying to integrate customers and suppliers into a network that goes beyond the traditional offerings of many players in the supply chain.

In essence, distributors are quietly weaving their customers, suppliers and other service providers into organized ecosystems that allow them to cement existing relationships, build new ones and expand as necessary into segments of the economy in which they currently have limited or no presence. These steps have been taken in response to dramatic changes in the global economy that have catapulted new players to the forefront of the industry while demoting or completely eliminating others. Surviving in this new world requires that distributors expand their services and strengthen current engagements.

Take the explanation provided recently by Michael Long, chairman and CEO of Arrow Electronics Inc., about how the company has been responding to the changing needs of its customer base by broadening the depth of its services. Based on Long’s explanation, Arrow might have started as a components distributor but the company is better described today as a facilitator of services to everyone in the information technology market with offerings that include hardware and components distribution but moving well outside this to the creation of an ecosystem for a varied set of audiences.

“We continue to evolve our business to the requirements of the marketplace [because] our customers have growing requirements for security, data analytics and hybrid cloud automation and orchestration, as well as the ever-growing needs for compute and storage capacity,” Long said in a presentation to analysts. “They also have the same complex requirements to evolve their data centers as our customers do in the Americas. We’re well positioned to help our customers achieve their objectives.”

Certainly, the one-trick pony enterprise that acts simply as a middleman between component vendors and OEMs lost out a long time ago in the global distribution business. However, even the new structure that emerged approximately one decade ago as the market consolidated is now itself being replaced by one where the winning distributors bring and hook customers and suppliers into a vibrant ecosystem that encompasses and extend beyond the traditional offerings of many players in the supply chain.

In this new climate, distributors must not only be broad-based but also offer highly specific and customizable products that customers can readily fit into their own operations. This is why companies like Arrow and many of its leading rivals have diversified operations to ensure customers can always find their niche requirements within the broader organization, according to observers. In the case of Arrow, this evolution led the company to develop its Verical unit as a multi-market and volume provider of readily-available components to electronics manufacturers.

Industry observers say the specific role a company plays in the electronics value chain is not as important anymore as the ecosystem it is able to create and use to nurture all of the enterprises in its orbit. Because of moves to position themselves at the core of the electronics supply chain over the last couple of decades, distributors need to help foster an ecosystem that OEM and contract manufacturing customers, component suppliers, software vendors and even the larger society can plug into, they said.

Today’s distributors already offer a dazzling array of services that include supply chain, design support and facilitation as well as logistics management but even within these broad offerings companies need specialized products that round out the declared and anticipated requirements of customers and vendors.

The industry is copying what seems to be a winning formula borrowed from OEMs in the wireless communication and software industries and exemplified by Apple but since copied by all of its rivals and others in adjacent markets. Dell Inc. is one of the biggest OEMs in the PC, server and IT equipment market but the company is entrenching itself deeper into the market with the recently announced $67 billion offer to purchase EMC Corp. One of the goals behind the offer is to assure the creation of an ecosystem to support the Dell-EMC combo’s legion of customers, vendors and contractors, according to Michael Dell, founder, chairman and CEO of Dell.

“We are ourselves embracing the digital future in a big way,” Dell said in a presentation earlier this week in London at an event titled “Be Future Ready”. The company is building an ecosystem that requires Dell to “use more and more of the data we are getting from our customers,” he added.

The Dell “Future Ready” campaign represents an opportunity for Dell to roll out to customers and the larger market the different services that the company is setting up as it continues to respond to changes in the industry. Each enterprise, the company said has to fit into an ecosystem. In the case of Dell, the areas of concentration are amongst the key challenges and opportunities facing all companies today. They include the cloud, security, mobility, Big Data and the Internet of Things, according to Tim Griffin, VP and General Manager of Dell in the U.K.

“The next few years will be incredible,” Griffin said in a statement at the Dell Future Ready London 2015 event. “New technologies will yield new opportunities, turning customers into lifelong enthusiasts. And since organizations are only as innovative as their technology, agile enterprise solutions that integrate cloud, security, mobility and big data with existing data center infrastructure are essential.”

If all companies need to champion their own ecosystems as Michael Dell observed in his presentation, some distributors may be far ahead in implementation than others. Still using Arrow as an example, the company’s range of products and services are expansive already but over the last several years, it has built these offerings into packages that customers and suppliers can utilize as needed. Just like in an ecosystem, not all Arrow customers would use all its services but everyone within the supply chain can find something that support their operation and find continued support for these and other future needs within the system.

Arrow has also put itself at the heart of these activities, fulfilling one of the key criteria for an ecosystem, that is, the need for a nurturer, sponsor or visionary builder whose main task is to champion the system, benefitting from it and ensuring others also secure advantages from it, just like Apple and Google do with the iOs and Android operating systems.

One other key element of an ecosystem that top distributors, including Arrow’s major competitors, have since developed is a variety of options for the participants in the network. For Arrow, this has meant having offerings for engineers – via its reference design program – through supply chain management, volume procurement service – via a business unit like Verical – and all the way to end-of-life information and resources for components buyers as well as IT asset value recovery programs.

Customers are free to pick the service of interest to them but the starting point is the awareness that these range of offerings are available through an ecosystem supported by a company with the breadth and financial strength to pull it through.

 

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Category: News Analysis

About the Author ()

Bolaji Ojo is editor-in-chief and publisher of Electronics Purchasing Strategies. He can be reached at bolaji.ojo@epsnewsonline.com

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