5 Big Bets That D&H Distributing Is Making In 2019

‘When I think about five big bets for D&H and think about moving into the second half of 2019, what really comes to mind first and foremost is this as-a-service model,’ D&H Distributing Co-President Michael Schwab tells CRN. ‘We’ve basically coined this new term, which is ‘X-as-a-service’ meaning everything as a service, as our go-to-market strategy.’

As-a-service inflection point

Michael Schwab, co-president of Harrisburg, Pa.-based D&H Distributing, said as the SMB-focused distributor moves into the back half of 2019, it’s focused on helping partners transition to an as-a-service model in the most painless way possible, which includes shifting VARS to an MSP model by adopting cloud.

“Those three: as-a-service, cloud platform, and MSP model. Those three are all integrated. You can’t do one without the other.”

Additionally, Schwab said ProA/V is booming with “no ceiling” as more SMB clients look to renovate their offices with more modern collaboration spaces that allow for easy use of video conferencing software. Schwab said the company is also betting big on security offerings, and helping MSPs deploy those across their networks.

Schwab spoke to CRN at the company’s 2019 Mid-Atlantic Technology Conference in Hershey, Pa. this week, where nearly 1,000 SMB focused VARs and MSPs were on hand.

‘X-As-A-Service’

D&H is trying to help its partners recognize that as-a-service is here to stay. Schwab said too many SMBs see the advantages of avoiding big technology investments, as well as the flexibility of scaling up and scaling down their networks, meaning VARs must learn to adjust.

“When I think about five big bets for D&H and think about moving into the second half of 2019, what really comes to mind first and foremost is this as-a-service model. And most everybody in our industry is familiar with software-as-a-service, and device-as-a-service which is continuing to create opportunities for resellers downstream for their end users.

We’ve basically coined this new term, which is ‘X-as-a-service,’ meaning everything as a service, as our go-to-market strategy, all-inclusive of software and hardware and peripherals and routers and switches and whatever else makes its way to an as a service model.

I say it’s at an inflection point, because if you think about the historic buy-sell business model of a manufacturer or distributor or reseller or VAR or system integrator, there are finite moments in time where ownership changed hands on the hardware. There were configuration services, but generally, the model had not changed for so many years.

In today’s environment, primarily driven by end-users and organizations that were born in the cloud, that weren’t used to having a lot of fixed investment in infrastructure, they recognize that if they can pay a monthly service, and either ramp it up or ramp it down depending upon how many employees they have, are they hiring are they cutting back allows them to scale their business appropriately from an infrastructure standpoint as they grow.”

MSP Model

Schwab said once a reseller sees the opportunities in as-a-service, the next step it ot help them transition into an MSP

“How do you transition, if you’re a traditional reseller, into this recurring revenue model, to take advantage of as-a-service? Not easy. Your accounting system is not set up that way. You’re paying your sales people differently, because the model might be 24 or 36 month payment cycle, versus, the end user paying you all at once, up front. How do you compensate your sales people appropriately?

How do you make sure that you build in the right profit model? Are there additional credit risks that you’re undertaking? Are there sales tax issues? There are all sorts of things to consider in this recurring revenue model that wouldn’t be obvious to our resellers nor easy for them to gravitate to without some help. So we’ve taken on that responsibility.

We’ve built out a team, under Jason Bystrak, to lead this model for us. He’s hired a staff of eight, which again, leads into the next big bet which is our cloud services model.”

Cloud Services For MSPs

D&H is poised to announce a new cloud service platform to help partners transition into MSPs, Schwab said. The company has cloud solutions that it has offered, which last year experienced huge growth, up 107-percent, D&H said.

“You need the cloud service model to make it easy for the resellers to be able to track what’s been deployed -- software and hardware -- to potentially white-label service to their end customers, to leverage an engine that creates the invoicing, and downstream facilitates opportunities, for them to know what to bill their end customer, and allows us to put on one platform all the content and information that they need to managed their MSP business.

We think that we are not only going to be able to put the infrastructure in place to help the resellers that want to take advantage of this model, we think there’s a lot of pre-sale support that needs to happen to help them understand change within their model, help them understand best practices, from counterparts in other parts of the country who have already gone through this transition.

We’ve been working with a company that helps evaluate their cloud readiness. Are you capable? Do you have the mindset? Do you have the resources? Giving the resellers the opportunity for a third party evaluation to understand whether this third party company feels they’re ready to transition to the cloud, and if not, what are the gaps that can help them get there as they move.

Security

Network security as a category grew 77 percent last year at D&H and the company is projecting that it will grow another 45 percent this year.

“I don’t know if you can have a conversation in today’s environment without having security pop up as one of those topics,” Schwab said. “When you read about the cyber-attacks and the voluminous risks that exist in everybody’s business today. Having their data stolen, having their computers locked up in ransomware, I don’t think there’s a single reseller that shouldn’t have all the tools that they need to be successful in talking to their end users about security.”

“So, its endpoint security, its security at the server level. Its even security for cloud solutions. When I think about security, it’s a combination of hardware and software solutions, network security. I would say our value proposition here is giving the manufacturers the opportunity to get facetime with our customer base.

Because it’s such a complicated area of the environment in which we serve today, we in many ways, pride ourselves on being the conduit of the manufacturers R&D and information flow that they can then provide out. We’re constantly evaluating new products and technologies to make sure we’re giving best in class solutions. Security is a big bet. The growth year over year is reflective of that fact.”

Collaboration

D&H hired Peter Hurley earlier this year as director of the Pro A/V & Collaboration Business Unit. The unit saw sales grow 111-percent last year and the company predicts still another 80-percent growth this year.

“The key to the collaboration opportunity is that it used to be far and away too expensive. Only Fortune 500 companies could afford the technology. Today, really with some of the go-to-market strategies, really, Logitech has some really great solutions. Polycom, which is new to D&H, has some terrific go-to-market strategies. So, they have taken what used to be enterprise-level solutions, and built that functionality into more simple to use technology. Easier to deploy, plug and play, and priced it for SMB, which is awesome.

If you think about the modern office, and starting from scratch, how you would build an office environment, there’s a ton of huddle rooms, it’s much more shared and open space. I think people recognize the fact that collaboration is brought together in a number of ways. Microsoft has Teams and there are other solutions. But to really take full advantage of the software that’s out there, you really need some of the hardware integrated as well. So, we see that as a great opportunity.”