It’s a monster bet on the future of distribution.

This week, giant tech distributor Tech Data pushed more chips into its Smart IoT and Analytics Solutions Practice in the Americas. Tech Data now offers channel partners one-on-one consultations and industry-specific Internet of Things (IoT) design services. Tech Data now distributes Cisco Smart+Connected Digital Platform and has new distribution agreements with iValue8 and Molex.

More than a collection of IoT-related announcements, Tech Data’s hard pivot to IoT has a lot at stake. Up until a few years ago, tech distributors made their bones warehousing products and providing banking services to a network of channel partners. In the brave new world of digital business, this traditional model doesn’t hold up well.

Now distributors must reinvent themselves as cloud brokers, IoT facilitators, and smart city enablers. “Tech Data is a massive organization going through transformation, a fundamental change to the business model,” says Forrester principal analyst Jay McBain, a 23-year channel veteran. “If they don’t get this right, three to five years down the road, it could threaten an organization like this.”

McBain says Tech Data was late to the cloud game and is now trying to leap ahead in IoT. It’s a smart move, too. IDC predicts the spend for IoT in the Americas will be $335 billion in 2018, and Tech Data wants to help its partners grab a lion’s share.

“The business opportunity for all ecosystem partners surrounding IoT is expansive,” says Michelle Curtis, senior manager of the IoT solutions group at Tech Data.

One of the colossal markets for IoT services is the smart city, whereby a city’s myriad assets such as parking meters and traffic lights are connected to better serve citizens, reduce inefficiencies and cut costs. Singapore, Barcelona, London, San Francisco and Oslo have emerged as model smart cities.

For distributors, smart cities best showcase their value.

“In smart cites, you’re stitching together hundreds, if not thousands, of types of equipment from different manufacturers,” McBain says. “This is what distributors know how to do. Even big vendors like IBM and Intel are not going to own a significant enough slice of the overall solution to help the channel.”

Channel partners can carry the IoT solution the last mile, customizing it to certain vertical industries and local geographies. They can leverage their existing relationships with businesses to make sales. And their deep knowledge of business challenges will help them deliver real business outcomes.

But there’s a downside to smart cities, in the form of technical complexity and political quagmire resulting in a painstakingly long sales cycle. This puts off many IoT vendors and channel partners from aggressively pursing this space. In response, Tech Data focuses on smaller towns and municipalities, specific areas such as law enforcement, and simpler solutions.

“Tech Data offers an ecosystem of vendor solutions in industrial, transportation and logistics, retail and hospitality, smart spaces like buildings, parking or cities, public sector and healthcare,” Curtis says. “We simplify the confusion in the channel with validated solutions in each of those vertical markets.” 

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While all of this sounds great for the channel, there’s an elephant-in-the-room problem: The vast majority of channel partners isn’t ready to seize the IoT opportunity. The average channel partner is an eight-person shop that might not have the wherewithal to go after new platforms such as IoT, McBain says.

“Of the 162,000 partners in North America or the 500,000 globally, 40 percent will retire by 2024,” McBain says. “If you’re looking at retirement by 2024, you may just not have the energy or enthusiasm to do one more complete 360-degree turn on your business.”

Nevertheless, Tech Data plans to carve out a role enabling its cadre of channel partners to sell IoT. The distributor offers training and services support, develops their capabilities to scale the business, and helps them market and pitch to line-of-business executives – the new shot-callers in tech.

“Can Tech Data educate and certify and help them build those practices, help them market and sell?” McBain says. “It’s imperative for Tech Data to get this right.”

Based in Silicon Valley, Tom Kaneshige writes the Zero One blog covering digital transformation, AI, marketing tech and the Internet of Things for line-of-business executives. He is eager to hear how digital transformation is impacting your business. You can reach him at tom.kaneshige@penton.com.