MISSISSAUGA, Ont. – Steve Raymund remembers the moment when he knew the IT downturn was coming.
Raymund, CEO of international distribution firm Tech Data, was attending Comdex Las Vegas in 2000 when he whispered, with some embarrassment,
to colleagues that the company’s October financials were not shaping up.
“”We were used to beating our numbers every quarter up to that point,”” said Raymund, who paid an annual visit to Tech Data’s Canadian headquarters this week. “”Suddenly, it looked like demand was starting to falter and fizzle.””
The impact of the slowdown, he said, “”radiated rings”” across North America, especially in the U.S. with the fallout from Y2K and the dot-com bubble bursting.
“”We clearly in the U.S. have indulged like drunken sailors in spending on IT equipment and are now suffering from a painful hangover,”” he said.
The bad news is that Raymund does not see any signs of a general recovery. The good news, from his perspective, is the impact of the slowdown in
Canada is not as severe as in the U.S. Some of Tech Data’s specialized business units have performed well during the slowdown, he added.
“”We carry a broad range of products so there might be relative strength in wireless or IP telephony. It is not shared in desktop PCs, which has been sluggish for the last few years as companies delay deployment of new technology,”” Raymund said.
In the wake of the slowdown, Tech Data has adopted some new methods to help the bottom line, such as monitoring capital investment and scrutinizing of discretionary expenses. By adopting these new measures, Tech Data has been able to recognize profits on the back end of its business, Raymund said.
Tech Data has also devised new management systems for pricing, products and margins around the world. Tech Data has a presence in more than 20 countries and rakes in about US$17 billion in revenue, putting it behind only Ingram Micro, the world’s largest distributior.
Tech Data is now trying to diversify its portfolio to make sure its resellers have the right programs and resources to grow its emerging niche businesses including imaging, IP telephony, and security.
“”In the days of the go-go 90s, we worried less about making our top line than building out our infrastructure to support our services that are required to meet our revenue targets,”” he said.
Raymund also said that the industry as a whole is not earning enough money. “”The reality is, on average, the typical technology company is generating losses, not profits. They are not able, or do not have the pricing power or marketing power, to make money and get a return on their capital.””
Raymund said he believes it will take renewed demand in the market place, along with new compelling technology solutions for the turnaround to start.
“”Companies are willing to step up and pay for compelling new solutions.
We are starting to see some of that in certain areas. At the end of the day, when we talk about what will it take to coax more buyers back into the market, it will boil down to a very simply thing: a stream of new technology.””