CBTS is offering clients a perk it’s never had a reason to provide in its three decades as a channel firm. The Cincinnati-based company rolled out a hardware warehousing program in May to buy customers time to get procurement approvals before prices changed.
“We had this moment with a customer up in Chicago where over a 45-day window they had to go ask for approval four or five times as the pricing on a set of SKUs went from $300,000 to $800,000,” Justin Rice, chief product and technology officer at CBTS, told Channel Dive. “It was handcuffing enterprises. They have refreshes that happen, they're getting pressure from their boards to build AI compute nodes on-prem, and it was causing all this havoc.”
In normal times, CBTS acts as a value-added reseller, wrapping IT consulting and managed services around the hardware it procures and preps for clients. The company, which was acquired by TowerBrook Capital Partners in 2024, has more than 3,000 clients and tops $1.3 billion in annual revenue split evenly between hardware resales and managed services.
The buy-and-hold initiative was triggered by an ongoing AI building boom that continues to constrict memory and storage chip supplies, driving up prices on PCs, servers, networking gear and other hardware categories. Last month, Apple followed Dell, Lenovo and HP Inc. in raising unit prices.
As vendors pass manufacturing costs through to partners, they put customers in a bind. For VARs accustomed to brokering deals that can take a month or more to complete, price instability is a major problem.
Current vendor quotes are only valid for about a week or less, which is down from a norm of about 45 days, according to Rice.
“We’re seeing that pressure on our customer’s budget cycles,” he said. “When you have a compressed timeline, it’s hard to go through an approval process with procurement in your budget cycle. This wasn't really an issue before because you had longer price protection. Even when we've had supply chain issues, we at least had price protection.”
The bigger picture
Broader industry trends underscore the depth of supply chain challenges and the scope of inflationary pressures.
For the first time in more than two years, global PC shipments declined from April through June, according to IDC research published Wednesday. Meanwhile, Dell revenues soared during the first quarter of the PC giant’s 2027 fiscal year and Lenovo reported its strongest fiscal year in company history.
“The real story here is the disconnect between units and dollars: shipments are falling, but revenue is climbing because vendors are pushing through price increases faster than demand is dropping,” Jitesh Ubrani, research director for consumer devices at IDC, said in the report.
IDC is among the analyst firms that expect chip shortages to persist at least through the end of next year as the cloud infrastructure spending spree continues. AWS, Microsoft and Google Cloud were collectively pouring more than $1 billion per day into capital expenditures, mostly to build out cloud and AI capacity.
The pricing crisis could intensify, based on what Rice is seeing.
“OEMs are changing their policies and saying that they have the right to adjust pricing all the way up to ship date,” he said. “That's scary.”
The view from outside the channel is more ominous.
Riley Thompson, who finances large hardware deals as VP and head of direct Sales at Mitsubishi HC Capital America, told Channel Dive that component pricing has become chaotic.
“Previously, we would look at assets like computers and servers and laptops as basically a commodity,” Thompson said. “There was a small price difference that the customer could pay and negotiate, and we would even help them negotiate better pricing if we saw something a little egregious. In this case, we're seeing pricing that’s sometimes 30% to 40% more than the guy just paid right next door — same demographic, same size company.”
The practice of passing component costs to customers can spill over into less transparent price hikes.
“Manufacturers factor in the raw costs, and they'll all point to that,” he said. “But once they've elevated prices, it's not about the raw cost anymore. It’s not even about the economy anymore. It's about who blinks first.”
Sales plus services
Component shortages advantage the biggest hardware manufacturers. Apple, Dell and Lenovo can use the combined weight of their PC, server and smartphone business lines to keep the supply of memory chips flowing, according to IDC’s market analysis.
“As market conditions continue to worsen … supply chain management and capabilities are increasingly important.” IDC VP for Consumer Devices Jean Philippe Bouchard said in the Wednesday report. “The largest vendors, with their buying power and long-standing supplier ties, are best positioned to take share from smaller rivals.”
Large channel suppliers have also fared well. TD Synnex reported a record quarter in May, with PCs, servers and networking hardware accounting for more than half of $28.9 billion in distribution billings.
The VAR business model withstood the initial price shocks, as customers rushed to complete hardware procurement before prices went up.
“We've seen a fair amount of pull forward,” Price said. “You have clients looking to build out AI workloads on-prem, as well as a post-COVID refresh, and that is creating an influx of demand in an industry that’s fighting for resources that AWS, Google Cloud and Microsoft all want.”
CBTS recently launched a rebrand around data, infrastructure and security hardware coupled with services to support AI deployments.
It’s finding customers for the buy-and-hold program in state and local government, as well as healthcare and financial services. The aim is to maintain long-term relationships with those clients, Price said.
“There is a burden of risk that we're willing to take on, but at the end of the day, we think it will be worth itself ten-times over.”
