Technology distributor Ingram Micro saw double-digit growth during its first quarter, with net sales up 14% and gross profit increasing almost 12% year over year. The growth was driven by rising hardware prices and expansion in its cloud and cybersecurity business, according to a recent report from Informa sister company Omdia.
Ingram’s good fortune comes amid upheaval in the distribution channel. Hyperscaler marketplaces have diverted the traditional pipeline running from vendors to distributors to partners and clients. The three largest cloud providers — AWS, Microsoft and Google — have become de facto distributors, selling technology directly to customers, while Ingram Micro and its peers strive to maintain their middleman role.
Some larger channel partners are building practices that compete with traditional distributors, Alastair Edwards, chief analyst at Omdia, told Channel Dive. At the same time, some distributors are seeking to engage with clients directly, bypassing channel partners.
“You're going to see a point where distributors start transacting directly with the end customers, certainly owning some of the billing relationships, and the partners will just act as agents for the distributor,” he said. “The dynamics of distribution space are changing rapidly.”
Ingram’s strong financials stemmed in part from the company’s investment in its digital B2B Xvantage platform, which unifies procurement and buying for partners, resellers and vendors. Xvantage generated $800 million in sales from AI assistant interactions and drove more than $1 billion in email-to-order sales, up 78% year over year.
Ingram Micro CEO Paul Bay highlighted the importance of the company’s platform investments during an April earnings call. He called Xvantage a “competitive moat.”
Platforms are essential for distributors to stay competitive, according to Edwards. “The challenge is that platform capability requires tens, if not hundreds, of millions of dollars in investment,” he said. “That’s going to lead to a widening gap between the largest distributors and the smaller partners who don’t have the ability to invest huge sums.”
The AI buildout is messy in ways that benefit distributors. Whether it's component shortages, pricing volatility or partners who need guidance navigating unfamiliar territory, those are the reasons distributors exist in the first place.
“There is a degree of rationalization that's happening in the channel,” Edwards said. “We see more vendors concentrating around a smaller number of distributors, partly to drive greater efficiency. Vendors are also attracted to the platform message because it helps to automate things from their side, while the distributors promise high levels of capability.”
