Can Electronics Distributors Become the Next Center of Gravity for IoT Solution Enablement?

In the universe of IoT suppliers, electronics distributors have been a quiet but long-standing contributor from the very early beginnings of IoT (aka M2M). Their role was and continues to be a retailer for devices and sensors that can get machines and things connected. Hardware distributors have been critical to growth of the IoT market because they can effectively serve a very long tail of customers and suppliers that are not buying in large device volumes.

However, in 2018, we saw nearly all of the large electronics distributors expand their IoT offerings to a suite of software and services. These include Arrow, Avnet, Ingram Micro, Synnex, Tech Data, and ScanSource. This insight provides a snapshot view of these activities and assesses their future role for IoT solution enablement.

The approach to IoT by the major electronics distributors can be categorized into three buckets of activities:

• Arrow, Avnet: The key differentiator of these companies is that both have invested heavily into device design and engineering services. Avnet has been the most aggressive in this area, acquiring several companies over the last 2 years that beef up its design-to-production services capabilities, including Premier Farnell, Hackster.io, and Dragon Innovation. Both are also aggressive in IoT platform services for moving data from the device to the cloud, with Arrow offering its own IoT platform. Finally, both are effectively public cloud resellers that also provide consulting services to clients on selecting appropriate cloud services.
• Synnex, Tech Data, Ingram Micro: All three of these companies are taking more of an IoT aggregator role, or as Synnex stated, want to be the “IoT general contractor.” Key to their success is a suite of consulting services for IoT solution design and implementation, and a large group of partners from which to assemble the IoT solution. Ingram Micro is layering IoT training into its IoT offering such how to design an IoT solution, which the company hopes will lead to deeper engagements with companies for a broader set of IoT services and associated hardware.
• ScanSource: ScanSource is the only company of the five highlighted whose IoT strategy is heavily centered on simply adding more IoT supplier partners but using them in ScanSource’s traditional role as a master agent. Intelisys is the business unit leading its IoT services, and in the master agent role, it is referring its customers to partners for IoT services. It does offer some consulting services to help in the selection of partners for IoT solution development.

What is similar about all of them is that all are relatively new to IoT solution offerings, navigating the IoT market to find their IoT sweet spot. As new entrants in the IoT software and services market, most appear open to entertaining a variety of IoT solution engagements. Organizationally, most are set up in a two-tier structure: new IoT solutions teams and legacy logistics teams. Finally, their marketing messaging and positioning continues to evolve for IoT services and around the business unit providing the services.

In about 2015, a new supplier group in the IoT solution ecosystem was starting their public campaigns to build relevance in IoT. This supplier segment was the public/private cloud suppliers led by Amazon and Microsoft, but also including Salesforce.com and IBM and to some extent Oracle and SAP. As we know today, these companies, most notably Amazon and Microsoft, have, in the view of this analyst, become the center of gravity for many companies when starting their IoT solution enablement journey. All sizes of companies are transitioning to more and more public/hybrid cloud use, and now with their suite of IoT services that include everything from device-to-cloud services to analytics and application development, small and large enterprises can build IoT solutions. Could the same thing happen for the electronics distributors? Here is what makes electronics distributors unique:

• Forward and Reverse Logistics: Electronics distributors are expanding into offering forward and reverse logistics services such as kitting and staging, asset management, claims/warranty management, advanced exchange, and end-of-life disposition services. As device volumes increase, these services will become increasingly important for not only larger suppliers such as OEMs, VARs, and other IoT solution vendors, but also smaller suppliers that have traditionally done these services in-house.
• Installation and Help Desk Services: There are many IoT solutions, particularly in telematics, that require trained installation services. In addition, help desk services for T1 to T3 support as well as for outsourced monitoring services can be integral to solution support, which again becomes more critical as the install base of IoT devices grows from the billions to tens of billions.
• Device and Endpoint Knowledge and Partnerships: With more intelligence moving to the edge and device OEMs looking to build their own IoT solution offerings, electronics distributors are well positioned to develop this knowledge and these relationships into revenue-generating opportunities.

When you combine these services and capabilities with other IoT platform and cloud services, they become a very powerful one-stop shop supplier. And their approach at least today is to be agnostic to the supplier ecosystem, which already separates them from each of the public cloud providers that are trying to lock in customers to their infrastructure and cloud services.

Where they will be challenged is that the IT decision maker or even the OT operator will not be thinking that their first port of call for building an IoT solution is an electronics distributor. Electronics distributors will need to invest in their marketing, sales, and consulting services to build awareness. This analyst expects that most distributors will stay closely aligned to their traditional business model, seeking projects with large device deployments (as they ride the doubling of the IoT install base over the next 3 years) complemented by a range of IoT solution enablement services.

As shown by the rapid shift toward public cloud suppliers, we will see if the electronics distributors cause the same sort of shift in supplier selection moving forward thus becoming a second center of gravity for the creation of end-to-end IoT solutions.