February 06, 2023, 09:00 AM EST
D&H Distributing is budgeting for double-digit commercial growth in 2023 despite macro economic headwinds.
Declining To ‘Participate In Any Economic Downturn’
D&H Distributing is budgeting for double-digit growth in the commercial business in 2023 in spite of the macroeconomic headwinds, said D&H Co-President Dan Schwab.
“D&H declines to participate in any economic downturn,” said Schwab. “We have to create our own destiny and help our partners be successful regardless of what is going on in the economy. There are all kinds of prognostications on whether the market is going to grow or decline. None of us know. Our mentality at D&H is we have to create our own opportunities and help our partners. That is what we are laser-focused on doing. Our expectation is continued double-digit growth.”
Harrisburg, Pa.-based D&H is coming off a strong year in 2022 where it saw double-digit commercial growth as the company approaches $6 billion in annual revenue.
The distributor’s cloud services and modern applications business was up 102 percent growth in in 2022 fueled by the launch of its new Moderns Solutions Business unit.
The Modern Solutions Business unit– which represents a landmark shift in the D&H go to market model- overall reported a 39 percent increase in sales with 66 percent growth in integration services; 46 percent growth in Cisco products and 25 percent growth in modern infrastructure.
“When you look at the overall climate with the layoffs you get this cloud or haze over the business,” said D&H Co-President Michael Schwab. “I think that is really representative of the fact that consumer consumption is a bit down. But in the B2B environment we are really excited about our SMB initiatives and the portfolio we have. We see a lot of momentum and goodness on the horizon in 2023 We are more of the glass is half full than what you read in the headlines.”
What is your mood going into 2023?
Dan Schwab: We are still budgeting for commercial double-digit growth. Michael and I used a line in 2009 that we are using again: D&H declines to participate in any economic downturn. We have to create our own destiny and help our partners be successful regardless of what is going on in the economy. There are all kinds of prognostications on whether the market is going to grow or decline. None of us know. Our mentality at D&H is we have to create our own opportunities and help our partners. That is what we are laser-focused on doing. Our expectation is continued double digit growth.
Michael Schwab: When you look at the overall climate with the layoffs you get this cloud or haze over the business. I think that is really representative of the fact that consumer consumption is a bit down. But in the B2B environment we are really excited about our SMB initiatives and the portfolio we have. We see a lot of momentum and goodness on the horizon in 2023 We are more of the glass is half full than what you read in the headlines.
What kind of differences are you seeing between the enterprise market and the SMB market?
Michael Schwab: I think enterprise customers got a little bit over their skis in terms of their forecasts, hardware consumption and they have all publically announced they are taking a break in IT spending. They are probably cutting their forecast at this time based on what their outlook is for the US economy in 2023 at least in the first half.
SMB doesn’t buy in that manner. They sequentially look into their crystal ball for what they need in the next quarter. It is much more transactional and vibrant which is why we continue to lean in and have good availability and inventory. Through our training, content and the patnerships we are making sure SMB focused partners have what they need to be successful in the market. I am more excited than I have ever been on the SMB market than the enterprise market which inevitably goes through business cycles on a much more peak and valley basis than SMB does.
What did you see regarding supply chain issues impacting partners?
Michael Schwab: In 2022, we saw the supply disruptions diminish. All the challenges of 2020 and 2021 as we came through the first quarter of 2022 we saw much better availability of technology.
The chip shortages and all the nuances of getting products into the domestic market became less of a challenge for the channel. That was a positive.
What we saw going into the second half of 2022 is with the increased supply there was some pricing erosion in the marketplace. We saw DRAM, SSD and component level products moderate and actually have some price declines. The downside of that is there was some pricing pressures and margin compression in the marketplace. The upside was that with better availability all the demand in the marketplace was able to be filled. When you look at that combination we ended up with double digit growth.
What do you see for 2023 with regard to economic prospects?
Michael Schwab: We are budgeting for more growth, more energy about enabling our partners to continue to rise above the economic noise to grow their business. We are certainly able and willing to help them do that.
We are very opportunistic and foresee great growth as we move toward the back to school time period in the second half of the calendar year.
Hopefully the global economic unrest is less impactful than we saw in 2022, that the inflation tendencies start to mitigate and decline. We are hopeful that technology overall gets into an overall much higher rate of growth.
So we see more of the same in the first half of 2023 with consistent growth across the SMB and then more universal growth in the second half of the year.
Dan Schwab: In the challenging environment today with rising interest rates and freight costs and payroll costs and inflation it is more important than ever that we work closely with partners to help run our businesses together smarter. So with freight we are looking at how do we reduce the combined net freight from us to partners and then to the end user.
With higher interest costs for borrowing money we are looking at how do reduce the cycle of time from when we buy at the manufacturer to when our partners bill their end user.
With training we are looking at how can we leverage the people we already have trained to help train the teams of our partners on new solutions whether it is modern collaboration or managed services. We have to help our partners sell those services and increase their margins
It is more important than ever that we work more closely than ever with our partners.
What is the call to action for partners for 2023?
Michael Schwab: The technology industry is 25 percent of the S&P 500. Trillions of dollars are spent on technology. There are significant opportunities on security and modern solutions.
Windows 11, for example, is a huge initiative at D&H. We want all our resellers to help customers migrate off of older platforms and technologies. Customers are perhaps putting their data at risk by not supporting the most modern operating system. It starts with the operating system and then it moves to cloud solutions and security. Those are the meaningful conversations we want our resellers to have with end users. It is paramout to our success as a distributor and our reseller’s success to be having those conversations and communicating with their customers.