The more choices customers have, the fewer channel partners they’ll want.

That was a message from ScanSource CEO Mike Baur during his company’s earnings call last week. Baur said the technology landscape is changing rapidly with hardware, software and services converging. And as they do, the number of partners that customers use will also converge.

“Technology distribution is being transformed with the convergence of hardware, software and services,” Baur said. “As IT, connectivity and cloud computing markets continue to converge, we believe that end users will prefer channel partners who can provide integrated converged solutions.

“With more choices than ever, end-user purchasing decisions are getting more complex, and that's where solution providers and technology architects add real value. They can help end users make technology decisions that will achieve their expected business outcomes. Because most business outcomes require technology solutions from multiple suppliers, the indirect channel is in the best position to deliver recurring, complex and high-value solutions.”

Mike Baur

ScanSource’s Intelisys & Advisory group – under president Ken Mills – seemed to benefit from this distribution transformation. That segment’s revenue increased 4% year-over-year as annualized net billings rose to $2.78 billion, and gross profits increased 2% year-over-year. However, adjusted EBITDA declined slightly due to increased Selling, General, and Administrative (SG&A) investments.

“We are investing to accelerate new order growth,” Baur said. “An example of our investment is the growth of our solutions engineering team who have expertise in advanced technologies, including cloud computing, wireless and IoT. Another way to drive new order growth is to help our partners by providing new and better tools for growth.”

The rest of ScanSource’s business didn’t fare as well as Intelisys. Its overall revenue of $740 million fell 4.6% year-over-year and missed expectations by $48 million.

Baur said he expects a new Launch Point team aimed at adding suppliers to add revenue. One new Launch Point supplier specializes in the next generation of private 5G and adds a managed services offering to ScanSource’s Smart Connectivity Series.

“Would we want more top line growth? Absolutely,” Baur said. “I think part of that will come as we add some of the new suppliers that we're talking about through the addition of Launch Point and its strategies as well as this idea of convergence. We believe that will attract more suppliers than we traditionally have.”