Strategic Partnership Helps GTSI, Tech Data Cut Costs

By Jennifer Freer, Staff WriterIn an effort to cut costs in the cutthroat government channel market, GTSI Corp., a business-to-government supplier of information technology products, has selected Tech Data Corp. as its primary distributor.GTSI is expanding its relationship with Tech Data and decreasing its reliance on other distributors to cut down on hundreds of relationships with distributors, reduce inventory and provide better service and faster delivery of products with this partnership, GTSI officials said. Tech Data, a provider of IT products in Clearwater, Fla., brings a large distribution network, vendor relationships and billions of dollars in inventory to the partnership, said Mark Smith, vice president of purchasing for GTSI, Chantilly, Va. In addition, the company has the capabilities to sell its products online, he said.Under terms of the agreement, Tech Data will provide GTSI with government bid support, onsite education courses, inventory management and e-commerce support.GTSI will give Tech Data access to its government customers, contract vehicles and customer contacts, Smith said. In 1999, GTSI won multiple-award contracts for over $100 million from the Army, Air Force and Navy for software, local area and wide area network systems and portable computers, and a $14 million Navy JetForm software blanket purchase agreement. "The margins for value-added resellers are so small that anything you can do to lower costs makes sense, especially if you can maintain or increase volume," said Thomas Meagher, vice president of equity research at BB&T Capital Markets of Richmond, Va.GTSI, the largest reseller of IT products to the federal government, had revenue of $669 million in 1999, earnings of $2.7 million and 521 employees. Tech Data, with 9,575 employees, saw 2000 revenue of $17 billion (fiscal year ends in January) and earnings of $128 million. Resellers are realizing that to be profitable and succeed in such a competitive marketplace, they must offer the government simple solutions, said Terry Bazzone, vice president and general manager of strategic business development for Tech Data. By making the process of obtaining technology products and services an unchallenging task for the government, the resellers will increase business and beat out competitors, she said.Bazzone said she expects strategic partnering to become more common. But to achieve a top seat in the channel market, resellers such as GTSI have to choose their distributor partners carefully to help strengthen their positions and give the government agencies a more extensive choice in their products, she added.The decision to consolidate business to Tech Data was made about two months ago, Smith said. Tech Data began operating a new distribution center in Frederick, Md., in August 1999, which give GTSI a distributor close to its government customers. The companies can share resources, deliver products quicker and reduce the shipping costs, Smith said. Tech Data has distribution centers across the country and can ship directly to the customers, instead of sending the products to GTSI and then to the customer, Smith said. MicroStrategy Inc., a software manufacturer in Vienna, Va., also uses GTSI as a reseller. These types of partnerships can benefit the government by creating one contact person, and helping projects get done right the first time, said Harold Youra, senior partnership manager for MicroStrategy. It's a better solution because one company is designing and implementing the project, he said. The old way of partnering was dealing with each partner and moving to the next. But with the government market becoming more competitive, finding the right partners is more crucial, Youra said. IT distributor Ingram Micro Inc. of Santa Ana, Calif., is using the Internet way to achieve the same goals of strategic partnering. The company July 31 enhanced PartnershipAmerica.com, an online, technology purchasing hub connecting government agencies with distributors, resellers and solutions providers, said Pamela Smith, vice president of business development for the company. Before July, the site was considered only an informational site. PartnershipAmerica also can deliver products quickly, reduce the number of contacts and save money, Ingram's Smith said, just like strategic partnerships. The program also provides government users with an easy way to research online and automatically fulfill orders, she added.With the federal government moving increasingly to online purchasing, strategic partnerships by resellers and distributors also is increasing. "Creating strategic partnerships vs. having multiple sources is becoming more critical," she said.