D&H Places Its Bets On AI, Managed Security, PC Refresh, And The Feds
IT distributor D&H Distributing ended 2023 on a roll, with revenue rising to more than $6 billion and recording its 105th year of profitability. That helped the Harrisburg, Pa.-based company, which touts how its employees are all co-owners, maintain its place as the world’s third-largest IT distributor.
D&H is not planning on taking it easy any time soon, however. Dan Schwab, who with his brother Michael Schwab is a co-president of the company founded by their grandfather in 1918, told CRN that the company is focused on bringing such technologies as AI and managed services to its solution provider customers, most of whom are focused on the SMB market.
It is that SMB focus that has helped D&H differentiate itself from other IT distributors, even as it continues to grow its midmarket and enterprise business by investing in a wide range of leading edge technologies and markets, Schwab said.
AI, for instance, is now at the point where SMB-focused solution providers can have meaningful discussions, and generate meaningful business, with their clients, he said.
“Big companies have invested in AI for the last couple years,” he said. “You see them using it in their call centers, offering an intelligent chat bot that’s really much better than it was years ago. We’re trying to see how AI affects a law firm with 400 employees, or a sales organization with 200 employees, or a regional banking system? How can they leverage it? We’re trying to take all these business cases and facilitate the training first for our partners, and then how they communicate with their end users.”
Schwab said D&H also expects its channel partner customers to see a big uptick in business from the Windows 10 to Windows 11 upgrade, and not only because of increased PC sales.
“New PCs drive much more network bandwidth within organizations,” he said. “Sharing all that data drives an upgrade cycle in servers, the network, and storage. Think about the storage for the computations you’re going to do, if you want to save that information. So now the entire front office becomes a back office conversation with partners.”
However, Schwab said, D&H is not ignoring the needs of its larger partners, and is investing in those areas where they also see growth.
“We’ve become a desirable partner for upper midmarket and enterprise resellers, many of whom look for us to help complement their federal goals,” he said. “So we’ve invested in resources and programs to grow our federal business.”
How is business at D&H?
We have a saying here: We decline to participate in the economic downturn. We were fortunate that we grew double digits in what was a really tough year, even though many manufacturers and distributors had quarters in 2023 with double-digit declines. Everyone was expecting the second half to be stronger. Everyone predicted a tough first half, and then a rebound, and it never materialized.
We’re really optimistic and bullish for 2024 for two reasons. One is, we’re up against much softer numbers. 2023 was still a year that people were digesting all their technology investments from the prior years, whether it be clients or infrastructure. Second, there’s some macro trends we believe will be accelerators, shifting the wind from in our face to at our backs. It’s figuring out with our partners where AI fits in their businesses. And managed security, where breaches have been accelerating. A lot of reports said they’ve never been higher. So continued investment in security and network protection along with managed security continues to grow.
Also, I think one of the foundational growth areas will be the Windows 10 end-of-service and the Windows 11 upgrade cycle with Microsoft Copilot. And as Microsoft is trying to move AI capabilities from the cloud to the client, we think 2024 will be the beginning of a macro upgrade cycle.
You said double-digit growth. Can you give us some numbers?
[D&H] surpassed $6 billion in 2023, with year-over-year revenue growth well over 10 percent.
And D&H still remains profitable?
Yes. We’ve been in business 105 years, and made money for 105 years. Our streak continues. I think that would be 420 consecutive quarters of profitability, if we were a public company.
Let’s break down those three key trends that you talked about. First, what is D&H doing with AI and channel partners?
When cloud first came out, there was a lot of hype. And it took a couple of years until it really flowed. It started in the enterprise, then went to the consumer level, and eventually to the SMB and midmarket world. Same with as-a-service: It started with enterprise customers, then consumers could do it, and now it’s hit mainstream. I think AI will see a much faster adoption.
In 2024, we’re investing with our customers and our vendors. With our vendors, it’s about where their technology is going to leverage AI. Not hypothetically, and not just ChatGPT. What specific business solutions? How does it take costs out, or help their end users scale? We’ve spent a lot of time turning the vendors’ messaging into business cases for our partners. At the same time, we’re interviewing our reseller partners about what their end users are asking them. Big companies have invested in AI for the last couple years. You see them using it in their call centers, offering an intelligent chat bot that’s really much better than it was years ago. We’re trying to see how AI affects a law firm with 400 employees, or a sales organization with 200 employees, or a regional banking system? How can they leverage it? We’re trying to take all these business cases and facilitate the training first for our partners, and then how they communicate with their end users.
Aren’t your distribution business peers also doing that?
I’m not trying to disparage anyone. I think we’re trying to really simplify it. It’s very much brass tacks: How is it going to help our partners help their end users? What does it mean to a small business? How can they apply it? So we’re trying to simplify it in a much more pragmatic and digestible format. In the end, D&H really focuses on the enterprise, midmarket, and SMB, but we’ve known for and really are the SMB distributor. For that market, we have to do a lot more due diligence because customers don’t have data scientists, they don’t have the size of organization that a Fortune 1000 company has.
What are some of the AI technologies or applications D&H expects to bring to smaller channel partners?
One example is Microsoft Copilot. I almost consider it as ‘rolling thunder.’ Throughout the year, Microsoft will be rolling out different iterations of Copilot and Windows 11 that really unleash capabilities by different verticals, industries, and solutions. We’re aligning closely with the vendors as they roll technologies out to then train and educate resellers. [For another example], there may be 50 different examples of printer manufacturers coming out with AI. You think, what do printers have to do with AI? They’re doing it to help businesses narrow down how many printers they need, where they need them, what type of maintenance they need, all sorts of data-driven decisions to help manage costs more effectively.