Hi everyone and happy Palm Sunday and Purim,
Distributors are starting to be more cognizant of the potential impact from the new wave of generative Artificial Intelligence (AI) technologies. That said, the AI still can’t predict a winning March Madness bracket!
Tech Leaders are Mentioning AI in Earnings
Through our continued tracking of the Distribution Index, we’ve tracked which distributors are talking about AI to public investors and which aren’t.
Exactly 50% of our tech leaders mention AI in their annual reports
Exactly 50% of our tech leaders mentioned AI in their Annual Report, and all of the ones who did mention it emphasized the competitive landscape shifting as a result. These organizations realize the risk of being left behind and the value that AI brings in creating new opportunities to increase top line revenue while expanding operational resource value. A number of these companies also explicitly mention their direct investment into AI within their business segments, with the most popular being utilization in eCommerce and Marketing.
On the flip side, only fitting, none of our tech laggards mention or recognize AI in their filings. We believe this lack of focus on AI is an oversight for these businesses as there are turnkey AI opportunities that even the tech laggards could take advantage of. More on that below.
Organizations that fail to successfully implement AI will miss opportunities for innovation and be less effective in engaging with customers. This is already apparent in our report 2 weeks ago where tech leaders are being valued at higher multiples compared to the laggards. With this implied leverage, efficient bolt-on acquisitions are more readily available to the tech leaders as well.
6 Example Areas for Turnkey AI Solutions
The AI opportunities for larger B2B distributors, those with greater than $1B revenue and especially those with greater than $5B revenue, are more robust and more easily captured. Using a generic example, if your distribution organization spends a few hundred thousand dollars buying a SaaS license and implementing a new AI technology solution, if that solution helps save 1% on $2B of spend within 12 months… that solution has a high ROI. Those same economics don’t create as much leverage for a sub $1B revenue distributor.
Each of these solutions are turn-key. Meaning they don’t require customization of your ERP and can even be used without a technical integration into your ERP. They are meant to drive hard-savings to distributors that are easily measurable and tangible. On a $5B revenue distributor, each of these solutions could generate over $1M in savings.
And, what we’ve found is … distributors care about saving $1M, even a multi-billion dollar distribution business.
Distributors of all sizes care about saving $1M.
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