Insight Enterprises, Inc. (NSIT) Earnings Call Transcript & Summary

Hi. Good afternoon, everyone, and thank you for attending JPMorgan's TMC conference this year. I'm Joe Cardoso from the networking and hardware team at JPMorgan. And today, I have the pleasure to host the CFO of Insight, Glynis Bryan, who has been with the company for over 10 years. Before we get started, I just want to remind investors that we will be taking questions towards the end of the session and any investors viewing or listening via the webcast, you can submit your questions online, and I can ask it on your behalf. So with that, let's get started. Glynis, given your tenure at the company, can you just take a couple of moments here to just give a quick background for maybe investors who are new to the Insight story?

Sure. Okay. And there's a presentation on our website, if you want to check it out afterwards. So we're a technology. We started life as a technology reseller. Over the course of the last 20, 30 years, we've evolved. And specifically in the last 5 years, I would say that we're migrating down the path towards being a leading solutions integrator, if you want to think about it that way. Over the course of our history, we've grown from being very, very small to now being $9.4 billion at the end of last year. We have about 11 -- 12 -- just under 12,000 teammates globally. We're organized regionally in North America, EMEA and APAC. We have now about 4,500 very technical resources of those technical resources that deliver the services and solutions to our clients, about 1,600 of those are in the digital, cloud and digital enablement, AI, IoT space that's pretty state-of-the-art and very relevant today. Coming out of the pandemic, one of the things we would have said is that IT was a winner coming out of the pandemic, both in terms of technology, in general, was a winner coming out of the pandemic. Demand is very high. Our clients are still kind of placing their orders. If you want to talk about it that way for hardware early, given the supply chain constraints that are still out there. And I would say that when you think about a differentiation for Insight, one of the things that we think differentiates us is that we are global today, about 75% of our revenue is in the U.S., about 22-or-so percent of it is in EMEA and then 3% in APAC. We're actually able to deliver resources across the globe, either through our own network or through partners. And we actually, today, I think, have more technical competencies given the acquisitions that we've made and then how we've grown them organically relative to some of our more "of our peers", if you want to think about it that way. We don't think of ourselves as being [indiscernible] anymore. We've moved on. And we would say that some people who've recently done an acquisition may be following in our footsteps, just saying. I think that's the essence of Insight. We do live by -- we're a purpose-driven company, and we live by our values of hunger, heart and harmony. We think that it's -- the focus on teammates that has helped us to be successful both in integrating companies when you buy services companies, what matters are the teammates. That's what you're really buying, you're buying people. And we have to do a good job of integrating those people into our organization and retaining them, especially in this age of our talent flight of retaining them, and we've done a good job of that, I think, because of the culture that we have at Insight. And when you're on the website, you'll see many examples of recognitions that we've gotten for the culture and the values and Best Places to Work awards across the globe. I'll turn it back to you.

Yes. Thank you. And super insightful. My team has been starting every fireside we've been hosting thus far with the 3 same questions, and we think they're pretty topical, but maybe not the best questions to start off sessions like this with. So let me just start off here. Given all the noise with the macro, obviously, investors are concerned about an upcoming recession. From Insight's perspective, are you seeing any signs of a recession in your business trends? And what are those trends that you would kind of highlight to suggest one way or another?

From the trends in my business, I would say I'm not seeing anything related to a recession, but I don't have my head in the sand either, right? So if I look at the investment banks out there or any of the economists that we may talk to, in general, they talk about all the factors that could indicate a recession is possible. Some people go as far as to say maybe within the next 12 to 24 months, it's a 35% probability of a recession. But at the end of all of their commentary, they always come back to their base case is that we're going to get through this without a recession. In general, that's the summation of maybe just the banks I've talked to. So I think our view is that we don't see it in our business today. But given the sentiment out there, we keep looking for signs that it's going to be coming. Why I say we don't see it in our business today is that we have had the last 3 quarters starting in the third quarter of 2021, we had hardware growth of 35%. It was 20-some percent in Q4, and it was 25% or 27% in Q1 despite all the supply chain shortages and the issues that are out there. So I think that we continue to see backlog increase. We continue to see bookings increase, and those are 2 things that I think are drivers overall of what we're seeing. And it's globally. It's a little bit softer in Europe. I will say that. But between APAC and North America, it's been pretty strong in terms of bookings. And Europe has some strong bookings as well, but just at a lower pace than North America and APAC.

Got it. You mentioned supply chains, and that actually feeds into my next question. Obviously, anyone who's been paying attention to kind of the IT spending ecosystem, Cisco just reported, and they highlighted incremental headwinds to the supply chain situation, particularly with lockdowns in China. So just specifically looking at the China lockdowns, are you guys feeling any implications to your business? Is there any incremental headwinds that you are facing because of the China lockdowns?

We haven't seen it yet. So infrastructure and networking gear has pre-lockdown was always a very long timeframe for delivery, like 365 days you get quoted. So I don't know, I guess there is 1 OEM out there that's potentially saying that things will be shifted a couple of months as a result of the lockdown in China. I think that when we talk to our OEMs, some of them, I think, just don't know. I know it sounds horrible. But I think that things are moving so quickly. They have different ways, they -- some people air freight stuff as opposed to waiting for the ports to open up and to ship them. So different OEMs make different decisions with regard to how they're going to get their product back into the U.S., and I would say to date, there is a backlog. Devices are not as backlogged as they used to be. They're much more readily available, readily from quotes available. It's really the networking and the infrastructure here that is taking a long time. But it has always -- it had an extended lead time.

No, makes sense. And I guess last question is the big question that everybody wants to know, and maybe I can ask this in a specific way for you guys since you guys have kind of 2 vantage points to this. But exiting the year, shot on the dark board essentially was that we start to see supply ease in the second half of the year. That seems to be rapidly dissipating as we move month-for-month, right? So what is Insight seeing? Like what are you guys hearing in terms of when we kind of reach this point of normalization? And maybe you can take it from the advantage of supplying maybe kind of devices versus infrastructure?

Yes. I would say that supply is still constrained. In general, it is still constrained. So it's easier to get devices than it was in early 2021, given our hardware growth, which is primarily around devices we've certainly got our fair share of it. But I don't see that easing going into the second half of this year. I think it's still going to be a constraint going into 2023. I say that because our backlog is high. That says that we have a lot of bookings out there for which we're waiting for equipment still. And when you think about the spread of the overall IT industry, devices and the peripherals that go with devices are roughly 50% of the market, then comes the communications piece, then comes server and storage. That's generally how our backlog is configured. Maybe communications networking equipment a little bit higher given how long the supply chain is. And I think that, that's going to take us through the end of this year into next year. Every quarter in 2021 and going into the first quarter of 2022, our backlog is built. So it's at a high that none of us have seen before. We have inventory in our books today. We don't buy inventory and hold it. We buy inventory for specific projects for clients. So we may be waiting on a switch to deploy something. That's why the inventory is on our book. So I would say that the supply constraints are going to be around for a little while into 2023, first half, second half, who knows, but into 2023.

Got it. So done with my standard questions. So let's switch gears here. The IT distribution market is highly fragmented. There's a host of public and private VARs, distributors, system integrators, all buying for share. First, can you just touch on what drives this market to be so fragmented and your views around consolidation longer term? Like do you think we ever get to a point where there's just a few large players that are operating in this space?

I think you will get to a few large players that are operating in the space, but there will still be thousands of smaller VARs, just because there's no roll-up strategy that you can apply to the small VARs as cost effective, my view. But in the larger, medium to larger VARs, that's where the consolidation has occurred. There's a lot of private equity money that's now in the tech industry, specifically around that consolidation. So I think you'll see that consolidation continue at the very top end. But that's maybe 20% of the market. 80% of it is still this fragmentation of all these small VARs. And every time we think that something is going to change that, like COVID [indiscernible] before it was the big financial crisis in 2009. We thought that was going to move some of the small players out. They're very resilient, and they have -- they're usually single threaded. They're a Cisco VAR, and IBN VAR or HP VAR, or whatever it may be Microsoft VAR. They have a couple of very good client relationships. And when you think about buying one of the smaller VARs, there's no cost synergies you're going to take out of it. They usually -- it's usually highly dependent on the owner who has a relationship, a key relationship with their clients. And if the owner leaves, then what do you have left? So I think that's why it's hard to get consolidation on the very small end of the market. But the medium and upper ends, there's a lot of private equity money out there that's chasing that part of the market. So I think that there will be 25 of us, but a lot of small ones still.

Yes. Got it. My second question on that topic is just who does Insight view, and maybe you touched on this in your introduction, but like who does Insight view as their key competitors in the space? And relative to them, what is Insight secret sauce? How is Insight driving differentiation for their customers?

I think if you think about our VAR competitors, we definitely have more digital and cloud-enabled capability than of our competitors. We're Microsoft's largest partner globally, but not only are we their largest partner globally, they actually come to us, and we're a beta site test for them. They bring us into deals. They leverage the technology that we have, they steal our people. They leverage the technology that we have and the capability. They would say that we have done the most in terms of transforming ourselves to be what they want us to be from a cloud perspective. So when we first went to the cloud, we Insight [indiscernible] cloud and our CEO started talking about the cloud. Nobody else was really talking about the cloud. Microsoft talked about the cloud, but they didn't do anything really around it. It's really when Satya Nadella became the CEO, that things changed at Microsoft with regard to doubling down on the cloud. And I would say that we maybe have an edge because our former CEO saw it early and pushed us, we weren't necessarily on board, but pushed us to actually double down on this little knit business at the time, and now it's 18% of our GP. So it's worked well for us, but there's a whole infrastructure you have to have. It's subscription billing, and monitoring of it, telling your clients when their usage is in excess and how they can better manage their usage. There's a whole series of incremental services that you can wrap around the cloud that wasn't -- that weren't there before. That I think we do well, partly because we have the software DNA and our history and many of this stuff, it evolves from that software DNA.

Right. Well, that's a good point, but your differentiation is definitely showing up in the top line growth that you guys have historically shown a expanding high single digit or greater per year, significantly outperforming their underlying IT spending. How much of that outperformance is driven by, let's say, share gains or versus customers or product verticals that the company aligns itself to? How should investors think -- and second part of this question is, how should investors think about the sustainability of that top line growth going forward?

Okay. So I'll just go on record of saying that top line growth is higher than the norm investors should expect on a go-forward basis. We think investors should expect somewhere in the range of 8% to 10% CAGR, right? So we hire [indiscernible] but over a 5-year period, you should expect, in general, a CAGR of about 8% to 10%, slightly ahead of the IT market, 200 or 300 basis points ahead of the IT market, depending on the mix of hardware, software and services. I think that we've sustained that partly through, we've done -- we haven't done an acquisition since August of 2019. But we've done acquisitions in the past, brought that business in and then integrated it and from there we've been able to kind of grow their capabilities in our existing client base and vice versa. So one of the things that we do when we do an acquisition is actually get the cost synergies first, and then we look for the revenue synergies after that. And I would say that, that is what has sustained our growth going forward even through the downturn is the fact that we're now getting the revenue synergies from many of the acquisitions that we've done before and really getting the synergies in terms of the capabilities that we're bringing to the table.

Got it. Insight is pretty uniquely positioned just given their exposure on the infrastructure side to maybe these legacy incumbent players like a Cisco Dow versus these cloud players like Microsoft, right? First, maybe can you touch on from Insight's perspective, how customer spending has and will shift kind of from like a past, present, future perspective? Specifically, what did you see during COVID lockdowns? What are you seeing now with reopenings? And kind of like over the past 2 years, how has that changed your customers' long-term strategic priorities going forward?

That's right there. So during COVID -- pre-COVID, it was all about just pre-COVID like in March, it was all about getting our clients ready to work remotely. And then they worked remotely for a very long time, far longer than any of the clients thought they were going to be working remotely. And now they live in a hybrid world. There's almost no client of ours that's back in the office permanently 5 days a week. So they're living permanently or semi-permanently until teammates decide they want to come back into the office in this hybrid world. And that actually says it needs to upgrade their infrastructure. So we did a lot of -- over the 2 years, most companies now don't have desktops anymore. It's all laptops. For us, that's a good thing. Laptops have shorter life just because they get band up, et cetera, in terms of the refresh cycle. And there's more connectivity and security and all these other things that you have to actually layer in on the laptop to help the client, make sure that the client environment stays secure. So I think that what we've seen is that migration from desktop to laptops. We've seen more bandwidth in the data center. So that is just now, I think, starting to pick up because in COVID, everything was locked down. Nobody went into the data center, no external parties rolled out into the data center. There are some things that we can do remotely, but -- sorry, some of the critical aspects do require you to be on site in terms of even after you've built it, you have to go on site to actually install it. So I think that we're seeing part of that coming through now. And one of the things that declined in COVID was all of the hardware after we got set up to work from home. And now that's coming back, coming back very strongly ultimately. I think that we -- in our particular forecast is front-end loaded. Hardware is going to be very strong in the front-end devices, very strong in the front half. In the second half, it's going to be services and infrastructure. They kind of go together, the infrastructure product plus the services go together. That's how we think the year is going to fall out for us. Q2 -- second half of last year is a very tough compare for us from an overall hardware perspective. So we're not expecting the 30% growth that we showed in Q1, it's going to be kind of like more in the single-digit range because it's a 30% comp in the second half of last year. But that's how we see the year rolling out and shaping up.

Got it. And is there any like implications in terms of customers' long-term investment strategies? So like have you seen any shift in priorities or how they are thinking about their technology deployments going forward?

That was the second part of your question.

Yes, long question, I know.

Yes. So I would say that if you think about all things cloud and digital, pre-pandemic versus post-pandemic, it's like 10 years have passed. And everything is now around digital and the cloud and how companies can be more nimble and agile, and that has a lot of implications, right? So if you have old technology in your data center, even if you're keeping a legacy data center and not moving workloads off to the cloud, even if you're keeping a legacy data center today, you can upgrade that data center, so you're more nimble and agile. But to the extent you decide to move certain workloads to the cloud, you can become even more nimble and agile and then we can help you manage that infrastructure. And I would say that what we see coming back from people today is very much more of a focus on us helping them drive business outcomes, not just giving them product or not just giving them a solution, but looking at a business outcome, a business problem that they have, and then we figure out with our technology and our solutions that we can bring to the table, how do we help them solve that problem. And then clearly, we want to manage it for them on a go-forward basis.

Makes sense. So maybe changing gears a little bit, but still kind of diving into the unique perspective that you guys have. Obviously, like anybody who's paying attention to Ciscos, HPs of the world. Everybody is trying to shift rapidly to software. And then at the same time, consuming this on a subscription as a service basis. How are you seeing your customers react to that transition? Like where are you guys seeing like what inning are we in? How is that tracking with customers? And then specific for Insight's business, what are the implications to these OEMs moving down to those business models, either software and then monetizing it through subscriptions and as a service? And we get this all the time, like how should investors view that? Is that a positive or negative implication to your business as they start to shift to these business models?

No, I'm going to say it's a positive, and here's why. Remember when the cloud first started, everybody said, "Oh, you're going to be disintermediated because Microsoft is going to take the cloud", right, that didn't happen. I'll come back to Microsoft later. But...

It's my next question, so...

When you think about the OEMs like Cisco, in particular, kind of developing software now and software-defined networks at 10 years ago, they said they'd never do. Like, we actually are able to help them because software is in our DNA. We have a lot of software and capabilities around software that can really help them. And I think we're their fastest-growing. I don't know what they call us in that regard with regard to software, but we're their fastest-growing partner around the software side of their capability. It's still small for them, of course, but we're one of their fastest-growing partners that help them in that regard. And I would say that, that's true across all of the OEMs. So even if it's like Device as a Service, which is really bundling the unit in with financing and then we wrap some solutions around it. They give us the unit and the financing, and we wrap our solutions around it. That still works for us in terms of how we go to market. There are different ways we can take that to market, of course. I would say that 7 years ago, 5 or 7 years ago, Gartner was talking about Device as a Service. It was going to be the next big thing. We figured out the mousetrap at Insight how we could use it. We got the accounting blessing about how we take it to market, et cetera, and it never materialized. Now that the OEMs are actually pushing it that the OEMs have a tool, a way that they can actually take this to market, I think it is going to get a little bit more traction. I think the clients out there may generally want a little bit more flexibility with regard to instead of a big CapEx, maybe stretching it out as an OpEx, all gets on your balance sheet anyway today with the new accounting rules. But I think clients want that flexibility in terms of the OpEx as opposed to a big CapEx outlay. And specifically, when you think about some of the industries that were hurt, the leisure industries that were hurt ultimately through COVID and still kind of recovering through COVID, they like that model without having to have the big capital expenditure associated with it. And we find that we're still a part of the equation going to the table, we can suggest it to them, better that we suggest it to them than somebody else suggests it to them is how we think about it. And we get the same economics really at the end of the day. We get similar economics to what we get if we sold them the product. And we get the managed services around it, right? And at the end of the day, the managed services that recurring revenue stream, it's sticky with the client, you deliver for them, gives you an end to do other things with that client. Once you're in there, it's not so much a purchasing decision anymore. It's an IT decision or even a financial decision from the CFO down. So it has worked for us. But it's not hugely -- it -- it's not exploding like the cloud, it's slower, but I think we'll get there.

Got it. So a similar question. Now we can talk about Microsoft in the cloud. Where are we in terms of that journey? Customers adopting cloud solutions? And maybe can you bifurcate between the moving essentially what -- I guess, what we would consider like legacy workloads or workloads that are currently on-premise data centers versus, let's say, net new workloads? Are you seeing more of the new workloads? Or are you seeing existing workloads getting pushed to the cloud? Where are we on that journey? And then similarly, how should investors view the economics as are you guys benefiting like on a like-for-like basis? Or is it kind of equals out at the end of the day?

Okay. So I would say if I use Microsoft as an example, and they're a good one. Adobe is also another good one. And they were the first to actually do the total migration to the cloud, and they hurt for a little while, but are coming out on the other side of that right now. For Microsoft, we're indifferent either way. And I think for us, we have a base legacy Microsoft practice, and that legacy Microsoft practice on-prem is converting to the cloud. So it hurts our revenue because the cloud's net and the on-prem stuff is gross. But at the end of the day, in terms of the gross profit dollars and the profitability associated with it, it doesn't hurt our profitability in that regard. So we're indifferent between the 2. Microsoft wants us to migrate that stuff once all their partners to migrate that stuff to the cloud. And I think that that's a journey that has started a while back, has accelerated hugely in the pandemic, and we'll continue to accelerate. I don't think there's anything changing there. In the corporate space, Azure is -- maybe it's stronger than AWS, depending if you're a legacy company, you probably have a Microsoft infrastructure already. So when you think about where to move some workloads, it's easy to go there. We have a big Microsoft practice. Clearly, we have a smaller AWS practice, but we can still be somewhat agnostic between if a client wants to go to AWS, we can support that migration. If they want to go to the Azure cloud, we can support that as well too. PCP is a little nascent for us. But I think when you step back and look at it, I would say that cloud is, I don't know, on the second base maybe, second rounding to third. They still got a lot of traction in it. So when it first started out, the growth was 30-some percent, now went to 20-some percent. Now there are different pieces, different elements are somewhere between high teens and 20s still in terms of overall growth. It's the fastest-growing segment of the IT industry. Maybe the intelligent edge is coming up behind it. It's also a bigger portion of IT spend today than it was 10 years ago. So it's growing at a slower pace, but it's still huge dollars because it's a bigger piece of the pie today.

Makes sense.

And I don't think you go back.

Yes, that's fair.

I don't think you go back. I don't think clients go back.

Yes. So yes, we can take the question in the back.

Because -- let me frame this the right way. You haven't seen any macro slowdown necessarily in your business yet. But as we think about what you just said that you don't go backwards from cloud, and you're part of the conversations that perhaps CIOs are making. What is your perspective on where company's infrastructure spend will go in a contractionary environment, whether that's a recession or just further slowing growth? I think we saw the first headline that I can think of this past week with coin base saying that they want to reduce their cloud spend by 20% to 25%. And we, as investors, haven't necessarily seen where cloud and infrastructure spend sits in the CIO's budget. So what's your perspective on where that will go in the event that belts need to be tightened?

Interesting question. In the event that belts need to be tightened, I think that there are tools that we can provide to our client base to help them better manage their infrastructure usage, consumption, I guess. But at the end of the day, when you own your infrastructure, you have infinite usage. When you don't own your infrastructure, you pay for usage. And how much you use it is totally dependent on you, not on the provider of the cloud. So I think that if you want to figure out how to control your consumption in a go-forward world, you have to figure out ways within your company to get better management of the expenses associated with the cloud. So some companies carve it -- spread it out to individual business units, and they have a budget that they have to spend with regard to how much cloud they can use. It's probably a better basis and have it sit in IT and IT jobs absorbs the cost and doesn't actually really know where it's coming from. When you know where it's coming from, you can actually go attack the problem. And like at Insight, our BI team, business intelligence team, the analytical team that we have, that's a big user of cloud resources, right? So we want to think about how do we control the expenses, are they living within their budget. That's where we look first to see what's happening there. And that's what I think companies will ultimately end up doing. I don't know that you can actually reduce your cloud spend by 25%. You're thinking they're going to take it back in-house. You don't get the same efficiencies. That's just -- I mean, and I'm a CFO sitting in a position where I pay for cloud services today. So everything I'm telling you is what Insight does ourselves because you have to manage it very carefully. But I don't think you can go back, because then you have to spend a lot of money upgrading your internal infrastructure, and that may be more expensive, more time consuming, and it takes the time away from your business, whatever it is that your business is in terms of how you're interacting with your clients and what you want to do for your clients. So at the end of the day, I don't think 25% is possible, but you can certainly get to 10% or 15% if you manage the business effectively.

Let's just pause there. Yes?

I apologize [indiscernible] this because I don't think it's the way you said it, but it will help me flesh it out. So what you refer to as devices, I think you mean client PCs principally?

Yes.

Okay. So I think what you said was like availability, there was like really difficult, and now availability is like less difficult. And you're seeing a really strong first half, but you're motioning to a slowing in the second half.

Only because my second half of 2021 was very, very strong, just a relative comparison.

Apologies for talking over you, but that's the thrust of my question. Is the slowing itself related to the fact that as availability improves, much of that demand that sat in your backlog is met and there's not further demand coming in to replace it? Or are you just talking about the artifact of the compares? I'll shut up after this and let you talk, but -- the follow-on question would just be, as we think about the balance of the portfolio, the stuff that's still constrained right now, like why wouldn't a similar playbook be applied in like 2023, when availability in those products begins to improve? So can you just talk about all that?

So my commentary about Insight, very specifically, first half, second half is really related to the compare in the second half of 2021. So we're going to grow over that compare, right? But I'm not going to grow 30% over that compare. That's really the point I was trying to get across. And then the first half of 2021 was soft for us from a hardware perspective. Other companies had a stronger hardware first half than we had. So for us, our first half is very strong because we're getting a lot of the large enterprise clients coming back into the market, coming back to us with regard to purchases. And we just, this is our belief, right? It could be that we have a bang up second half as well, and it really grows in the double digits. But relative to the compare that we have, we think that we're being reasonable and prudent with regard to the guidance around not having as much growth in the second half of the year. But bookings, that's a measure for us in terms of our clients continuing to place orders in advance. Bookings are still strong, have been strong for the last 1.5 years, continue to be strong. So that says that there is demand for IT goods coming through. The infrastructure spend has been held up for like 2 years, right? So first of all, nobody went into the data centers to be able to do anything around infrastructure. Then when they were going to be able to do something around infrastructure, it turns out that the supply chain was very extended and is still very extended. So I think the supply chain around infrastructure is going to extend for longer than just the device side of it. So I think that it's not '23 necessarily. Every year, we get asked this question, is IT spend going to continue at this pace? And the reality is that, it does not going to continue at this pace, which for us is kind of like double digits. But it's going to continue at a high single-digit pace, we believe, because of the client segments that we serve, because of the Windows 11 coming out, because of the PC -- sorry, the laptop, specifically refresh cycle being shorter and because of the backlog of demand around storage and infrastructure spend and the fact that people want to upgrade their infrastructure to take advantage of the technology out there today, you have to upgrade your infrastructure. You'll be left behind otherwise.

Just on that last point, where does the deceleration come from? Is it the pace of that spend will slow down in terms of volume? Or are there certain areas where CIOs are going to just spend less in order to bring us from that 8% to 10% growth rate to that 6% growth rate?

I think that CIOs have a budget. And typically, the budget doesn't grow by 10% every year unless it's a specific initiative. So when you -- when the CIO looks at his budget, he thinks about how do I actually determine my priorities, and where I spend the dollars. Most CIOs today would put security, cloud and digital innovation of some kind at the top of their list with regard to how they want to spend their budgets. And so they will take dollars from somewhere else or they may actually go to this device as a service or some other as-a-service model that is CapEx versus a big capital piece of the budget on a go-forward basis. They have more tools to play with today, but by having more tools to play with, it actually has created more complexity for them. I actually am pretty bullish about the whole technology segment and the value that we bring to bear for our clients. And I think that not just our clients, but most tech clients today would say that when they have upgraded their infrastructure, when they're taking advantage of the technology that's available today, that they get better business outcomes. That's really the end game.

Any other questions in the room before I continue with mine? No, looks good. All right. Yes. So maybe changing the topic a little bit here. And we've gotten this question from investors, whether it's anyone in the space, right? If I look at your top 5 partners, that's publicly disclosed in your filings, they account for 50% of revenue, and it's the names we talked about, Microsoft, Dell, Cisco, et cetera, right? So for investors concerned relative to the partner concentration risk, like what would you say to them to alleviate that concern?

I think our partner concentration is endemic across the industry, right? I mean those are the big players in the industry. So Insight actually has over 5,000 partners, but the top 20 and probably 90% of the overall, maybe 80% of the overall COGS whatever product cost, if you want to think about it that way. I don't think that's a risk, though, because I think that partners have made the determination over the years that they have a channel strategy, and it's been many, many years since they've changed that channel strategy, but they've made a determination that they don't -- they can't afford to get to the numbers of clients that we can actually touch. So they use us to get to a broader cross-section of clients. And I think if they were to kind of back away from the channel, they're still going to be the big players in the industry. They would have to find a way to sell that product directly. And I think they determined that's more expensive than doing it through the channel.

Makes sense. I think we're up on time. So I want to take the time to thank you for participating and thank you for everyone for joining us today. Really appreciate it.

Thanks for question. Appreciate it.