Ingram Micro switches to networking

Ingram Micro switches to networking

Global distribution leader Ingram Micro may be taking its time to crank up operations in Australia, but senior executives see naught but blue sky and green pastures in the future as its Asian-Pacific consolidation plans gather momentum.

According to the organisation's local head, networking is one area where it is expecting to make ground.

Australian Reseller News last week engaged in an exclusive teleconference that assembled Ingram's chairman Jerre Stead; recently-appointed CEO and president Kent Foster; Asia- Pacific president Hans Koppen; and Australian managing director Michael Shea.

During this discussion, the panel conceded the role of distributors in the IT supply chain has totally changed, but disputed suggestions the two-tiered distribution model is a dying one. It also gained consensus that now, more than ever, channel players face extinction unless they embraced a shift towards business models with a much heavier services focus.

While informing ARN that Ingram's Australian revenue increases have been far short of less mature Asian markets, regional head Koppen said he expected "some pretty good growth" here in the future.

"We still have a lot of work to catch up with the leaders," he said. "It is not like India or China but it is a growth market and there is enough demand for us to value-add services, so we feel we will quickly grow our presence there."

Local chief Shea has had to manage the integration of ERA and ITG that launched Ingram in Australia as well as "putting on 11 or 12 new vendors -- including Microsoft retail and HP".

He said that "amongst other projects", it is "working very hard" in the networking space to build on recent partnerships with 3Com and Intel. With strong players already supporting that market, it will be a tough nut for Ingram to crack.

"Networking is definitely a space we are moving into," Shea said of Australian aspirations for the company. "There are many discussions, [involving] both us courting vendors and them coming to us. It is really only now that we are emerging and evolving into an efficient partner for resellers."

New CEO, Foster claimed that despite the recent failure of global operators -- including the world's second largest, CHS Electronics -- the future of two-tier distribution in IT is solid. As methodologies required for success shift dramatically, a real "shake-out" has taken place in the ranks all over the world allowing the survivors to increase hardware margins and focus on value-added services.

Ingram's first quarter results showed it had more than doubled earnings to $US96.1 million from year to year on $7.80 billion in revenues (up 16 per cent). A statement from Ingram said net sales in the US grew 11 per cent to $4.59 billion; in Europe 17 per cent to $2.04 billion; and in other regions 38 per cent to $1.16 billion.

"A lot of people felt the role of two-tier distribution had diminished drastically and one of the things they focused on was our profitability [falls] and our share price [falls]," Foster said. "But if you look at last year's [global] numbers, we grew revenues 27 per cent.

"Our business was not falling off at all," Foster beamed. "In fact it was growing significantly but what we did have was a very intense competitive environment. We have seen lots of shifts in the value chain and it is now obvious that if you don't provided value, the market will destroy you."

Foster also envisaged recent channel consolidations in the Australian market as being sure to continue. He sees it all as a progression towards the Asia- Pacific region's IT supply chain resembling the "rule of three -- two big globals and a strong regional player" that tends to apply to mature markets.

Foreseeing the future, Foster suggested that perhaps the South African influence in the local scene might ally with another global. Tech Pacific, by his observation, represents the "strong regional" pillar in the equation.

As the man that had held the reins for the biggest distributor in IT during a period of rapid change and fluctuating fortunes, Stead's comments on the major changes in distribution were requested. He nominated three, those being global consolidation, e-business and the emergence of value-added servicing.

"If you think about it, in the year 1999 and the beginning of 2000, the third, fourth and fifth largest distributors have now gone," Stead said of US distribution carnage and consolidation.

"My guess is there will be some additional adjustments but it is getting pretty close to where it should be," he added.

But it is the Internet which Stead reflects on as the most significant revolution for Ingram and distribution in general. He credits the Web with allowing IM to expand revenues from $8 billion in 1995 to $28 billion last year. This while only padding staff and associate numbers from 6800 to 15,000 over the same period.

"That is not just because they worked harder," Stead said. "It was because of the incredible Internet, infrastructure tools we are providing them [enabled them] to be more effective. We actually have one of the 10 largest e-commerce Web sites in the world today."

Of emerging services, Stead said he was expecting to be able "to provide a series of service offerings on a for-fee basis".

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