The biggest name in Australian IT distribution will soon be confined to the history books if all goes to plan. With Ingram Micro's $700 million buyout of Tech Pacific completed, new managing director Kerry Baillie hopes to have both organisations operating as a single entity by the end of March.
In an exclusive interview with ARN, Baillie apologised to the market for a lack of communication since the takeover was completed back in November. This, he said, was the result of legal constraints that had since been lifted. The main priority now was to get the two companies working as one as quickly as possible.
At the time of the merger, Ingram had about 200 staff compared to the 650 at Tech Pac. Baillie said feelings of uncertainty had already seen some staff leave and existing temporary contracts would not be renewed. He estimated about 15 per cent of Tech Pac staff had left during the last year through natural attrition and predicted the number of job losses as a result of the merger would be lower than that. Total cuts will be no more than 120 employees.
While rumours of staff redundancies were rife in the lead up to Christmas, Baillie said staff had still not been given any indication of who would not be retained.
"Ingram Micro was run quite efficiently and we [Tech Pacific] have been increasing that so both organisations are quite lean at the moment," he said. "However, there will be some duplication and, where that is the case, there will be selection."
As far as product managers are concerned, Baillie said the preferences of each vendor would be given some weight in the appointment where both Ingram and Tech Pac had previously held the same account.
In the short term, former Tech Pac resellers would continue to buy product through its existing systems and Ingram dealers would be encouraged to move across, Baillie said. Meanwhile, two IT staff had been sent to the US to look at the Ingram system and would also visit Europe to see how it operated there. Next year, a new Ingram system would incorporate upgrades from both. The TechLink website would be clipped straight into it, retained as the last trace of Tech Pac.
"The guiding principle is to keep our vendor and customer interfaces intact," Baillie said. "We will achieve that with existing systems and business practices and by improving our delivery capacity.
"Our operations have to be better than they have been in the past. We must ensure we have sufficient staff and resources to meet our combined vendor targets and that every reseller who wants to buy from us has the same access as they did."
In Sydney, the Tech Pac premises in Rosebery will serve as headquarters. It has a whole floor of spare capacity already wired up and ready to house Ingram's existing sales and marketing team. Baillie said those staff would be relocated in the space of a weekend.
Baillie said Ingram would look to close some of its existing sites around Australia but also intended to open a third warehouse in Sydney. Ingram's warehouse in Melbourne will close, with staff transferred to the existing Tech Pac site, which is currently operating at about half capacity. Baillie said the Brisbane warehouse was currently under review.
Both existing sites in Perth will close because the distribution powerhouse is searching for larger premises. The Tech Pac sales office in Adelaide will be retained because Ingram had no presence in that state.
The senior management team will be dominated by former Tech Pac staff, with six of the eight people reporting directly to Baillie having moved across with him. Former Ingram boss, Steve Rust, has been appointed director of operations.
Ingram's sales director before the merger, Paul Scanlon, will be charged with setting up a new sales channel centred on the TechLink website. Baillie said the new division would look to compete with Express Online.
Commercial sales director, John Walters, would be responsible for appointing state managers across Australia. These are also likely to be former Tech Pac employees, Baillie said, because the existing Ingram structure did not include state managers.
While merging the businesses would mean removing some overlap, Baillie said this would not be as difficult or widespread as many people might think because Tech Pac had been strong in retail while Ingram had a large OEM business.
From combined business of $2 billion, Baillie estimated the overlap would be about $350 million. In terms of vendor partners he said the new-look Ingram would have about 90. This was about 20 more than Tech Pac was already handling.
Baillie said vendors were still keeping a watching brief on developments as the merger started to take shape.
"The vendors have said that if we can hit the combined targets and keep service levels up then we are fine," he said. "If not, they will reconsider their options so we have a window in which we have to perform."
From a reseller point of view, he was keen to dispel any fears of a credit limit squeeze.
"We have always given credit to accommodate the level of business that resellers are prepared to put our way and that principle will remain intact," he said.
"The one thing that will change is that some resellers will have been paying one broad-based distributor this month and the other next month to create a 60-day cycle. I can't fix that but resellers operating in this way are a minority."
Baillie predicted the new distribution giant would not change market dynamics significantly. He also doubted other large operations would issue a volume challenge.
"I think one broad-based distributor is enough for a country of this size," Baillie said. "If Tech Data was going to come down here they would have done it by now. Express Data has specialised and Synnex have tried to go broad-based but it didn't happen - they are both good at what they do.
"We have to co-exist with other players in the market and we won't be trying to impede their progress."