Distributor Ingram Micro Inc. said Monday it is laying off 550 employees and outsourcing most of those positions overseas in a move to increase operating efficiencies and consolidate some business functions.
The Santa Ana, Calif., company, the world's largest IT distributor, released a statement that predicts the moves will produce savings of $10 million this year and ramp up to an annualized savings of $25 million by the first quarter of 2006.
About 50 percent of the layoffs will be at company headquarters and the remaining from locations across North America, mostly the company's Buffalo, N.Y., and Canadian operations. Some marketing and finance functions will be consolidated, he said.
"This is not a reduction in the number of people we have touching customers," Keith Bradley, president of Ingram Micro North America, told ChannelInsider.com. "We're still committed to the exact same level of service and customer experience."
No field sales or management positions will be affected by the moves, said Bradley.
Ingram Micro employs 13,500 people globally.
Ingram will outsource to a global outsourcing services provider by year's end transaction-oriented service and support functions, including selected North America positions in finance and shared services, customer service, vendor management, and some positions in technical support and inside sales.
The distributor is negotiating with two outsourcing providers and expects to choose one by the end of this month. It will then conduct extensive training sessions at the outsourcing company.
The move comes five days after the company announced that its chairman and chief executive, Kent B. Foster, is retiring after five years at the helm. He will be replaced by Ingram Micro co-President Gregory M.E. Spierkel. Co-President Kevin Murai is being promoted to president and chief operating officer.
Ingram Micro customer Tony Williams, vice president and chief technology officer of value-added reseller Riata Technologies, in Austin, Texas, said he is confident the moves will not affect the level of service Ingram Micro gives customers.
"Ingram really does care about that. They certainly wouldn't do anything to jeopardize that," said Williams whose company is a member of Ingram Micro's elite reseller group, VentureTech Network.
VentureTech Network members are scheduled to converge in Atlanta Sunday through Wednesday for the biannual VentureTech Network Invitational. During the event, members will meet with Ingram Micro executives as well as representatives from such major vendors as Hewlett-Packard Co., Cisco System Inc. and IBM to discuss market opportunities and other business matters.
Williams said he expects the layoff and outsourcing plan will be among the hot topics of discussion between VentureTech members during the invitational.
The consolidation and outsourcing moves will cost an estimated $26 million, $18 million of which net of tax, of which approximately $5.5 million were incurred in the first quarter of 2005. The remainder will be recorded through the fourth quarter of 2005.
Nearly all the costs will be charged to operating expenses and include reorganization costs, consulting, relocation and other transition expenses associated with these actions, the company said.
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"I understand Ingram's need to find a way to lower cost on transactional business. We are trying to do the same thing in our own company," said Jane Cage, partner at Heartland Technology Solutions of Joplin, Mo., also a VentureTech member.
"We have a strong relationship with Ingram. They have already called to let us know that we won't see a change in the way we interact with them," Cage said.
Bradley said the plan will allow Ingram Micro to become more productive and enhance profit margins. The moves are consistent with the company's strategy to expand the core business, pursue new and adjacent markets, and build more services capabilities.
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