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Mike Vizard:The first thing I thought I’d ask you since we’re here at your event is, you know, there’s still a lot of choices among the distributors. I can go to any one of your competitors, low and high — and I won’t bother going through the list out of respect for your event — but why Ingram? What today in your mind differentiates Ingram and why should the solution provider partner with Ingram over the multitude of sources that they have out there?

Greg Spierkel: Well, there’s just a huge number of things in my mind that I think are positive about why Ingram. [A recent survey says] a broad base of resellers that’s saying, “Look, there’re six categories out of 15 that Ingram was best in class.” So, right there there’s a voice of the customer base that’s talking about things that we’re doing well. That all said, the things that we keep pushing right now and I think we’re having some real success with, is we continue to be really innovative. We continue to be taking risks and doing things before others will. I think we find opportunities, either in products, or solutions or technologies before others do. And, you know, I can go through a list of examples, but what we’ve done in managed services recently is just on the cusp of something pretty interesting for the industry. It’s helping a segment of resellers, not all of them, but you know, at some point, that gets bigger and that becomes a great service offering, and there’s a whole suite of capabilities that we built around that. We’re going after interesting things like teaming up with Google to be the first to offer Google services in the channel. And we’re doing this on a global level. We’ve just signed up with Best Buy. We’re first to sort of help the channel again to be successful, to find new leads and opportunities. There were other choices out there. Both those companies, guess what — Ingram Micro. In terms of size, innovation and ability to take risks are, you know, front and foremost in my mind. So from a community that has choices, I think we provide more services and more options and a greater team to work with day in and day out. So I think that’s one of the main reasons why we keep staying ahead of the curve in size. That doesn’t mean everybody else goes away. You know, there’s still going to be choice out there.

Vizard: You mentioned managed services and it feels like we’re at some point — I don’t know whether you want to call it an evolution or a revolution; it depends on your point of view I guess — but a lot of people talk about solution providers in the age of managed services aren’t going to be reselling products per se because they’re going to become almost a type of buyer where they take the paper, they own the product and they manage it. Is that going to fundamentally change the relationship between distributors, resellers and their end customers, or how do you see that kind of playing out?

Spierkel: If you’ve followed the channel over the last few years pretty closely and if we talked 10 years ago, we would have said you, the reseller, don’t have to touch the product. You really shouldn’t; there’s no value-add in that. Yet there was skepticism, some concern and some angst in the reseller body at-large that basically said, “No, no, no. You may get access to my customer base.” So fast forward from a period of maybe 30 to 40 percent of our resellers at that point 10 years ago who were managing that touch the product today, you know, less than 5 percent of our customer base touches the product anymore. So it used to be 70 percent and now it’s less than 5 percent. So that’s analogous to saying, “Look, Ingram has got a real good core competency capability. They’re a trusted partner.” I would take the same view on managed services, not that we’re going to take over all the backroom offices for everybody. I think it’s an evolutionary thing just like the statement I made before. You’ve got a situation where clearly we feel that there’re some services and tools that we can provide and leverage our scale for to make the reseller be more effective with his customer base. Many of those resellers and systems integrators frankly don’t have the financial wherewithal to put these tools together. They can go out and get pieces of them, but Ingram Micro, again, is taking care of the supply chain for them and providing them a number of capabilities that make them look bigger as a trusted partner to their customer base. I see this as another helping step and evolution in our relationship with our customer base. And again, a certain portion is going to use it and a certain portion is going to continue to develop its own tools. I think as we get better at it, I think there’s a better chance that we’ll have a greater degree of penetration and I think we’ve been pretty happy thus far with everything we’ve done in the first full year of doing this. We announced this last year at VTN in the fall, so this is just a one-year anniversary essentially of our move down what I call a managed-service domain. But there’re a lot of other services we’ve been providing beyond managed services.

Virtual solution providers.

Vizard: And a lot of those services include everything from accounting to marketing and now, I know, there’s the managed services and the technical side. A few years back the term virtual VAR was in vogue. Are we kind of moving down the path of virtual solution provider? Because it almost feels like every cost aspect of my business as a solution provider I can now essentially outsource to Ingram and then all I need is the engineers and the salespeople.

Spierkel: That’s a big piece of what they need to do. There’s a lot of work to manage the relationship, understand their applications, understand their business model, and obviously then apply the technology and that solution set. So to your point, we are reaching that role. But let’s not lose sight that that’s been the value-add that the reseller and the systems integrator have had forever. It’s like saying, I’m the IT department in a midsized company. I’m going to work with you to understand what the company needs to do and where it’s trying to go from a strategic perspective, and then I’ll apply technology and applications to enable that company to be more successful with its own customer base. I frankly believe, the more we can do that way, the more engaged we are with those resellers — which I think works to our benefit — but more importantly, the more successful they are and this supply chain health continues, you know, because there are other options out there. People can bring pieces of the solution set via specialty players, via niche players. So we’re surrounded by a lot of choices there all the time. But if we can bring it in in a better cost profile and we understand what the resellers are doing because they’re our large customer base — they’re dynamic and they’re changing and they’re feeding us with a lot of good information about the requirements — we’ve got a pretty good idea, then, of a roadmap, a set of opportunities that we can make at least a healthy majority of those relationships be more engaged with Ingram Micro and feel that we’re continuing to provide new and interesting value.

Vizard: I guess there’re three things that people worry about in that context. On the one side of it, they go, “Well, it’s great because all my cost stuff is being essentially amortized across multiple partners and therefore it’s lower to me, so that’s good news.” On the negative, I guess they worry a little bit about, you know, are they becoming just agents and therefore their valuation of their company won’t be as high because they’re basically becoming agents of Ingram and they’re not full-fledged companies.

Spierkel: I have to say I’ve not heard that back from anybody. If anything, there’s been a desire at points sometimes to become more agent-like and have Ingram invest in them or have the big distributors invest in them so that they have an exit strategy, so that they have deeper financial pockets so that they can do other things. Because they recognize infrastructure, asset management are things that are frankly not their core competency. At the end of the day, the reseller, the systems integrator, that VAR, their real strength remains with understanding the application environment. So I don’t think you’re hollowing out the organization, unless you want to be a full-service play, like an IBM or an EDS. But that’s their role in life. That’s different. And even there, they’re outsourcing pieces. You know, they’re BPOing things themselves (business process outsourcing) pieces of their own competency that you used to see in the past. So people can understand after awhile, “Where’s my strength and where can I align with key partners, in our context — the supply chain context?” So it’s not only cost. It’s a little about — you know, because cost is important — but it’s also all about who’s got the better, deeper pockets for understanding the full suite of capabilities that the market needs and all the technologies are going on? And a lot of these firms are only touching on pieces of that and they want to rely, then, on companies like us to say, “Look, help me get there when I need it. You know, here’s my competency, but if there’s some adjacent things going on, you can help me with the adjacent pieces so I look good still in front of my end customer.”

Vizard: What do you say to the solution provider who historically has always played you know — I call it dialing for margins — and they would basically shop for product across three different distributors and try to shift the business around, and as I hear, you know, the new distribution model, it pretty much requires a solution provider to kind of line up on a key partner rather than play dialing for dollars. So, is there a shift in culture or a shift in mindset that needs to happen?

Spierkel: I couldn’t give you an exact number, but there’s a large percentage of resellers that feel very comfortable with a primary relationship, a company that they feel has provided them the most benefit, the sales rep, and the account manager and the technical resources have been really good to them over the years. And, you know, some of that shifts a little bit, but I would say the majority of the resellers out there are pretty aligned to one relationship or another. And then they’re going to have a secondary or maybe a tertiary partner, you know? And so the percentages may be 60, 70 percent with the primary, then 20 and then 15 just in case availability’s an issue and sometimes to some extent to keep everybody honest in the game. I think that’s a pattern that’s been in play for a long time. I don’t believe it’s changed substantially, to your comment. I don’t see it aligning differently in the last two, three years. We’re doing as much as we can to be the number one relationship with the largest base of partners that we can, and I think we are. But you know, that doesn’t mean there aren’t going to be some segments of the customers out there that are going to play just a pure price game and there’re other players. But that would probably play in the commoditized space of product availability and product supply. But most of the resellers are going to align themselves up saying, “You know, I want Ingram because I know I’ve got a field rep here, I’ve got two people in the technical resource pool I deal with every day. They know me, they know how I want to respond to my customers, and I value those people and I’ll buy because of that — because of all the programs, the people, and I’m going to stay with that relationship, you know, for the majority of my business.” I think that’s still very much in the cards, just like it has been for a number of years.

Volume or value?

Vizard: There’s a fair amount of talk today about the need to change the nature of channel programs away from being volume-focused and more value-focused. And everybody, I think, understands what volume means but I’m not so sure everybody understands what they mean by a value-based channel program. So in your mind, what do the vendors need to do and how do they need to kind of change their programs to reflect more of the value part by the solution provider.

Spierkel: That’s something I think we’ve been doing a much better job at. Over the last three years, the North American team has done a great job in trying to divisionalize our company internally in light of the external dynamics. So what do I mean by that? We’re much more solution-oriented in those divisions than we ever have been. In the past, it was all about big volume in transaction. We’re still — that’s a key part of our responsibility. But now the size is where it is. We’ve said, “OK, to be really successful you have to specialize within this bigger organization.” So we’ve got an organization, as you know, that’s now committed to solution-based selling around enterprise computing and storage, and we’re adding to the portfolio so that we understand that completely and that there’s a subsegment of resellers and end-customer solutions that are going down that path. We’ve got the same thing with the components business and the system architects there and the customer base — point of sale, data capture. A separate division understands the solution set. So internally we’re going after, let’s say eight of these significant stacks of solution capabilities and there’s about that, there’s maybe more, but those are the ones where we’ve got some big, broad groups that are dedicated to that. Those teams know that it’s not a single vendor solution. It never is. You know, even if you’ve got a networking solution and there’s one big networking player, there’s still a lot of other peripheral parts of software, cabling equipment, other things that maybe a networking vendor doesn’t have. So there’s an ecosystem of us understanding other choices and other pieces of the solution because there’s more hardware and software. It’s the same thing with putting in a mobility solution or a navigation solution. You get to a server, you get to some PDAs, you get to some software and middleware to make this thing work — you’re talking a six- to 10-vendor solution. And that’s where we get our — again, that team understands that solution set and the alternatives that are in there because there’s usually more than one vendor alternative. So you have to understand how those interrelationships of product fit together and from a technical point of view and an interoperability point of view. That’s a key part of the role that we play in helping that reseller understand those choices. So from my perspective, I think that’s where we’ve gone a good ways in the last two, three years here in North America and we’re continuing to go down that path.

Vizard: How do you get that mindset back to a vendor community that you serve also that, you know, is still somewhat obsessed with things like direct attach rates and all that other stuff?

Spierkel: There’s no question that the vendor — certain vendors, particularly the largest one — want complete mindshare. I mean, that’s nothing really new. Take a large vendor like HP, an important vendor, they don’t have the software stack. They don’t have the peripheral stack. They don’t have the networking stack. So if you’re going into a small business with a solution set, they may have the computing and the desktop infrastructure piece down cold. They’ve got a very good capability there. But there’s a number of other areas that, you know, again they recognize that we have to sell other products to get to that solution. And it’s not lost on them. As they go to sell themselves, they’re drawing on a lot of vendors themselves as they put solutions in place. So if they’re going into their direct customers, they’re also pulling from other vendors to get the complete solution, whether it’s enterprise software or whether it’s mobility capabilities. They’re drawing on other pieces to make the solution work for their customers. So the vendors clearly want us to have a bias towards their products. I mean — and they’re going to ask for breadth of coverage, depth of coverage, technical skills and certification skills, which we have and which we’ll continue to have. But vendors are understanding why we’re putting what I call product category solution-orientation teams together, because it isn’t a single solution set. And when they get into that solution set, then they say, “OK, I want best-of-share mind in that solution set,” and they’ll help us with programs to be successful in that because they say we’re being more targeted with our programs. We can go in deeper dive with our own analytics and everything else, and have much more pointed programs to hit goals that they’re looking for as well. So it’s a win-win in a different way. That doesn’t mean there aren’t going to be some people who are just pushing for volume, but frankly, we’re much more than just volume. We have been for some time and we need to continue to go down that solution orientation.

Vizard: You spent a fair amount of time in Europe. What can we learn in the North American channels from the way channels are run in Europe?

Emphasis on relationships.

Spierkel It’s a wholly different dynamic in Europe. There’re so many things I could talk about there. You’ve got a situation in Europe where there’s much more relationship selling than there is in North America. Not to say that North America doesn’t have a relationship and a relationship bias, but there I would say it’s a 2x factor of importance weighing on what you do. And that then means people are putting less sophistication or less specialization in place in Europe than there is here, and more of an emphasis of depending on the vendor to some extent and the distribution partner to put the solution together because they’re going to work on their relationship, which is their competency, understanding applications. So they’re much more focused on that, day in, day out, then I’d say North America is. I would give them credit also on a very different dynamic again. There’ve been certain competencies that Europe has been ahead on North America and that’s everything around mobility. North America is probably two, three years, in some cases more, behind Europe in certain product categories. Take navigation. It’s now a hot item here; triple-digit growth if you go to any of the big box retailers or off of the Internet. You’re seeing navigation take off and that’s just last year, this year. That was on fire in Europe four or five years ago, and people were putting together much more interesting solutions around that, both at a PDA level and at a basic phone level — miles ahead from where North America is in that regard. Why? I think greater use of the phone. There’s always been a bigger use of mobile phones in Europe. Much more difficult issues and challenges around languages, reading signage, as people move around, so they’re much more comfortable with their own language and not being able to see things visually, which here in North America I’d say is better organized. So it’s interesting how infrastructure will influence certain applications or certain solutions sets in one region from another. You could take the story over to Asia, where they’re skipping putting in desktops and putting in more laptops and mobility solutions and a wireless infrastructure and not worrying about cabled anything. So a complete step ahead again and a different dynamic. And if I go to India or China and just seeing what we sell and how the buying patterns are over there, they’re a little different, again in part because of infrastructure differences that have influenced how IT is being applied or at what rate it’s being applied. So it makes for some challenges for us as an organization, but I think our people understand it and, to the credit of the vendor community we work with, the bigger ones that are global in nature understand that, too, and work with us that way.

Vizard: The channel’s been international for years now but now the business is going global. How does the channel need to respond, how do companies like yours need to respond? Because they’re going to see more deals that are going to be …

Spierkel: Multiregional or multicountry, potentially at least. Yeah, I would say that challenge still remains out there for everybody. A global deal or a multination deal is still something that I would say the vendor community hasn’t figured out and for Ingram Micro is still challenging. Let me explain why. You know, our typical sale is usually in an in-country solution — 95 percent of our sales are in-country globally, so only 5 percent are trans-border where, you know, something’s sold here. Maybe a solution for Canada and the U.S., or something sold in Holland could be a solution for three countries in Europe. And where we run into problems is in a, let’s say, a platform for Europe, even just going out with a PC solution and a few servers, you have different SKUs for each country because of language issues, because of keyboard differences and because of pricing differences. And ultimately, what is even more challenging is most vendors compensate and reward and drive behavior on an in-country sales basis. So if I was going to go buy all the product for a multimillion-dollar sale in Europe out of Holland but only 10 percent of the sales are in Holland and 90 percent of the sales go to four other countries, the Dutch guy that’s getting that sale is licking his chops because he’s pretty happy. But he’ll have trouble sourcing SKUs from other countries so that’s where he needs our help, because he won’t be able to buy them in-country for his own operation. And then the in-country guy will get a benefit of the sales. But then let’s assume 50 percent of that sale ultimately is, even though it’s headquartered in Holland, 50 percent of the sale is going into Germany. The German vendor guy is not getting compensated for the sale in-country because it’s being pulled from another place and maybe Ingram is involved with it. And so from that perspective, there’re some challenges internally in the vendor community. So I would say the vendors have probably got the biggest hurdle in trying to get to standardized SKUs, standardized price points and common compensation plans that are neutral from sourcing to the selling process. That is something that hasn’t been sorted out and squared away. I will say, though, that we do work on a number of large bids and as we go forward I think we’re improving our processes where the vendors can give us the rights to work around some of their internal challenges. We’ve been able to put some good capabilities in place. But you have to work on what I call a certain degree of customized solutions to make that work. It’s not a standard practice because sales of a system configuration here in North America, and then you’re trying to export that to another country or another region — the SKUs will be different again, product homologation or approvals might not be the same, you have to replace it with maybe another product that’s comparable but not exactly the same. All those types of things make for a challenging situation there.