Santa Ana’s Ingram Micro Inc. has struck a deal to provide technology services to a unit of Best Buy Co. that serves businesses and consumers.
Best Buy plans to tap a network of subcontractors who provide technology services and consulting for Ingram Micro, the industry’s top distributor of electronics, computers and other gear.
“The focus isn’t exclusively on hardware and software, but also service contracts, maintenance, warranties on equipment and audits of network security,” said Jason Beal, director of sales for Ingram Micro’s services division.
The Ingram Micro Service Network has some 700 companies,with about 10,000 workers,that the company can call on to serve Best Buy’s small and midsize business customers in the U.S., he said.
Best Buy has sought to expand by going after sales to companies with five to 1,000 workers. Customers include government agencies, schools, restaurants and stores.
Ingram, with $34 billion in yearly sales, collects a “finder’s fee,” or a small amount of money, every time a Best Buy business customer calls on an Ingram subcontractor.
“If (Best Buy’s customers) are growing their business and doing more services, then they will become more healthy customers and buy more products from Ingram,” Beal said.
The goal is to have “hundreds” of work orders a month, he said. Beal declined to say how much the deal could add to Ingram’s sales.
The work orders can be for something as small as fixing a printer to as large as rolling out software at a restaurant chain across the country.
The contractors also could set up telephone service over the Internet, lay cable or install a data storage network, Beal said.
Ingram’s network is set to complement Best Buy’s Geek Squad, its tech support group for consumers.
Geek Squad only operates near Best Buy’s stores, so subcontractors for Ingram can step in where there aren’t any, according to Beal.
The Ingram Micro Service Network has been around for about 15 years and is run from Santa Ana.
Ingram has been looking to diversify its mainstay distribution business to boost profits.
The Best Buy deal “is continuing to diversify our business,” Beal said.
“Announcements like this validate everything we have been doing to add value to our services and really enable our partners to go after profitable revenue streams,” he said.
The company doesn’t break down sales for its services unit, which also includes a division started earlier this year to drum up sales to makers of data storage gear.
Ingram’s main business, getting tech gear from manufacturers to stores and service companies, runs on the slimmest of profits,on average, the company nets pennies on the dollar.
It was hit hard this year with intense price cuts from its biggest customers, which include computer makers Hewlett-Packard Co. and Toshiba Corp.
Ingram has gone after more consumer electronics business as the sector has grown to rival the computer industry in sales.
In June, it bought Scottsdale-based DBL Distributing Inc., which distributes electronics accessories such as cables and speakers to stores, for $96 million.
In addition to consumer electronics, emphasizing service can help offset the profit pinch, analysts say. But Grady Burkett, an analyst with Morningstar Inc. in Chicago, said such a strategy may only pad profits in the short term.
“Ingram’s customers expect more value-added services, such as warranty management, product support and extensions of credit, though they are not always willing to pay for them,” Burkett said in a note to clients. “Ingram will be forced to provide these services to its customers or risk losing share to a competitor.”
And competition is getting tougher in the distribution business, he said.
Ingram’s competitors, including Clearwater, Fla.-based Tech Data Corp., Phoenix-based Avnet Inc. and Fremont-based Synnex Corp., are likely to chase Ingram into its new markets, Burkett said.
“More than a dozen large global distributors, as well as hundreds of smaller regional players, are going to compete for market share,” he said. “Excess returns will be increasingly difficult to obtain as regional distributors in Asia vigorously defend their own markets.”
