As the biggest distributor of Microsoft Corp.’s software, Santa Ana’s Ingram Micro Inc. has a lot riding on the software maker’s latest operating system and upcoming business software suite.
Microsoft’s Windows 7 operating system debuted last month to positive reviews.
And there will be a flood of new versions of other Microsoft standbys—including Office, Exchange and SharePoint—in the coming months.
Ingram, the largest distributor of software, computers and consumer electronics, is looking for a boost in sales as the releases are expected to drive purchases of software licenses and computers.
“Microsoft has found a good footing, not just with Windows 7, but with the other products on their roadmap,” said Mario Leone, chief information officer at Ingram Micro. “I think they are compelling and hopefully will spur more growth for all of us.”
The releases offer a selling opportunity for Ingram and its customers—technology consultants that install software and computers for their customers. Ingram also supplies to retailers.
“It’s a good catalyst,” Leone said. “We can look at pushing related sales of hardware and peripherals with an eye toward other software introductions that will be coming later. It’s a nice opportunity for us to go out there and start pitching.”
Many corporations are overdue for up-grades, Leone said. They’ve put off buying computers for a number of years now, he said.
The biggest reason for the delayed buying, of course, is the recession.
Last fall’s financial crisis ushered in a period of budget freezes. That took a toll on corporate technology spending.
It didn’t help that Microsoft’s Vista operating system, which was released in 2005, bombed.
It was poorly received for a number of reasons by consumers and business users alike. Many skipped out on it altogether and continued to work on older versions of Windows.
“Many companies, like ourselves, have gone ahead and amortized the previous version of Windows,” Leone said. “Eight years later, the timing is such that we have gotten just about all that we can out of it.”
Modest Uptick
Industry watchers say Microsoft’s new software releases are likely to usher in a modest uptick in spending.
“Everybody has been waiting for this,” said Chris Andreozzi, president of KnowledgeCen-trix Inc., an Irvine-based technology services provider and Ingram customer. “There are hundreds of thousands of PCs in our local market that are ready to be refreshed.”
Privately held KnowledgeCentrix said it saw third-quarter sales climb due to demand for Windows 7. It has yearly sales of about $5 million.
“The third quarter was one of our best quarters ever relative to services related to Microsoft,” Andreozzi said. “The bulk of our business at this point has been around the deployment of Microsoft technology on the server side and around the SharePoint collaboration software.”
KnowledgeCentrix’s typical customer has 250 to 2,500 employees. Its biggest customer has nearly 30,000.
Still, larger economic woes likely will temper growth.
Gone are the days when a Microsoft release drives massive spending and a big buildup of newly made computers.
“There was a long period of time where, when there was a new release, everyone would rush off and install it,” Ingram’s Leone said. “The idea of making a change with every new version I don’t think is practical any longer.”
These days, spending on software and hardware is “pretty strategic,” he said.
“People take a hard look at their use of hardware and software and the relative value of the new functionality,” Leone said. “They ask if it will increase sales performance or operational gains or reduce costs.”
This year was the worst in recent memory for technology spending, according to market researcher Gartner Inc.
Ingram, which nets just pennies on the dollar in its bread and butter distribution business, got hit with a double whammy.
The company saw sales slump and profits squeezed as both consumers and corporations cooled their spending on technology.
“We had gone through some very tough times,” Leone said.
Ingram sees yearly sales of about $30 billion.
Corporate Spending
Corporate technology spending slumped 7% in 2009, Gartner’s data showed.
The computer products market has struggled more than other segments with worldwide spending expected to be down 17% in 2009 compared to a year earlier.
In 2010, spending on computer products will be flat, according to Gartner’s estimates.
“The Windows 7 release will generate renewed interest in hardware upgrades in consumers and small businesses following its release, but corporate demand is not expected to gain momentum until the end of 2010,” said Charles Smulders, managing vice president at Gartner. “An overdue PC hardware upgrade cycle, and the economic environment, will be as equally important as Windows 7 in determining final demand in 2010.”
