Cloud computing—as nebulous as the technology sounds—could mean big business for Santa Ana technology products distributor Ingram Micro Inc.
Ingram Micro is the top distributor of technology products, including computers, software, servers and consumer electronics.
Its slim profit margins—Ingram nets pennies on the dollar—have prompted it to seek profits in providing services to its customers, which install and service technology products for businesses.
Cloud computing helps companies cut costs by allowing them to offload big databases, software programs and networking to servers run by third parties.
“Over the past four years, we’ve really proved that a distributor could play a role in cloud and managed services,” said Renee Bergeron, vice president of managed services and cloud computing for Ingram’s North America operations. “That’s a big step coming from a distributor of primarily hardware and software.”
Growth Market
Software and other corporate services built around the cloud are seen as being the biggest source of growth in the coming years.
“We believe we can carve out a solid, higher-margin opportunity,” Chief Executive Greg Spierkel said in a call with analysts earlier this year. “We already have a strong foundation as we’ve been selling enterprise products for years.”
Enter Bergeron, who joined Ingram’s services division last year.
“I was brought in to build this as a significant line of business for Ingram on a global scale,” she said. Cloud computing “is seen as a major contributor to moving up margins across the organization.”
Bergeron hails from Fujitsu America Inc., where she spent a decade.
At Ingram, she runs the services division for North America, which handles a variety of tasks for Ingram resellers, including helping to manage warranties, financing, software licenses, invoicing and logistics.
She replaced Justin Crotty, who left for an executive post at San Jose-based NetEnrich Inc.
“Renee has all of Justin’s responsibilities,” Ingram Micro North America President Keith Bradley told trade magazine Consumer Reseller News last year. “We’re closer to what the cloud is, and we’re ready to move forward on that piece.”
Portion of Revenue
Cloud-related business made up a quarter of the revenue from the North American services division last year.
“We see it as the fastest-growing portion of the managed services division,” Bergeron said. “That’s where we are expecting the largest growth in 2011 and beyond.”
For the fourth quarter, Ingram saw North America sales of $4 billion, the bulk from distribution. That was up 13% from a year earlier.
It reported total quarterly sales of $9.9 billion and profits of $115 million.
Services currently make up less than 10% of sales. But they can carry gross margins in the 7% to 15% range, Spierkel said on a call with analysts.
That’s compared with gross margins of roughly 5.5% on Ingram’s distribution business.
Santa Ana
Business: technology products distributor
Market value: $3.3 billion
2010 revenue: $34.6 billion, up 17%
2010 profit: $318 million, up 57%
Customers
Ingram is looking to help its reseller customers boost sales to their own customers, typically small and midsize business.
Cloud-based applications can help smaller businesses do backup and recovery, collect business data, handle email, process and store payments, among many other tasks that take up a lot of space on a network.
“Ingram wants to be the leading cloud aggregator to the channel,” Bergeron said. “We want to bring a comprehensive portfolio of solutions that resellers can pick and choose from to resolve the problems of their customers.”
Ingram helps vet vendors and software programs so its customers can feel good about reselling them.
It also helps train resellers to install, upgrade and manage cloud-based applications.
The company gathers data to develop targeted marketing campaigns that resellers can tap to grow their businesses.
“Our resellers are looking to Ingram to vet and conduct due diligence to really find the gems out there,” Bergeron said. “Our philosophy is to make it easier for the reseller to buy through Ingram than it is to buy direct.”
The company has partnered with some of the frontrunners in cloud computing, including Microsoft Corp., Rackspace US Inc. and Amazon Web Services LLC, part of Amazon.com Inc.
Acquisition
In September, Ingram picked up InterAct BVBA—a small distributor in Belgium that specializes in reselling software and providing services to companies looking to set up a cloud computing network.
It also started a special website to help draw in resellers to its cloud services offerings.
Some 1,500 resellers have registered on www.ingrammicrocloud.com, according to Bergeron.
“The initial goal was to help resellers by educating and training them when it comes to cloud service, to help accelerate adoption,” she said. “It’s been really well received.”
