Agilysys On the Move

That distribution business made up more than $1 billion of its annual revenue. Last year, Agilysys sold off the remaining portions of it to Arrow Electronics, raising nearly $400 million. Here, Rhein, chairman of the board, CEO and president of Agilysys, discusses the decision to sell the lucrative distribution business, maintaining partner relationships and helping employees deal with change.

VARBusiness: Agilysys sold off the distribution business last year to Arrow. What went into making that decision?

Rhein: Two factors led to the decision to divest the distribution business: One was we saw a wonderful opportunity in the VAR business, in being a VAR. Value-added resellers could develop in terms of intellectual assets, and [they] could get paid for that value. The second factor was that it was difficult to differentiate in the distribution area. We would develop different systems, and the industry was developing supply-chain management techniques. But distribution is ultimately a business of scale. We were not going to be competitive enough on a global scale.

VB: What was the reaction about that from your partners?

Rhein: Some called to congratulate me. On the other hand, there were some who considered us the competition. They were concerned about the change.

VB: How were you able to maintain partner relationships during this period?

Rhein: We spent a great deal of time with Arrow to provide customers with as much information as possible. And we did that with our employees. Our integration teams worked together and developed detailed plans. Arrow and Agilysys together were able to execute well. Planning is the key; very detailed planning and the commitment to do it right, as well as good communication. You cannot overcommunicate.

VB: Were there internal staff challenges, particularly in terms of morale?

Rhein: In the context of any acquisition or divesture, people feel anxiety in terms of change. You mitigate that by communicating. We tried to do that as frequently as possible. We did not have significant layoffs. Our entire corporate staff and senior management staff stayed the same. We still employ 1,200-plus people.

VB: Agilysys just bought Innovativ. And last month, the InfoGenesis deal was finalized. What are your goals for those acquisitions?

Rhein: InfoGenesis will enhance our offerings in the hospitality space. We can now cover all the operational needs of our customers, from POS [point-of-sale] management to activity management. Innovativ is a much larger business. It really brings us much greater diversity in terms of product offering. It's the most pervasive company in the market, and rounds out our portfolio. Being the largest provider of Sun, it strengthens our relationship with customers.

VB: You've led through many changes at Agilysys. What are some of the principles that have guided you through?

Rhein: That's an interesting question. I think the answer is that we've always done the right thing. Frankly, I operate under that principle to guide our culture. It not only determines the strategic direction, but also how we do the strategic thing, how we handle employees, customers and shareholders. n