Ingram Micro Turns To Outsourcing

The third-party service provider contract is expected to cover mainframe and major server, desktop and enterprise storage operations; WAN and LAN support and engineering; systems management services; internal associate help desk services; and worldwide voice/PBX for the distributor. Ingram Micro will retain control of IT strategy and architecture, worldwide application development, quality assurance, and customer and partner programs internally. The transition will be seamless, and VARs will not see any service level decrease, according to an Ingram Micro spokesperson.

"Contracting out our IT infrastructure gives us the best of both worlds,we can take advantage of the third-party service provider's economies of scale to achieve a lower cost structure and have the flexibility to access the expertise needed to manage a variety of technology platforms," said Guy Abramo, Ingram Micro's chief strategy and information officer, in a statement.

Ingram Micro anticipates that about 200 employees located throughout North America will be affected by the outsourcing plan. However, the distributor hopes to transition affected employees by helping them gain employment with the new IT provider. Other Ingram Micro IT personnel will remain with the distributor to provide core IT services, focus on strategic business and technology initatives, and handle the IT connectivity requirements for customers and vendors, the company says.

Ingram Micro is also negotiating with a third-party service provider to handle the IT contract. As of press time, the company wouldn't name names until talks were complete, though one channel news report cited Dallas-based Affiliated Computer Services, a $3 billion business process and IT outsourcing solution provider that has 10,000 clients and 40,000 employees worldwide.

Tech Data's Q4 Woes

Separately, Tech Data, the industry's No. 2 distributor, says it expects further sales softening in the United States this quarter,a time when distributors typically enjoy a revenue upswing as businesses spend remaining IT budget dollars for the year and retailers experience a holiday rush.

The distributor attributes the lower outlook to a soft IT market, fewer shipping days and some impact from Hewlett-Packard's selling direct. Tech Data's plan for Q4, ending Jan. 31, is for sales of $3.8 billion to $3.95 billion and net income of $31 million to $34 million, or 53 to 58 cents per diluted share.

While some analysts and industry observers believe Tech Data's worsening outlook may also be a result of loss of market share to competitors, CEO Steve Raymund believes otherwise. "We tracked share pretty closely, and we don't believe that we're losing share," Raymund says. "In general, the market appears to be softer as we're moving into the fourth quarter."

Tech Data also faced a tough Q3 for its U.S. operations. Sales revenue was down 17 percent for the quarter ended Oct. 31, and market segments for peripherals, networking and systems were all down 17 percent, 9 percent and 8 percent repectively. The lone bright spot was software, which increased 11 percent.

Overall, Tech Data's sales in the third quarter were $3.81 billion, down 10 percent from the $4.22 billion earned during the same period last year. Net income was $32.8 million, or 57 cents per share, compared to $28.5 million, or 51 cents per share, in the year-ago quarter.

"The IT slowdown continued to hinder our results, as well as most,if not all,of the companies in this industry," Raymund says. "Despite these challenging circumstances, we're very pleased that our performace and execution have been among the best of the entire IT marketplace."

For the first nine months of the fiscal year, Tech Data earned $103.2 million, or $1.77 per share, on sales of $11.73 billion, compared with net income of $74.3 million, or $1.34 per share, on sales of $13.03 billion for the same period last year.

"Our expectation is that we'll continue to drive solid market results regardless of the economic conditions we encounter," Raymund says.

Mike Cruz ([email protected]) is a Fullerton, Calif.-based freelance writer who specializes in distribution issues.