Q&A: Ingram Micro Board Member John Ingram

John Ingram, a member of distribution giant Ingram Micro's board of directors, vice chairman of Ingram Industries and chairman of Ingram Distribution Holding, spoke with CRN News Editor Steven Burke about his outlook for the distribution business, the changing dynamics of distribution and an important lesson from his late father, Bronson, who helped build Ingram into the world's largest computer products distributor.

CRN: You have a 13 percent stake in Ingram Micro and are participating in other distribution businesses. Why do you continue to hold a stake in Ingram Micro and how long will you hold onto it?

Ingram: It is indeterminate. But we love the company. For me personally I have worked there. A lot of players have changed, but there are still some that are there. I just have a personal affection for the business. I think I also have a healthy respect for how hard it is. It is a hard business with the amount of transactions and the margin for error. I have a great respect for not just the management team but everyone that makes it work. It is a hard business.

CRN: What is your mood as you look at this distribution business in 2007?

Ingram: You know what I really feel. I feel as silly as it may be to compare it to this: It's like the Austin Powers movie when Austin lost his Mojo. I feel like we got the Mojo back. I feel good about it. Again, it is a hard business. But we have got momentum. Some of the others are having their time in the barrel and we are going to make hay while the sun is shining. I am really quite optimistic.

CRN: It's now a $30 billion business. How big can this business get?

Ingram: I don't know if there is any kind of upper capacity on it. I think as we look both domestically and around the world, there are still a lot of opportunities out there. There are parts of the world, particularly in the Far East, that are pretty much untapped. There is some difficulty and it is not the easiest place in the world to work, but if we can figure that out I think you can put a lot more logs on the fire.

CRN: Talk about how important the global economies of scale are going to be for Ingram. You are the biggest distributor. Do you see consolidation taking hold in the distribution segment?

Ingram: I think that having the global footprint is important and it is important for vendors to have partners they trust that can take them around the world. They certainly want to sell their products all around the world. Having said that, I know from firsthand experience that just being global isn't enough -- you have to be good locally, too. I really think where Ingram Micro is excelling right now is the fact that we have a global footprint, but we are executing really well locally. That combination is a devastating advantage.

CRN: When you look at the different distribution interests from the books to the barges, where do you see this distribution business going?

Ingram: It is a really exciting time for book distribution. I don't even talk about it as book distribution. I really talk about it as content distribution. Because at the end of the day, a book is just a compilation of content. What we are doing is we are really positioning ourselves to be a service provider to publishers so we can help publishers move into the digital age. Book publishers tend to be very conservative by nature. So they need help moving into the digital age. From a 50,000-foot perspective what I would say is we are positioning ourselves to help publishers monetize their content either through physical channels or through digital channels. I think we are really the only place they can go to get both of those. I believe it is going to be a huge advantage. It is a huge opportunity for us.

CRN: Is that a lot different than what is going on in the computer products business with Ingram Micro?

Ingram: Obviously, more and more computer software is sold by licenses and downloads. So that is somewhat analogous to the book side. But you know at the end of the day you can't download computers and printers and things like that down a wire. It just doesn't work. On the book side, in essence the book is information. It might be a novel you want to read from beginning to end, but in many cases it is really information that you are after.

I really believe that over time there are going to be multiple formats that information will be available in. One of the great revolutions that the book industry is going through right now is trying to figure out how to price that content other than in the format of what has already been predetermined to be a book. So do we price it, by chapter, by page? How is that going to be? At Ingram on the book content side, we are positioning ourselves today to help them make that leap by creating service offerings that can help them securely store the content, access it and then repurpose it.

NEXT: Ingram Micro's biggest challenges, but advice from Ingram's father that has kept him going.

CRN: As a member of Ingram's board, what do you look at as the biggest challenges facing the company at this point in time?

Ingram: I think we have a great management team. I give [former CEO] Kent [Foster] a lot of credit for bringing that back together after we went through a period that was tough and we had a lot of turnover and what not. Probably the biggest challenge Ingram Micro is we are a $30 billion company but with tiny margins. And it is a challenge to have enough depth of management. You can't afford to have too much because we have got tight margins. You need great people and we've got them. But having enough of them to really run and take advantage of the opportunies out there is the biggest challenge.

CRN: Where do you go when your margins are that low?

Ingram: One of the things that Ingram Micro has worked on successfully is to a certain degree unbundling the services. What has traditionally been the buy-sell arrangement really doesn't capture all the value that is being created in that transaction. From the vendor perspective, there was all this hue and cry of go direct, go direct, go direct. And vendors found out what we already knew: Guess what/ distribution is hard. There may be some of it you can do. The pendulum really clearly looks to be swinging back to the way of distribution, which is good and just proves the vendors are rational. And they know what pain feels like. So that part is good. So there is more opportunity there.

On the other side we will always have a core physical distribution capacity, but the management team is building all kinds of services around it. It is creating those value-added services which is where there is going to be opportunity to create margin. Management is bullish and I believe they are correct in saying we can do both. We can continue to grow the [core] business. But the opportunity to make real money is in expanding the services. That is where a lot of the focus is.

CRN: Look at the troubles Dell is having and the renaissance in distribution. Has there been an inflection point with the Dell problems?

Ingram: To be honest, I think it is more of a vendor-by-vendor experience. Distribution sounds so easy. You bring stuff in. You store it. You ship stuff out. I mean, how hard can that be? Well, just try to do it at scale with all kinds of other variables at play and you realize you know what it is pretty hard. What ends up happening -- and we've seen it happen time and time again -- is vendors move down the path. And there is always, especially for the large ones, there is a certain percentage of the business that makes sense and they can handle direct. No distributor would quibble with that. But as you move further up the food chain, what vendors quickly come to is: Do I really want to replicate Ingram Micro's infrastructure? Why in the world do I want to replicate Ingram Micro's infrastructure? I kind of thought I did because I thought it would be easy and, No. 2, the resellers mostly want to buy solutions. They have been tasked by the end users to buy solutions. They have got it set up for a week from Thursday or the day after tomorrow and they need all the pieces to be there. So who are they going to count on: 15 different people to ship product in or one place that they know is going to reliably do it? It really gets down to the difference between theory and cold reality.

CRN: Within Ingram Micro, what is the greatest pain point that you would like to work on with the board?

Ingram: I think for both resellers and manufacturers to really fairly value the services that Ingram Micro provides. There is too much in my opinion that is taken for granted and not truly valued until they don't have it or they try to do it themselves.

CRN: Talk about idea of branching out and expanding and diversifying Ingram Micro. What is the next Internet or big spike we might see?

Ingram: I'm not sure my crystal ball is a whole lot clearer than other people's. I think you'll see Ingram continue to work in adjacencies and expand what we do in the global footprint we have. I really think there is a lot of opportunity that is there, especially in the Asia marketplace. But the company is flexible and is there to catch what happens next. We are here at an invitational conference with people on the front lines giving feedback to the manufacturers and Ingram Micro on what the customer needs are. Ultimately, that is what drives opportunity: What do you need and how do you figure out how to provide it?

CRN: What is your advice to VARs who are struggling with some of the same challenges Ingram is?

Ingram: From what I understand, I don't think they need a lot of advice from me. I think they are doing smart things. They are focusing and figuring out how to be an inch wide and a mile deep as opposed to a mile wide and an inch deep. What I mean is the people in the VentureTech Network are developing really strong competencies in certain areas and then opening up and partnering up with other people as opposed to be afraid to share. There is so much change and so much need for specialization it is impossible to be great at everything. So be really really good at one or two things and work with your colleagues on the others.

CRN: Has there been one piece of advice from your Dad that has kept you going as you push forward with this enterprise and the industry?

Ingram: He always said: "Give me a great management team and an OK business, and I'll take that 10 times out of 10 over a great business and a bad management team." What I would say is we have a great management team. I know it is hard. But I am confident they are going to figure out what to do to drive it forward. As a board member of Ingram Micro, we are very vigilant about that issue. It is certainly the most important thing in our private businesses as well.