Ingram Partners Say EMC Making Big Mistake by Dropping Distributor

Ingram Micro partners told CRN that they're confused and confounded by EMC's decision to stop working with the largest distributor in the world.

"I think it's a mistake," said Guy Baroan, president of Baroan Technologies in Elmwood Park, N.J. "How do you go from 'Hey, you're distributor of the year' to 'Oh, we're going to drop you?'"

EMC bestowed top distributor honors on Ingram Micro in June 2014, with executives praising the Santa Ana, Calif.-based distributor for growing its EMC portfolio by double digits and forging the most net new partner relationships of any North American distributor.

[Related: EMC Ends Storage Relationship With Ingram Micro ]

Just seven months later, EMC announced plans to sever ties with Ingram Micro in a move that one Ingram Micro partner called "mind-boggling."

"I'm really surprised," another Ingram Micro partner told CRN. "When you start to disconnect from your resellers, you start to see your numbers take a hit."

One partner who sources $5 million to $10 million of EMC business each year through Ingram Micro said the distributor's departure comes as a result of changes to the vendor's partner program that incentivized direct relationships between vendors and solution providers at the expense of distribution.

That partner said the bar for solution providers to work directly with EMC had been lowered from close to $100 million to around $25 million to $35 million.

With more VARs and MSPs slated to work directly from EMC, the partner said EMC Initiated a request for proposal (RFP) process a couple of months ago designed to eliminate one of the vendor's four North America distributors.

The business branches of Arrow, Avnet, Ingram and Tech Data were each asked to present a proposal detailing how they would support EMC's business initiatives in 2015. But several days ago, an EMC representative told the partner that Ingram Micro was the sole company not tapped to continue working with EMC.

A different Ingram Micro partner confirmed that EMC sent its distribution through an RFP process, with Ingram emerging as one of the losers.

"EMC has made a conscious effort to evaluate our distribution program so that we can provide greater focus for our channel partners, while ensuring that our customers continue to have choice and flexibility," the vendor told CRN in a statement. "We have consolidated our distribution approach in North America, as we have previously done in EMEA and Asia-Pacific, so we can better focus our product and enablement efforts."

The six Ingram Micro partners who spoke with CRN -- many on the condition of anonymity -- believe that the distributor wasn't selected in the RFP process due to some combination of financial impediments, strategic differences and intrapersonal conflict.

NEXT: Why Did EMC Break Up With Ingram?

One Ingram Micro partner chalked up EMC's departure to the periodic tensions normally felt in a vendor-distributor relationship becoming too frequent or severe.

"Someone must have pissed someone else off," a different Ingram Micro partner said.

A possible area of disagreement was Ingram Micro's decision to bring its Advanced Computing and Advanced Technologies divisions together under the Advanced Solutions banner, said Augie Riolo, president of Knowledge Information Systems (KIS) in Virginia Beach, Va.

While EMC had a significant presence in the Advanced Computing arena, Riolo said bringing so many technological areas under the same roof benefits broadline vendors such as Hewlett-Packard, Dell, IBM and, increasingly, Lenovo, which can service the entire stack from devices to networking to the data center.

"Unless you combine EMC with something else, it loses its importance quickly," Riolo said. "Why would Ingram jeopardize its HP relationship for an EMC relationship that wouldn't fulfill everything?"

Similarly, the major Ingram Micro and EMC partner said Ingram Micro may not have liked the terms of the RFP and asked for things in the proposal that EMC wasn't willing to provide.

Other Ingram Micro partners see the move as a cost-saving effort by EMC in light of disappointing financial results in the first half of its fiscal year, shareholder pressure for better returns and the gradual commoditization of business continuity technology.

Even if EMC were looking to shed expenses by dropping some distributors, Baroan said EMC erred in dumping Ingram Micro given the depth of its partner network and the back-end work the distributor does on behalf of partners.

"Anyone who isn't working with Ingram doesn't realize how much Ingram is doing for their partners," Baroan said.

Riolo, though, felt EMC might not be a great fit for Ingram Micro going forward as the distributor looks to lean more heavily on vendors that can offer complete solutions.

It remains unclear why Ingram Micro was dumped given that many of its partners report having a positive experience with the distributor's EMC team.

KME Systems of Lake Forest, Calif., would frequently receive well-coordinated pitches from Ingram Micro and EMC to get involved with reselling the VNXe storage systems, according to company president Mark Essayian.

And the Ingram Micro partner who's also a major EMC reseller said Ingram Micro's EMC team consistently delivered high-quality work and was stronger than many of the distributor's other vendor teams.

Though this is the first instance Ingram Micro partners could recall that a global vendor dropped a large distributor, one partner feels it will be far from the last.

As technology becomes cheaper, more efficient and easier to access, he expects additional major vendors to drop distributors in the next 12 to 24 months.

NEXT: Will EMC's Departure Hurt Ingram?

Most Ingram Micro partners feel the distributor wouldn't be negatively affected by EMC's departure given the limited position EMC occupied in Ingram Micro's portfolio and the availability of storage alternatives.

"This is a relationship that is easily replaced," said Riolo, pointing to the Dell EqualLogic and HP storage products. Riolo resells EMC products into the federal market.

Many other vendors agreed.

"It's hard to be a diva amongst all the 'superstar' product lines Ingram carries," one Ingram Micro partner told CRN in an email. "Ingram's priority is the reseller, and if EMC was dropped for whatever reason, I trust Ingram."

The Ingram Micro partner who has a large position with EMC, however, disagrees.

"Nobody wants to lose a chunk of business like that," the partner said. "It's going to leave a mark."

Other distributors are licking their lips at the opportunity.

One Ingram Micro partner who used to work with EMC said he was notified of the change not by Ingram Micro but by Tech Data, who had regional managers email Ingram Micro's EMC clients and offer to move their portfolios over to Tech Data.

As for EMC partners that have sourced their business through Ingram Micro, the distributor's partners said the transition should be simple for all but the smallest of solution providers.

Essayian said major EMC customers and those with strong ties to the vendor will find it's not a big deal to change where they procure the products.

"If you're not aligned with the manufacturer, you're doing yourself a disservice," he said.

Occasional buyers of EMC technology, though, risk being ignored by the vendor, Essayian said.

Riolo said he doesn't expect it to be a big deal to move his EMC-aligned federal business to a different distributor because he already has relationships with them.

The pain will be concentrated among smaller EMC partners who only work with Ingram Micro today, one partner said.

The major Ingram Micro and EMC partner said his company is already set with credit and process orders for the transition, but will need to get acquainted with a different team at EMC once he selects a new distributor to work with.

Ultimately, though, he sees the distribution changes as a way to negotiate a better deal than the solution provider currently has with Ingram Micro. Specifically, the partner hopes to secure a deal with cost-plus pricing, which guarantees a certain margin.

"They [the distributors] are all fighting for our business now," he said.

PUBLISHED JAN. 28, 2015