As business IT requirements have shifted over time from straight hardware sales at fixed credit terms to SaaS and managed services, Ingram Micro has moved to provide partners with the financial tools to address the change.
Anthony Mackle, Ingram Micro’s senior vice president and CFO for the U.S. and Latin America, said it has been difficult for many partners to shift from 30-day or 60-day terms to charging monthly service fees. And this has created an opportunity for the distributor to explore ways to finance partners’ business instead of just transactions.
“We provide that cash flow to not only fuel your growth but also quite frankly get you through to the break-even point,” Mackle said. “And what we found out was on either a 36-month annuity or SaaS, month 23 was your breakeven point. That’s where your cash flow starts covering the investment out of your pocket because you have to hire the head count and buy the software and hardware yourself.”
The move toward managed services and the cloud has required new financing tools for partners, Mackle said.ADVERTISEMENT
“That evolved from just financing contracts and the cash flow cycle to also funding partner acquisitions of other partners. … We started to step in to support their acquisition strategies,” he said.
That’s the kind of support solution providers said they have seen from Ingram Micro.
Scott Lennon, president of Total Communications, a Hartford, Conn.-based solution provider that in December Lennon acquired from its former owner, Frontier Communications, said support from Ingram Micro was essential to his ability to take the company independent.
“Ingram Micro knows our run rate, they know us, and they understand the challenges of a small business,” Lennon said. “So they came up with programs to help ensure we succeed.”
That included providing a term loan to help Lennon acquire the company as well as a good line of credit to help the business grow.
“Ingram Micro gave us the runway and the term loan,” he said. “We’re also looking to leverage Ingram Micro for future acquisitions.”
John Santoru, president, CEO and new owner of Albuquerque, N.M.-based Holmans USA, said he acquired the U.S. Department of Energy-focused solution provider this past April with creative financing from Ingram Micro.
The distributor also helped with strategic inventory, a key requirement with certain government customers, Santoru said.
“Ingram Micro financed not only what we owed them, but the backlog as well. … Ingram Micro understands my customer base and knows that federal customers place large orders from $500,000 to $3 million,” he said. “We can really sweat the payables. But Ingram has always worked well with that.”
Ingram Micro has a strategy called “Get To Yes,” Mackle said.
“With ‘Get To Yes,’ it doesn’t matter whether you’re using traditional credit, traditional financing or financing the partner,” he said. “It is how we can help you finance your business, the deal and fuel growth.” The strategy means Ingram Micro can’t just publish a booklet laying out financial options, Mackle said.
“The reality is, as soon as I hear something different, I’m going to create something else,” he said. “And in a lot of cases, our financing is literally tailored to what our partners are trying to do and where they’re trying to get to.”
This is completely different thinking from how a bank provides financing, said Melanie DelValle, Ingram Micro’s director of customer finance.
“Think of somebody buying heavy equipment and a bulldozer costs $1 million,” she said. “Banks understand that type of financing because they understand the collateral. What Ingram understands is the MSP business and the channel. We leverage that understanding to create unique financing o erings based on the structure of that business.”
Looking ahead, Ingram Micro’s financial services will be increasingly tied to the new Ingram Micro Xvantage platform, Delvalle said. Xvantage is a new digital experience platform launched in September that aims to improve how the distributor works with partners, including making it easier to finance partner interactions.
“[We’re looking at] how do we leverage our Xvantage platform to be able to combine customers’ ongoing software subscriptions—including cloud with a device payment—in one single monthly payment,” she said.
David Sewell, CEO of Sewell Tech, a Dallas-based MSP, has seen “Get To Yes” in action.
“We’ve never had a customer not get approved,” Sewell said. “Working with Ingram Micro on leasing means bigger deals. I don’t have to do credit approvals. I let the Ingram Micro financial people pull credit and do the approvals. It’s nice to have that option when a client is looking to buy a lot. This makes it easier to close deals.”
Channel financing is a unique specialization that must be able to handle on-premises and on-premises infrastructure and services, Mackle said.
“You have to hire the head count to support those services, you have to buy what’s needed, and you’re billing out over time,” he said. “You’re billing monthly. So you’re getting monthly payments, but it’s out of your pocket. How do you grow that faster? You need cash flow.”LEARN MORE: Cloud Storage | Managed Security | Software as a Service
Joseph F. Kovar is a senior editor and reporter for the storage and the non-tech-focused channel beats for CRN. He keeps readers abreast of the latest issues related to such areas as data life-cycle, business continuity and disaster recovery, and data centers, along with related services and software, while highlighting some of the key trends that impact the IT channel overall. He can be reached at [email protected].
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