Ingram expands financing capabilities to support partner transformation

Anthony Mackle, senior vice president of finance at Ingram Micro

Anthony Mackle, senior vice president of finance at Ingram Micro

DALLAS — Financing has always been a big value that distribution brings to the table. But a serendipitous combination of timing has put a brighter spotlight on the subject at Ingram Micro.

At its One Ingram Micro conference here, Anthony Mackle, senior vice president of finance at the distributor, said the company’s purchase last year by China-based HNA Group has given the company the flexibility it needs to offer new and creative types of financing, at the same time that its customers need just that creativity.

While the move to managed services, cloud, and other annuity-based sales motions has become both desirable and necessary for solution providers, those changes from a traditional sell-and-deploy project business to a more recurring revenue business has brought with it pain.

As Ingram Americas president Paul Bay puts it, “it’s great to wake up January 1 with 50 per cent annuity streams in your business. But nobody talks about the three year journey to get there” during which the small but growing annuity business can put a tremendous strain on the thin margins of the traditional business. “That means it’s our job to be creative,” Bay added, to facilitate partners making that transition.

That creativity has expressed itself in Ingram’s financing efforts with a new mantra.

“The only deal we haven’t financed is the one we don’t know about,” Mackle said — a phrase that would be repeated several times by several Ingram executives form the main stage, and in press briefings at One.

That creativity has expressed itself in numerous ways — but one of the most valuable to partners making that transition towards managed services or other recurring revenue efforts has been the distributor’s ability to essentially finance the efforts to build and grow the new recurring revenues business unit at a low interest rate, in return for Ingram getting more or all of the solution provider’s hardware and software sales — essentially using the additional product margins to cover the reduced interest rates.

“Our role is to support the transition to this new model. A lot of customers struggle with it, and with annuity billing, you start making money on month 30 of a 36-month contract,” Mackle said. “As we move to the cloud, it’s on us to help fund their business to get there.”

The additional flexibility in financing is partly a function of Ingram’s size and scale, but also a function of the size and scale of the distributor’s new parents.

The move to various recurring revenue models is powering what Ingram refers to Technology as a Service (TaaS) — the idea of presenting everything on a subscription basis to customers, even things that may be seen as “traditional” buys.

Mackle said solution providers are able to shorten the sales cycle by presenting customers with options — basically “here’s the 36-month cost, and here’s the 45-day cost.” Customers appreciate seeing both, Mackle reported, and it plays into both customer preference and requirements in the current environment.

Those requirements are likely to even by strengthened, at least in some regions, in the coming months, a a result of pending changes in U.S. accounting rules in 2019, which will require traditional opex leases to go on the balance sheet, meaning those who have previously fled to leasing for capex/opex flexibility are likely to take the next logical step to as-a-Service subscription pricing.

As a result of all of these changes, Mackle said he believes that “financing is becoming more and more a competitive advantage” for solution providers, and he urged them to get Ingram engaged earlier in the cycle.

“Don’t close the deal until you know how you want to fund it, then bake it right into your margins,” Mackle advised.