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Ingram chief on $100m SLASH FEST: 'It doesn't take a genius' to see IT market's changing

Job cuts, closures and 'we'll take advantage of cheap labour'

Lumbering tech distributor Ingram Micro is banking on the biggest restructure in its European history to make the biz leaner and meaner, regional president Gerhard Schultz has revealed.

Details of the global transformation plan designed to slash annual overheads by $100m a year are emerging, and as revealed yesterday will include job cuts and warehouse closures.

"It doesn't take a genius to figure out this IT market is rapidly changing from a diversification of form factors and different consumption models of IT," Schulz told El Chan.

"That generates some challenges to Ingram Micro, in particular when it comes to its cost structure or the ability to react to industry downturns or opportunities evolving in new sectors," he said.

There is a five-point plan that execs in Europe are implementing in a bid to achieve a "cost leadership position in a commoditised market" and to react more quickly to emerging technologies.

Transactional functions including collecting claims, processing invoices and entering orders that arrive electronically are inconsistent across all of Ingram Micro Europe, said Schultz.

"So we'll carve out those activities and centralise them in our Eastern Europe [share service centre]," he revealed. "We'll take advantage of cheap labour which is there in Bulgaria."

There are 250 heads currently working in the capital Sofia and another 250 will be added this year. "That is the first lever, building a centralised transactional backbone".

The other shared service centre inherited via the Brightpoint buy will be closed, as will one warehouse in Germany and one in Belgium - real estate consolidation in another lever to cut costs.

Backroom functions including finance, information systems, HR and legal are currently replicated in every country across the region, "at different productivity levels, different resource utilisation and different degrees of automation and effectiveness," said the man.

He said these functions accounted for two-thirds of General & Admin costs, and will be removed from country-level MDs to centralise the accountability.

"That does not mean we centralise the resources, but we'll centralise accountability and adjust our resource pool," said the big dog.

If credit moves outside of a country, resellers could find themselves trying to overcome cultural and language barriers with someone reading off a spreadsheet that has no local understanding of their business.

This is a point we put to Schultz but he disagreed, saying the back-office functions "don't require tons of flexibility when it comes to responding to market opportunities".

Efforts to create a more consistent organisational structure is something else Ingram execs are considering, this could allow Ingram to "prototype" one segment in one country before scaling if successful.

"The market has so many opportunities right now which we cannot address across Europe at the same time with all of the operating entities, so this notion of rapid prototyping, correcting and then scaling requires consistency in the operating model otherwise you start from a different base in each of the countries."

Ingram is clearly trying to incubate new tech units to compete with local specialists that are quicker to jump onto the next big thing in tech.

The final point in the restructure plan involves dissolving the central European functions at Belgium HQ to create competence centres. HR and strategic vendor management will be based in the Netherlands, for example.

"Our plan is to taken the subsidiary which has the most mature organisation there and get them to lead. That position has not yet been placed as to what we'll hook up in the UK," said Schultz.

"As a result of all the changes, IM Europe is forecasting cost savings in the high double-digit millions worth of benefits" – and these will be fully realised next year.

The company would not be drawn on the potential numbers being made redundant in the region but simply said: "The net effect will be workforce reduction."

Schultz said the UK entity was seeing "substantial growth" and is adding 30 sales specialists this year to "capture opportunities", but he admitted some back office personnel will be for the chop. ®

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