As if streamlining its outsourcing business and making changes to its Canadian leadership weren’t challenging enough for 14-year company veteran Martin Kalsbeek during his first months in his new role at Ingram Micro Canada, The
RAM Group’s insolvency and subsequent takeover by NexInnovations isn’t making his job any easier.
Kalsbeek was appointed to his current post as Ingram Micro Canada vice-president and general manager following the layoffs of former Ingram Micro Canada chief executive Murray Wright and vice-president of marketing David Walsh in May. Last month, Ingram Micro North America president Keith Bradley said the decision to restructure the distributor’s Canadian management team follows Ingram president and chief operating officer Kevin Murai’s decision in 2001 to unite Canadian and U.S. operations.
More recently, Markham, Ont.-based RAM, an Ingram partner, sought bankruptcy protection from creditors for its Canadian and U.S. divisions under the Companies Creditors Arrangement Act after admitting it is facing over $12 million in debt. Court records show that among its creditors, including The Royal Bank and rival distributor Tech Data, Ram owes Ingram Micro Canada $1.2 million. In June NexInnovations offered to buy all RAM’s customer maintenance and support contracts, supplier contracts and goodwill for $2.25 million over the next several years.
ITBusiness.ca spoke with Kalsbeek late last week to ask him about his new position in the company, what changes he will make to Ingram’s Canadian operations and how the RAM situation affects Ingram and the IT industry in general.
ITBusiness.ca: In 2001, Ingram Micro president and chief operating officer Kevin Murai united U.S. and Canadian operations and promoted Murray Wright to head up Ingram’s Canadian office. How will you implement Ingram Micro’s North American strategy compared to Wright?
Martin Kalsbeek: It’s business as usual in terms of local autonomy within the country. We’ve done one key thing a little differently out of the gate. When Murray had the role he had the responsibility for Canada that included the VP-GM assignment and in addition to that he was also vice-president of sales. We’ve split that role and hence Mark Snider’s with us. We’ve increased our coverage from an executive contact level with our customer base in Canada.
We’ve been very active in front of our customer base. We’ve visited with 60 to 70 larger customers across the country and that has met with very good reaction. It was one of the changes that demonstrates Keith Bradley’s commitment to retaining local autonomy with myself no different than Murray had as the GM and then Mark as our vice-president for sales in Canada. Potentially vendors and resellers may have been concerned about that.
Going forward some of the pieces we’ll look to execute, and these pieces were always available, it’s just a matter of leveraging it. That is, resources in the U.S. in terms of best practices. That could be programs such as our VTN program (a North American program that was integrated last fall). That started to take place before these leadership changes were announced. We’ll continue integrating programs along those lines in Canada.
The other piece is our IT platforms, be it our Web site, the tools that we would use between our customers and Ingram Micro. We would look to leverage the U.S. where they had tools that could improve the customer experience between Ingram Micro and our resellers. We would look to leverage those tools and implement them in Canada as quickly as possible.
ITB: Prior to your current post you served as senior director of the Affiniti (Outsourcing) program for Ingram Micro Canada. How will you use your experience to continue the outsourcing strategy that Murray and Dave Walsh were working on before they were let go?
MK: I would work with resellers (when I was involved with Affiniti) to figure out ways we could take costs out of their business. We had duplicate cost structures. We had our distribution centres at Ingram Micro and a lot of resellers back in those days had their own warehouses. It was really an outsourcing role with resellers to lean on distribution more to take cost out of their structure so they could compete with direct marketers.
In terms of the outsourcing that we’ve done offshore that still is in full motion. The impact was just over 500 positions in North America, there were about 120 people affected in Canada. Of those 120 the majority of those people have been able to find replacement jobs within the company. Out of the folks that were affected from the sales and customer service groups all but three have found new jobs within Ingram Micro.
ITB: How will you run the company differently from Murray?
MK: The business wasn’t broken. The key difference will be I’m very focused on what our customer’s needs are. We’re interested in focusing on our resellers and making sure we can work on improving and contributing towards their financial health.
Some examples of that would be controlling costs. If we can control costs we can take those cost savings and re-invest those dollars in programs for our resellers. The other area we’ll be very focused on in the next while is working with our resellers with a focus in improving the financial health of our VARs. We would be very interested in working with them to introduce high-margin products to the product mix that they sell. This includes products like adjacent markets, which is no different than the strategy that we’ve had for some time so the push into consumer electronics. We’ve got a used and refurbished product business. We’ve got an AIDC point-of-sales business.
ITB: You mentioned that you’re spending a lot of your time meeting with customers. In the wake of the management shakeup, what are customers telling you?
MK: Customers are in a very competitive marketplace right now. They’re battling for business on a daily basis. From their perspective, once we’ve positioned the changes we’re very happy with the confidence level customers have had within Ingram Micro.
I would say it has been at worst neutral and in many cases very positive. They’re looking for ways for Ingram Micro to help them improve their profitability, helping them control costs and helping them find new products and solutions to help make them in their product mix more profitable. We have not found customers dwelling on the leadership changes as an issue.
Their confidence level in Mark and myself, because we’re not new to the industry, we’re not new to Ingram Micro, we’re kind of picking up where they left off.
ITB: How’s employee morale these days? Is it an easier transition for employees because you come from within the company?
MK: There certainly have been some changes at Ingram Micro. There certainly was some cause for concern. We spent a lot of time making sure we had town hall meetings. We’ve been very open with the associates addressing questions. They’ve been very comfortable with the changes. They completely understand them. Particularly within the sales organization they’re re-energized, they’re refocused, they had a great month and they’re feeling good. The first six months of the year have been the best that we’ve had in Canada at least in the last five.
ITB: Keith Bradley had come up to Toronto recently for the VentureTech partner conference before Murray and Walsh were let go and never said anything about company changes. When did you know about the move and why was Ingram not filling its partners in on what was happening?
MK: I think we were as proactive as we could be. I don’t think it would have been appropriate to discuss that outside of the company prior to Murray knowing.
ITB: According to an affidavit from the RAM Group, Ingram has security over all of Ram’s assets. How did this come about?
MK: Part of our credit practices in setting up credit lines for our resellers — and it’s no different than our competitors — is that in order to feel comfortable with extending credit lines, one of the conditions that we would look for would be to have some form of security. That’s no different than RAM. They would have been treated no different than any other reseller.
ITB: In January, RAM started laying off employees. When was Ingram aware that RAM was in trouble?
MK: We were not familiar to the extent I can comment that RAM would be in trouble. I would say we had a good working relationship with RAM. We were conducting regular business with RAM. They made some announcements a week or so back. From our point of view with the security position, that’s why we have a practice along those lines to protect us in the event something like that happens. We’re very happy that NexInnovations is involved. We look forward to increasing our business with NexInnovations.
ITB: What was RAM’s line of credit?
MK: I think the documents we had will say that the balance was just over a million dollars.
ITB: How much does Ingram expect to lose or recover from what has happened?
MK: I think we’re in a pretty strong position. I think it would be difficult for me to give you a firm percent. Security puts us in a position for a good recovery.
ITB: What sort of impact will this have on the IT industry as a whole and on Ingram’s bottom line? Do you feel deceived?
MK: These happen on a periodic basis. We have policies in place and practices so that when these things happen it’s a low margin business. We’re concerned about the financial health of our VARs. Our core business, even though we focus on other areas such as consumer electronics, is to take care of and work on the profitability of our VARs.
Here’s an example of a VAR who’s in a position where they’ve been acquired by NexInnovations. That’s not healthy for the distribution channel and it’s not healthy for the VAR channel. From our point of view it’s not a matter of being deceived. It probably gives us more reason to put more effort behind working with our VAR customers to help them become more efficient and to sell higher margin solution product.
ITB: Should the process for looking into the financials of your customers be more rigorous to avoid something like this from happening in the future?
MK: We have a staff of people within our finance department. We are a significant credit facility for the reseller channel in Canada. Part of our normal practice is quite often we are, in a very confidential manner, viewing financial statements of a number of our resellers. We have advance notice as to the health of our reseller channel and we would adjust the credit lines accordingly.