Q&A: Arrow ECS President Catherine Morris Talks Growth

In a matter of several months, Arrow Electronics' Enterprise Computing Solutions has more than doubled in size. Through its November acquisitions of Alternative Technology and InTechnology Distribution, Arrow ECS is morphing from a $2 billion business to one that will generate $5 billion, expanding past its geographic reach and enterprise-hardware technology. More recently, Arrow's plan to acquire KeyLink from Agilysys, with $1.6 billion in revenue, will make it a key distributor of HP and IBM enterprise systems.

Arrow has tapped M. Catherine Morris as president of ECS, along with industry veteran Kevin Gilroy, also president of Arrow ECS. Morris talked about Arrow's strategy with VARBusiness senior editor Jeffrey Schwartz.

VB: Where are you within the continuum of acquisitions? Are there more to come?
Morris: We are always opportunistic if something appears that continues to help us with our strategy. Alternative Technology was very different. They are primarily a software distributor. They are very unique and different from our tradition in hardware, storage and servers. We saw that as a unique opportunity to leverage software sales across our hardware base.

VB: Are there other potential areas you feel you could go after?
Morris: On the product set, we are comfortable where we are. Geographically, we are still fragmented, so there are opportunities within certain geographies in Europe. It's extremely difficult [given] there's 50 to 60 distributors in continental Europe. It's not like there's a KeyLink, where you can pick up the No. 1 distributor of IBM over there.

VB: What impact do you see vendor and VAR consolidation having on the distribution business?
Morris: I think it's very healthy. At the end of the day, the VARs have the ability to get better access to a deeper relationship and effectively decrease their cost to serve. For the distribution channels and suppliers it provides a breadth of services and scalability that will be transferable to the VARs who could sell better to the end users, and they can grow faster than the market.

VB: What impact is all that having on Arrow's expansion?
Morris: I don't see their consolidation having a big impact on Arrow.

VB: Are you looking to increase the number of VARs you work with?
Morris: Absolutely, we are looking at account expansion.

VB: How are you positioning Arrow's expansion?
Morris: At the end of the day, we are not hardware peddlers -- we are the people who can provide the resources, technical marketing and bandwidth to help the VAR deliver an effective sales process and provide all the resources they may need whether they are a large VAR or a small VAR.

VB: How will you integrate the new companies?
Morris: When we acquire companies, we always take the best of both. KeyLink and Alternative Technology's IT systems will remain in place until we can evaluate their capability vs. ours. We will go to their customer sets and see what is most important to preserve and what best practices we can import so our existing partner base can get the benefit of those services. The other big part of our business is the integration centers and providing integration work for our partners; we will be leaving those centers intact.

VB: Do you envision consolidation among the large distributors?
Morris: That would be kind of hard in the U.S. In Europe I can see that happening. But here I think it's a rational market right now.

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