Ingram Micro Exec Talks Acquisition In Turkey
Ingram Micro Doubles Down In Turkey
Ingram Micro closed Monday on acquiring a 58 percent stake in Armada, Turkey's largest value-added distributor with 170 employees and annual sales of $280 million.
The Santa Ana, Calif.-based distributor has its sights on boosting its presence in the fast-growing Turkish market and felt that Armada had good inroads into SMB customers and technology areas, such as networking, security and the data center, Ali Baghdadi, Ingram's president of Middle East, Turkey and Africa (META) Technology Solutions, told CRN.
Baghdadi expects Armada to ink agreements with more major vendors under Ingram Micro's umbrella, as well as expand its cloud and mobility offerings. Here's what he said during an interview Tuesday.
What piqued Ingram's interest in Armada?
We already had a presence in Turkey, but it was a relatively small presence, and Turkey is probably the largest GDP country in my region, followed by Saudi Arabia and South Africa and the United Arab Emirates. So our presence in Turkey was not really proportional to the size of the market, whether it's the IT market or the size of the market overall. So we made an effort to look at what potential distribution companies there are in Turkey, and our choice is based on a company that has value-add activity, that has the right management, that has the right infrastructure, that would allow further growth. And that is what Armada has to offer.
What opportunities does the Turkish market present?
The Turkish market is a fairly industrial market. It's got a fast-growing SMB segment, which is not served properly. The IT penetration is fairly low. So there is a tremendous upside in terms of solution sales. It's got a population of 76 million; it's a reasonable size of a population. And it's very advanced in terms of education. So it's easy to offer solutions that can be deployed in the market.
What specialties does Armada bring to the table?
They're very strong in data center, networking and security. And they have a very good established setup, which has training and engineering facilities that can introduce many of the things that we at Ingram Micro are starting to introduce, be it professional services, training, and even some of the reseller activities. So it's a very good platform to develop, and they really are delivering very good results for a distributor.
What changes will Armada experience as a result of being folded into Ingram?
I think it's really going to enable them more, to give them more tools, more facilities to develop the business in the Turkish market. We already see many of the major vendors that have not signed previously with Armada are already in contact with us to see if we can bring the Ingram Micro standards via Armada to serve them in the Turkish market. So very exciting times because we could see a lot of great change going forward.
What does that mean for Armada's existing workforce and executive team?
They're all very excited. I had a conversation with some yesterday [Monday]. I was there; they're all very proud of being part of a Fortune 100 company. We don't have multiple companies to integrate there, so we rely on the management team. They're very much part of the deal. It's a very operative and creative team; they will lead the company with help from Ingram Micro … Today, they have 170 people. I anticipate that, as we introduce other business units, be it mobility, or cloud or services, they will grow. Altogether in Turkey, we have more than 200 people.
Will Armada operate as a stand-alone entity?
We will keep its entrepreneurial spirit. What they do is very similar to all the solutions business that we do in the region anyway. Our META region is highly focused on agile solutions, and they're very much into this. It's complementary, and they will continue doing so. And we'll add some new solutions to them, including cloud and mobility. We would use them as a platform to make these introductions … We'll keep the Armada name. It will be called Armada, an Ingram Micro company. This is what we've done with other companies who have significant brand equity in the market … There is no need to change the name.
What opportunities does Ingram Micro see in cloud?
So cloud, we already have all of the resources. We made an acquisition of a company in Canada and the U.S. called SoftCom. SoftCom has a very small operation in Turkey, as a matter of fact, so that's some of the additional people I just mentioned. So we've got servers and a data center in Turkey, and as our cloud business continues to grow and offer more solutions, we will have through the channel -- and Armada has a significant channel in the Turkish market -- over 4,000 channel partners – and that will be an instant captive market for cloud.
What about in mobility?
In terms of mobility, the market is growing for devices, and we certainly see a potential for mobility services as well as mobility devices. So we don't want to rush; we will introduce things in a timely manner. Also, this is a significant market. It represents about 20 percent of the total IT spend in Turkey. And we see ourselves playing a big role in that as well, in training, professional services and so forth … In some countries, services are in the 10 to 13 percent range, with the exception of, maybe, South Africa, which is higher as a percentage than even Turkey. So the 20 percent is a significant size still.
Do you see the services share of total IT spend going up?
If you look at the IDC figure, services actually have the highest compound annual growth rate within all the IT segments, at least until 2020. So we see a decent opportunity there as well. We already are a global training partner for IBM -- we're going to open training for IBM in Turkey soon … We're looking to sign up other vendors … We're going about the training here. We are assigned for distribution, meaning we're authorized to do it everywhere in Turkey.
Does Armada have a particular vertical or business size focus?
Where they are strong, compared to any of the other distributors, is in the SMB segment. We see that as a strong area for them. They have some enterprise resellers, or large account resellers as well, but really the biggest segment is the SMB. And that is valued by many people in that division there … It's very solution-driven: IT security, they're just entering physical security, they do data capture and point of sale. They're the biggest Cisco distributor, so they have multiple segments, multiple sectors. It's fairly broad, and Turkey is an industrial, touristic and agricultural country, so there are many segments that they serve.
How do global markets fit into Ingram's strategy going forward?
Outside America, Ingram has four regions now. That's Latin America, Asia-Pacific, Europe, and Middle East, Turkey and Africa (META). Ingram did not have any presence in META two-and-a-half years ago, until September 2012. This started with the acquisition of Aptec, which had a presence in about five countries in the Middle East and Africa. And then other acquisitions brought in a couple of other countries. I came with the acquisition of Aptec. I actually founded Aptec, so I've been an entrepreneur all my life.
Why does META present so many opportunities?
META is a vast geography, which has 76 countries. If you look at the combined GDP of all those countries, it's similar to the GDP of North America. It's spread over many countries; it has significant potential and a very, very high and fast growth rate because it's coming from a fairly low base of IT penetration … Of course, we can't be in all 76 countries, so we select the key countries where we have stability, we have growth, we have potential economic upside. So we're in 10 countries or so … We're the third or fourth region [by size] within Ingram Micro, but we probably are the fastest-growing.
How does your presence in META compare to other distributors?
We're the global player with local knowledge. So our boots on the ground, with presence in all the key countries in the region. There isn't a single, global distributor who is actually playing any significant role in the region. They all are maybe in one or two countries at most … We're playing in a dozen countries now. When I ran Aptec, we acquired Tech Data Middle East, for example. Avnet came into the region through acquisitions of business as well. You can't run the region remotely, you have to be present in it. You have to have the right management to move forward as well.
What, if any, changes will existing Armada customers notice?
I don't think they will notice anything. We have compliance that we introduced to the associates, so any new company that wishes to join … they are a listed company on the Turkish stock exchange. They are one of the best-run and most compliant companies that we have come across in the region or in Turkey definitely. So we're hoping for more opportunity in terms of services, more opportunities in terms of product.
Is there anything else Ingram's channel partners should know about the deal?
The channel is very excited. They want to see what Ingram is going to build. We are going to be opening in new countries in the region. So just keep your eyes open, and I can give you more interesting stuff maybe in January or so.