Industry viewpoint - How to say boo to the golden goose

Tower Education's managing director, Ian Turner, gives his opinion on Ingram Micro's decision to sell off its training operation.

As first revealed in PC Dealer at the end of last month, the distributor cast the division aside, divorcing itself completely from operating a technical training business, (PC Dealer, 30 July).

Tower entered talks with Ingram Micro, but as negotiations progressed it became clear that the company was not seeking an ongoing relationship - more a complete exit from the training world. In my opinion, the lack of access to Ingram's customers removed much of the value of the training business. This view probably flies in the face of the common view of authorised training, which is generally seen as a large golden goose. The reality, in fact, is somewhat different.

The 'authorised' training area was largely pioneered by Novell a number of years ago and then emulated by other vendors - most notably Microsoft - as a way of increasing the skills of their channel partners.

At that time, training resellers was a vendor's first priority. Their approach was to work through the distributors and the current channel pricing and discount model was created. One could argue that not too many years ago, training was dominated by distributor training organisations.

They were the first into the market, gaining substantial market share and were able to provide excellent margins for resellers as well as themselves.

However, times have changed. Instructor Led Training is labour intensive and the vendors' priorities have changed from educating the channel to educating the consumer. If we assume Ingram Micro turns over at least #500 million per annum in the UK, but that its training operation generated less than #1 million of this, you can see that training was not high on its list of concerns.

That 0.002 per cent of turnover would have required a larger proportion of the headcount and facility space. So, when Ingram Micro decided to focus on its core business of volume product distribution, I suspect few tears were shed at the distributor.

Returning to our golden goose for a moment, I'm sure many resellers look at training and conjure up fantasies of mouth watering margins just needing the magic symbols of Microsoft Authorised Technical Education Centre (ATEC) or Novell Authorised Education Centre (NAEC) to turn those dreams into reality.

But the reality for many of the distributors has been very different.

More training companies have entered the authorised market, encouraged by vendors to provide geographic and cost competition. What has been worse is that nearly all of these recent entrants have been user training organisations, quite happy to deal directly with corporate or trade business.

The original players (mainly trade-only organisations) have been left to fight with one arm tied behind their backs. The resulting discount and special offers available over the past few years have no doubt been wonderful news for the training brokers, but they have taken the remaining shine from the training business for distributors.

Unlike their younger competitors, they were not able to balance margins with direct sales. As more outside money pours in to seize a chunk of the goose, one must wonder what will happen to those training organisations that are still waving the trade-only flag.

I suspect they will have to make some hard decisions about their core competencies. Ingram Micro is an omen for further changes within the training market.