Overview
German multinational tech company IGEL is a provider of a managed endpoint operating system (OS) for secure access to any cloud workspace and has played an instrumental role in enabling this much-needed dynamic and adaptable productivity through the innovative technology it brings to the market.
IGEL’s purpose-built OS allows for secure access to cloud workspaces such as Virtual Desktop Infrastructure (VDI) and Desktop as a Service (DaaS), addressing markets stretching from government and healthcare to retail, logistics, and everything in between. A leap forward from its humble beginnings as a German hardware start-up over 20 years ago, IGEL now operates in the US and Europe and continues expanding.
With the support of Arrow Electronics, IGEL has been able to shift from its original hardware-led business to a software-defined model with recurring revenue.
As a result of its transformation journey, IGEL is a market disruptor. Among the first to offer a Linux-based managed OS platform, its standalone software runs on any x86-64 device, independent of the hardware or the cloud to which it connects. This capability has delivered a wealth of benefits for IT teams and end-users in terms of lengthening the lifecycle of their existing assets and ultimately leading to cost savings, improved performance, and increased security.
The journey toward a software-centric business model
Fifteen years ago, IGEL was a hardware company focused almost entirely on Europe, specifically with a high concentration in the German, Austria, and Switzerland (DACH) regions. The company serviced small and midsize businesses (SMB) through a two-tier distribution channel and associated global network of authorized distributors. In recent years, with the leadership of CEO Jed Ayres, the company evolved and expanded to the US. With the appointment of Ayres, there was a renewed focus on growth, and with it came a laser focus on their unique operating system offering.
In embarking on its transformation journey, IGEL established an alliance with Arrow that saw it become part of the Arrow ISV appliance program. It ultimately helped reshape IGEL’s business and positively impacted its profit and loss (P&L), balance sheet, and gross margin. Over the past five years, the company has experienced a triple-digit growth rate in non-hardware billings, margins, and units, with non-hardware sales contributing to almost 80% of 2021 sales. In 2021, the IGEL subsidiary IGEL Technology Corporation gained recognition as one of America’s fastest-growing private companies.
IGEL started its new business model by selling licenses alongside the VDI estate. The transition saw the company move through various phases, from selling perpetual software with and without hardware to a recurring revenue model based on a maintenance renewal contract schedule. It is now in a position to transition to a subscription-based billing model.
Ensuring a successful transition
The Arrow team worked alongside the IGEL organization to thoroughly understand the various elements of its hardware business and operations to recommend the best path forward to achieving a software-centric business model while simultaneously continuing to serve customers and provide a better buying experience. The project saw IGEL transfer hardware inventory, supply chain, warehousing, logistics, warranty returns, and all related fulfillment and order transaction elements to Arrow, which now sells the hardware to IGEL’s current distributors. As a result, IGEL has focused on selling its proprietary software through the same channels.
The relationship brought the Arrow and IGEL global teams together daily to collaborate and address each project requirement and align with every area of the business. Everything from labeling and hardware unique identifier data capture to warranty repair services and beyond was addressed to help ensure a successful and uninterrupted experience to end users.
Today, Arrow assumes full responsibility for IGEL-branded hardware inventory and supply chain management.
There are many nuances in moving hardware around the world. All the intellect, forecasting cycles, and overall management of ensuring everything is in the right place at the right time is a huge effort. With this now being managed by Arrow, our leadership team spends very little time worrying about hardware and availability. We are using that energy to focus on growing the company and delivering innovation - unlocking that through software.
- Jed Ayres, IGEL CEO
Why Arrow?
“Make the impossible possible” are the words IGEL’s founder Heiko Gloge used to drive himself and the company forward over the years. The IGEL leadership team recognized that same “can-do attitude” in Arrow.
“From the outset, Arrow’s “we’ll find a way” culture of tackling issues gave us the confidence and drive to move forward, while other potential alliance partners were stuck in a ‘we can’t do that’ mindset,” stated Ayres.
According to Ayres, the aspects that differentiated Arrow from the competition were the team’s energy and creativity. Most of all, the diligence in understanding the IGEL business and formulating the best strategy to elevate the business and add value. “Arrow met us where we were and worked to take us to where we are today and where we want to go in the longer term,” said Ayres.
There is no one-size-fits-all formula for transitioning a hardware business to a software-centric one, especially when hardware has always been the company’s heartbeat. To this end, IGEL was conscious that it had unique processes, like most companies, which were logical for them. Arrow understood that and, together with IGEL, recognized that some were serving their purpose while others needed refining. The teams set out to address each of these to optimize business operations.
From a financial perspective, the business transformation has allowed IGEL to reinvest savings previously tied up in working capital from hardware and related real estate, redirecting them to make investments that drive margin, namely software. This investment has put the company on a path to delivering one of the most innovative and disruptive endpoint operating system platforms due to launch in the Spring of 2023. Ayres credits Arrow for playing an instrumental role in unlocking what the company defines as an essential piece of technology and driving such a transformative moment in IGEL’s history.
The business transformation has also been the catalyst for IGEL creating a recurring revenue stream. No longer having a warehouse has changed the company’s narrative and opened the way to new market routes that were largely unexpected but also instrumental in scaling the business. At the same time, the collaboration with Arrow has made the hardware set more competitive, delivering a wealth of benefits to our end users.
Ayres Advice for Those Looking to Transition to a Software-centric Model
“Companies can team with Arrow to meet their unique needs and provide a clear growth plan and tangible outcomes. At the same time, the business needs to be actively involved and invest the time to bring things to fruition by clearly defining its needs and objectives and the pressure points that could make or break it. There are great opportunities to be made, put your best people on the job, and you will get the best outcome.”
