ScanSource Layoffs 'Very Difficult,' But Intelisys Investment Remains Strong

Layoffs are coming for ScanSource, which expects revenue from its most recent quarter to be down about 20% year over year. That will trigger $30 million in expense cuts, the company said on Thursday.

But there is some good news. Despite the pandemic, ScanSource expects revenue for Intelisys, the master agent it bought nearly four years ago, will be up 15% when the final quarterly numbers are in.

ScanSource’s Mike Baur

“Based on COVID-19 impacting our business since March, we spent a lot of time figuring out where [the decline in business] was going to impact us the most,” Mike Baur, chairman and CEO of ScanSource, told Channel Partners. “We’ve been talking about the decline in premises-based communications for a while. So it was easy to say we had to reduce our investment there. But at the same time, we continue to invest heavily in our Intelisys business.”

The $30 million in cuts include both personnel – about 200 jobs – and other expenses. The reductions in layoffs were made this week. Overall, the distributor will implement the $30 million in savings over the next four quarters.

Most of the eliminated jobs are support positions – rather than customer-facing ones – in declining business areas such as the on-premises communications business — meaning hardware. The types of hardware sales declining include printers, barcode scanners, cash drawers and equipment around point of sales, ScanSource said in May that the hardware business was down 22% year-over-year due to COVID-19‘s business impact.

ScanSource’s John Eldh

“Our channel that’s focused on SMB in retail, hospitality and, of course, lodging, have all been impacted — no surprise there,” said John Eldh, chief revenue officer at ScanSource. “That also includes manufacturers who couldn’t open their factories because of COVID.”

The company’s strategy is to reduce its footprint to maximize revenue.

“We wouldn’t have taken this action if we thought it [the pandemic] was going to be over in a few months. But because of the impact of COVID continuing, we wanted to go ahead and take the action now,” said Eldh.

ScanSource Layoffs a ‘Necessary Evil’

ScanSource wanted to make sure that it protected those areas of the business that are important to its growth and the parts of the business that won’t impact sales partners who need support. At the same time, the leaders noted, it’s tough letting employees go.

“Taking these measures, most of all letting go valued and dedicated members of our team, is very difficult,” said Baur. “We are incredibly grateful to these employees for their service to ScanSource, and deeply appreciate their loyalty and hard work to move ScanSource forward.”

On the other hand, the Intelisys business is growing. Intelisys plays in big markets around cloud, connectivity, UCaaS and CCaaS, for example. The business has seen double-digit growth, so it will continue to get strong investment from ScanSource.

“Our focus is bringing on more channel managers that can help us meet the demand in growth. And those channel managers will help us to recruit, onboard and manage our relationships with the partner community,” said Eldh.

Those partners include agents and, especially, VARs.

Intelisys investments also include technology and tools which aim to make it easy to do business with the company. In particular, the commission tool RPM.

Canpango, which ScanSource acquired two years ago, turned out not to be a good fit. The Salesforce implementation business will close after existing contracts wrap up over the next few months. The 45 employees at Canpango are included in the 200 employees ScanSource is cutting.

ScanSource expects to provide full fourth quarter and fiscal year 2020 results on Aug. 25.