Maybe we'll get started. Good morning, everyone. Welcome to the Insight Enterprises twenty nineteen Investor Day. I'm Helen Johnson. I'm Senior Vice President of Finance.
I run Investor Relations for Insight as well as our being our North America CFO. Today, we have a great agenda planned for you, and I forgot the clicker. So let me get that. Thank you. Ken and his extended leadership team are here today, many of which are up here in front row, and they'll introduce themselves when they come up.
But we really do have a great day planned for you guys, and we wanted to thank you in advance for investing so much of your morning with us. As is customary, this is our safe harbor statement. We will consider it red. And if you want to digest it more, it's in your booklets in front of you. When we think about the agenda, you know, Ken's gonna start us out and really kinda give an overview of the journey that we've been on.
You know, he's been on board ten years now and and the journey that, more specifically, around the last five years. We'll have each of our regional presidents come up and give you an overview of their businesses. And then we're going to take you into a deep dive about our solution area go to market strategy. This is particularly important for us because it's a different way of thinking about Insight, really the journey that we've been on for the last last decade or so, evolving from a traditional reseller to a services and solutions company. And then, of course, will follow-up with the financials.
But first, to kick us off, I just wanted to introduce Insight.
Digital transformation enables companies to thrive today and into the future. How will you evolve your offerings of the digital marketplace? What is your strategy for scaling your digital business? Transforming your business for the future takes insight. Build, build, implement, and manage IT solutions that serve today's needs and move you forward.
We'll help you modernize your data center to improve operations and increase agility. Build a next generation workplace to build productivity and attract talent. Simplify IT procurement to lower operational costs. Advance innovation. Speed time to market to gain a competitive edge.
That's good. With holistic expertise across modern IT, we create solutions for where you are now and where you'd like to go. Empowering transformation today and tomorrow takes insights.
Good morning.
Thanks for being here again. Really excited to have you. I'm going to spend some time really talking about the transformation that Insight's undergone. I'm certainly going to double click a little bit on PCM. I know that's of interest to certainly all of you as well.
And then I'm to talk a little bit about how we see the opportunity in the IT market evolving and of course then talk about how we believe we're so well positioned to really take advantage of what's occurring there. To jump in, we'll talk a little bit about who we are as a company. We talk about ourselves being an intelligent global solution provider, really helping our clients' businesses run smarter. So very, very different than you might have seen us years ago. So we're, of course, in the IT space.
We love the IT space. But our clients, of course, are just looking for IT to really provide them that source of advantage, that source of differentiation, that source of innovation, how they really collaborate better. Our teams are really designed to really help our clients really provide the aspects where they can architect, design, implement, and very importantly, manage these solutions as we go forward. That's how we're really positioned as a global technology solution provider. When you look at the journey that we've been on, we started a course out.
We're 31 into the business now. You look at when we first started a course, was very much a lot of very fundamental reselling activities. It was about building the business organically, about scaling the business geographically. We did an acquisition early on there of a company called Comarch based in Chicago. In fact, it's still our hub of where we actually do our integration and lab services.
It's our warehouse. So it's still a long time ago, that's actually still the footprint that we utilize there. So it was a lot about the kind of services that we were providing back then, which was really around how are we helping our clients in the hardware life cycle services area. Then we migrated, of course, into the 2,000 era, really talking about how do we develop more solutions around the business. We did an acquisition of Calence to really help us build out our network solutions business.
A very important acquisition for us was Software Spectrum, which really gave us the software footprint that we needed as a company. That gave us scale globally, it gave us our footprint for Asia Pac, extended our footprint that we had already established in Europe and gave us a lot of capabilities around Microsoft and software lifecycle services around there. We built again more capabilities around software asset management and those types of things as well. Then we started to move into, of course, the era we're in today, which is really about digital innovation and the things that are going around about the cloud and AI, which I'll talk about. Acquisitions like BlueMetal, which is based in the Northeast, and a footprint really providing some leading edge software development skills around IoT and AI.
Matt Jackson is here with us, he's one of the founders of Blue Metal. He's going present and talk about some of the really interesting things we're doing with clients in that space. And then, of course, we augmented that with a company called Igneea out of Australia. Mike will talk about that as well as he comes up, that really is a footprint that was established in the Western Part of Australia. We've migrated it now to Melbourne and to Sydney and then we're taking it throughout the region.
Taking these acquisitions, bringing them on where they give us some scale and then being able to expand them and scale them very, very quickly has been really a good formula for success for us. And then of course, you've seen us really focus on the data center. So we acquired a company called DataLink a few years ago, about three years ago now, because we didn't really have the core expertise and we believe strongly that hybrid cloud is here to stay. We didn't have all the architectural expertise that we needed around the data center to really enhance the solutions that our clients needed. So DataLink is very, very focused as a public company, very focused in that space that really gave us the capabilities there.
Then of course, most recently, PCM. PCM was very attractive for us as we need to really build out that mid market client set for us. They're a $2,200,000,000 public company, about $1,600,000,000 who's really focused in that mid market space of clients for us. You'll see as that becomes more and more important as we're able to scale that business and really extend our managed services footprint, because those clients need managed services probably more than any client set out there, really gives us expanded capabilities as we go forward. That's sort of how we've really continued to expand.
Again, looking at acquisitions to really help us provide added skills that we need in the marketplace, as well as where it makes sense to add scale to the business with the economics really to help drive our business.
So when you look at just sort of
a snapshot of Insight 2018, this is Insight standalone, you can see that basically, again, we've been in business for thirty one years. We service clients in 190 countryterritories. So a lot of people are sort of, wow, that's interesting. But what drives that is the fact when you're procuring software, companies want to procure software, they want to procure it in one location. Right?
So if they want to basically procure their software in Manila, basically anywhere like in Milan, they basically are a global company. Said, Okay, we're gonna procure the software in Milan, but we've got locations all throughout the world. We need to make sure you can manage those for us. You need to provide the software asset management expertise. If they wanna purchase that in San Francisco, that's fine as well.
If they wanna to purchase it in Munich, we're okay with that. Having that global capability becomes very, very important. It's been critical to our success. You can see the CAGRs over five years of the growth rates that we talk about. About 7% CAGR on a constant currency basis, higher, about 8% CAGR in that regard and forward looking at our sales.
But you can see, of course, the bottom line growing much faster than that at 12% and, of course, from an EPS point of view, at 20% over the past five years. Importantly to note that our services business, of course, very much critical and foundational to our business overall. It's about 15% of our top line revenue, but you can see that it actually represents 46% of our gross profit dollars are actually coming from the services business. So we'll continue to focus on that, continue to expand. And another area to note, of course, is on the cloud.
It wasn't but a few maybe four or five years ago where people were wondering, Geez, how is the channel really going to play in the cloud? Does companies like Microsoft and other entities really need you for that? Does AWS really need you? Does Google really need you? What we're definitely seeing now is 18% of our gross profit dollars are being generated from what we call the cloud.
And we're not talking about hybrid private cloud, we're talking about the entities that we can do from a public point of view, public cloud point of view. So really a very important part of the business as we go forward. And in the far right, basically what you're seeing here is the fact that, interestingly, the evolution where 3,000 of our teammates now are in the technical capacity. When we started the business thirty years ago, that was not the case. We really had to evolve much more towards technical skills and certifications to really provide the kind of solutions that our clients need globally.
Talk about PCM a little bit and why was that so important. As I mentioned, of course, strategically really driving and being able to adjust the mid market space was really important to us. It really adds and checks the box there for us. It gives us actually a very nice footprint in Canada as well. So we're about the number six or number seven provider in Canada alone, and now together we've become the number three provider in Canada.
It gives us Cisco Gold status in Canada, which we didn't have. It adds a couple 100 service delivery people that we needed in Canada. It extends our footprint a lot more West than we were. We were positioned much more towards Montreal and sort of Toronto, so it gives us a much added footprint. So really pleased with what it's doing there.
It also gives us more capability and solutions in The UK market, which they had entered into about five years ago. So there's some capabilities there that certainly Wolfgang will touch on that we're taking advantage of. It adds a couple $100,000,000 more in the services footprint. And of course, very importantly, when you talk about scale acquisitions, the economics have to make sense. Right?
So as we've announced, of course, and we'll talk about this more in Galenas' part of the presentation, the $70,000,000 in cost synergies. Very confident that we'll be able to deliver those $70,000,000 in cost synergies. We'll probably see $35,000,000 of that next year, but we'll start run rating very, very quickly to be able to deliver the following year the $70,000,000 number. They'll take a little bit longer in some cases because some of the leases on real estate take a little bit longer to evolve to, but majority of the action will occur, as you'll see, over the next year in that regard. Again, very confident that we'll deliver on that.
When you look at the business and how PCM folds into it, if you just overlay their numbers, can see, of course, we've become a $9,200,000,000 company in 2018 terms. From a GP point of view, very importantly, you'll see basically the GP is almost doubling from 2013. So almost doubling our gross profit from 2013 to where we are finishing in 2018. So that's significant for us. And then, of course, you can see that it adds 80 basis points in gross margin performance from 2013.
Again, movement in the right direction for us as a business. When you look at the timeline where we are, we're a little over five weeks into when we announced the closing. Very much on track, so we were very fortunate during the quiet period to get a lot of work done during that twelve week period. The first week, Steve, who has the majority of the resources, basically announced the full leadership team the first week. It's a good compliment, of course, of PCM folks that are part of that leadership team.
So really, that was real important to provide the clarity and the vision for all the teammates and so forth to make sure they really understand what's the direction going forward. So quickly we did that the first week. You can see now we're into the process where we're rationalizing the brands. It will become an Insight brand. There will be a couple of niche brands that we're going to keep for a little bit, and we'll work on integrating them in.
But for the most part, 95 plus percent of the revenue, certainly probably even more than that, will be the Insight brand, and that's happening as we speak. The big factor, of course, coming up for us now is the integration of the platforms from an IT perspective. So we're on track with our plan there. We'll start that integration and start to see actually we'll start implementing some of that towards the end of this calendar year, and we expect to be through that certainly by the first half of next year. We'll be basically all on one SAP platform for the business.
So again, things moving along according to the plan that we've set out and very comfortable with what
we see at this stage.
So let's talk about the industry. So the industry, just a little snapshot, it's still a very young industry, right? It started in the 1960s and some of us might remember the bunch, right? The boroughs, the UNIVACs, the NCRs, right? The people who were in this sort of space early on in the business.
But you talk about the mainframe era, basically there's about a million mainframes sold globally. And then of course we had basically the mini computer come in with the likes of a deck and that took it up tenfold. So we went to 10,000,000. Pretty astronomical growth that most industries would die for if they could get that kind of compounded growth exponential like that. And then, of course, it continued to evolve with the PC.
Went up by another factor of 10. The desktop Internet took it up by another factor, so now you're talking billions of units. And now of course we're evolving to a space where now the mobile internet is taking it up even further. Now we're talking with the whole advent of AI and what's happening there, tens of billions. Unbelievable growth that's continuing.
As we all know, every company is having to become an IT company of sorts. But we're really excited, and this is what's been very key on the acquisition front that I talked about. We saw this trend coming back in 2015 and said we have to play in a different space. We have to be able to address the evolution of what's going on with IoT, And Matt's going to talk about some real case points that we talk about and just the opportunity that's out there for us as we continue to evolve and make sure we're well positioned to really support our clients pretty much all the way down the stack, right, from the software development side all the way through the managed services side when you talk about AI and IoT. The explosion of what's happening here is just amazing as now we're starting to talk about tens of billions of units.
We like this so much, of course, it's not magic. It all needs more compute. It all needs more storage. It all needs more bandwidth, networking. It all needs more security.
All the things, of course, that we're well positioned to really evolve to and take advantage of with our clients. This is, again, as you look at the market a little bit differently, this chart is sort of depicting here on the left, basically. What's the opportunity for us? As you really narrow it down, we're playing basically in about a $700,000,000,000 market opportunity directly that Insight can actually address, So pretty big opportunity. What the right chart shows, and this is basically looking at the Solution Provider 500 list that's done every year, is basically the pie is growing in a CAGR for the last five years at 5%.
So that's pretty much us and all of our competitors in this space growing about 5%. What you see is the top 10 depicted here are growing at 9%. So certainly starting to grow much faster than the rest in total of the market. So we think scale does matter. We think actually scale is going matter even more going forward for a few reasons.
One is when you start looking at, and you'll hear from Amy once she talks about digital marketing, it's no longer sufficient to just have a sales force like we all had back in the early days. Right? If you don't have a complement of digital marketing capability, you're not going to be relevant going forward. And we'll talk about some of the proof points there. So real important, but those are big investments.
Those are significant investments we make from IT point of view, from a talent point of view in the organization. We'll talk about how that complements that. That's a business that's really important to us and a business that really requires scale and capability to do that. We think a lot of the smaller competitors certainly aren't going make that journey. When we talk about managed services, which becomes more and more relevant as well, having the capability to do managed services 20 fourseven, to be able to do it for global clients, to be able to do it in all the multiple languages as necessary, that requires scale that requires capability.
Again, going to favor the larger scale players in the business. When you look at things like the cloud platforms that are being built out there, we were actually using a third party cloud platform initially. It started on ten years ago. Actually, were very early to it. And we determined that it just wasn't sufficient.
It wasn't going to provide the experience that our clients needed. Clients certainly wouldn't go to Amazon and expect to go to two different sites, one for their hardware needs or software needs and then one for their cloud needs. It needs to be fully integrated into one commerce platform. So we basically took that on ourselves to build our own cloud management platform that's fully integrated into our system. We can operate much, much faster than we were being able to operate with a third party.
So again, those require significant investments and significant scale as a business that I think will start to favor. I'm not saying that these smaller competitors aren't gonna figure out where their niche is, but it's gonna be different. Right? It's no longer gonna be sufficient where you could just sell a point solution anymore. Clients are looking for total solutions to their needs.
I think for this market, again, it's going to start to favor more of the scale players in the business going forward. I think that's indicative of the growth we're seeing, 9% versus the total pie at 5%. When you look at the cloud, of course, heavily playing in the cloud. It's a real important part of our business. Growth rates in the 20% plus sort of run rates, you're looking at IaaS or PaaS or SaaS.
So exciting area. No question that's going to continue. But on the right side, it's important to say that, you know, hardware isn't dead. Right? It's going be a hybrid cloud for as long as us are all in this industry.
We're going be selling a lot of private cloud. So this basically indicates that the public cloud is growing very, very fast, of course. But when you go out a few years, it's about 28% of the total business. The rest of that being, of course, private cloud, and that's where we're basically saying our orientation has to be able to play in hybrid cloud. But that's why we certainly are making significant investments to really make sure we've got the capabilities to be able to support our clients where they are.
Because not all workloads make sense to go into the public cloud. A lot of workloads make much more sense economically to stay in the private cloud. So we're gonna be in this space together, and our clients are looking for somebody who just doesn't come with one point of view and basically say, hey. Everything's gotta go to Azure. Everything's gotta go to Google.
Right? In the public cloud. No. We're basically saying, hey. Let's look at your workload.
Let's make the determination of what makes the most sense for your business as you continue to evolve, especially if you have to sweat some assets as well. So again, really bodes well, I think, going forward for us in the business being able to support both camps. So we all understand the private cloud, we all understand the public cloud. What's not clear to everybody today is that the biggest cloud coming forward is the intelligent cloud, right, the intelligent edge. This will be the biggest cloud going forward.
And what's driving this, of course, is all the things around AI and IoT. Right? The cost of making things intelligent is approaching zero. So everything that you see, we'll go through some case points and start talking to you about what's going on in areas like smart farms, smart places. Right?
All this is happening at the edge. And when you think about the edge, of course, the best example, of course, is autonomous vehicles, right? That compute can't be done, right? It can't be done in public cloud, can't be done in private cloud. And the data basically even when we get to five gs, five gs is not going to be sufficient for autonomous vehicles to communicate in public cloud.
In fact, the estimates are right now that basically by the time you communicate to the public cloud, your car will have moved eight feet. That's sufficient. So you're going to have to definitely there are certainly applications that make much more sense to be able to run at the edge, latency issues, cost issues and so forth. So this will become so it's interesting when you look at our business because our evolution of the business has been the mainframe. Everything very highly centralized.
Went to the PC, everything highly decentralized. We go to the cloud, everything very highly centralized, and now we're talking about the intelligent edge. And the point being is that it's gonna be complementary. It's not going be one or the other like it was in the past. It's going to be a complementary function going forward.
And we're really well positioned because this is an incredible opportunity and there's going be a lot more hardware being generated here than most people think. Right? Because it's not magic. What's happening, what we're seeing is hardware actually is coming to solutions that never used technology before. Not too many farm industries are using, you know, technology out in the fields.
They will be. The sensing technology is so critical when they look at water being such a critical asset to them. How do they make sure that they've got the IT resources? It's not magic. They're going to need edge gateways, all sorts of hardware that they haven't used before.
So we're really well positioned. We'll show you some case points and some examples of how we see this evolving. But this is very important. This is why we've been investing in the capabilities to make sure that we're well positioned to not only help them design the software at the edge, right, for these edge type of solutions, but make sure that we can actually provide the hardware solution at the edge as well as the managed service at the edge. Managed service, of course, a chart here from Gartner that just talks about where managed service, of course, will be one of the know, is the leading sort of service for for the cloud.
So companies, of course, especially in that mid market space that we talked about, why PCM was so critical for us, they've got to have somebody who has capabilities to manage services because they're not gonna have the skill sets. IT is not becoming simpler. IT is becoming more complex. They will not have the skills to do that. So when they go to the public cloud, they're still going to need companies that actually manage that environment for them.
That's why managed service is such a critical offering for us, and we'll show you some case points what we're doing in that area to really build that out. But again, that at scale, doing that globally, doing that 20 fourseven, doing that at level one, two and three, and being able to provide, of course, multiple languages to be able to support our clients where they are on the globe. A real important area of investment for us. These are the five factors. No news here.
I think we've all seen these going forward. They've been pretty consistent over the last few years and certainly will be consistent going forward. These have been our guiding posts to make sure that we're investing in the right areas to support our clients, because our clients need help in all these specific areas. You talk about what are the key assets as we go forward and what's the platform for insight, really based it upon the culture of the company. We talk about innovation being so important and the investments that we've made.
We've talked about digital innovation. Being global, we think, is very critically important to our clients, not just on the software side, but we'll talk about some cases where we're seeing clients, of course, move more and more saying, we want you to do our hardware globally as well. Of course, the client and partner ecosystem that we've been developing, and then, of course, the financial rigor and discipline that we have. So those are the five strategic assets, I'd like to walk through those specifically and show you how we're well positioned there. So when we talk about the culture of the company, it's very simple.
I've worked at four different companies in my career and we all have a value system. Hard for us to remember them, all the companies you're a part of, all of you have a value system. If I ask you to write them down, we might get different responses. Right? Because it's not clear because usually it's a long list.
Right? It talks about ethics, do the right thing. Right? I mean, all of us have been there. We really got down to the point in saying we've got to really simplify this so people really understand them.
So it's very, very simple. All of our teammates understand them globally. It's hunger, heart, and harmony. So hunger basically is that insatiable desire to win with our clients. That's the reason we exist.
We've got to have that. We've to exhibit that hunger. Heart is it's all about people. The only thing that differentiates us as a company is the people we have and the solutions we deliver. We also do have a responsibility being a public company to communities we live in.
So we do spend a good amount of time in our philanthropy efforts to really making sure we're making the communities that we're participating in a better place. And then Harmony, best team sport there is. Right? When you look at what's going on from a Harmony point of view, it takes everybody in the finance group and the credit and collections group, the warehouse, the integration centers, the front end technical people, the architects on the software side, the salespeople. It takes everybody together in this business.
Hunger, heart and harmony, very, very simple but very powerful as a culture for our business. We think it all starts with leadership in our mind. We spend a good amount of time investing in training programs globally for all of our leaders at the supervisor level all the way up to the levels amongst the team you see here in the room. We're very much students of leadership. We spend a lot of time really focused in this area.
We've really narrowed it down to what we believe are four leadership commitments that we owe to our teammates. Right? So we talk about first thing, of course, we've got to be able to create clarity. So making sure that all of our teammates really understand the vision of where the company is going. How do we constantly simplify things in a world that's becoming more and more complex?
Right? So it just has to be a mantra of constantly working there. Then we talk about inspiring people. Right? That's our jobs as leaders is how do we empower our people to do the best job they can.
So we very much focus on us as leaders, we have to make sure our people understand the what and the why, but we want our people to do the how. Right? We don't wanna micromanage our people. We wanna empower them to do that. So we as leaders make sure they have to understand what and why we're doing it, but really make sure we've empowered them and trained them to do the how.
Then we talk about demonstrating thought leadership. It becomes really important to our business. We've got to really make sure that our people are being curious. Our people are looking at the constant things that are changing in the marketplace. How are we doing more and more test and learn?
Right? Things are changing quickly. How do we make sure we're staying on top of the innovation curve that's occurring? So we require all of our leaders to make sure they have a responsibility to make sure they're demonstrating thought leadership. And then finally, of course, we have to deliver results.
We owe that, of course, to the financial community and our our stakeholders in the company who have to do that. But very importantly, delivering results allows us to make the investments to grow our business and support our clients better, provide a better environment for our teammates to invest in them, to empower them to do better jobs. So very core to what we do as a company. So some proof points on what we're doing from a culture point of view. So you can see our NPS scores going up by 40 points.
You can see that our tenure, from a sales rep point of view, is improving and increasing. You can see gross profit generation over a five year CAGR up 20% per sales, per individual in the company. And then very importantly, you can look in 2019, we were actually on Fortune's list of the number 23 company, in the industry in technology. Right? So pretty good accolade from a very good source.
And also in 2018, we're actually very proud of the fact that we were voted as one of the top 100 companies in The US for diversity. And you're seeing again taking those same accolades to Australia, taking the same accolades to, The UK as well. And then you look at, ratings like Glassdoor, you can see which we track. A lot of new teammates coming into the company are using things like Glassdoor to really get a determination, is this the kind of company I work for? You can see a rating of 4.2.
And then of course you can see 81% recommending Insight to a Friend. So these are the solution areas. Helen touched on this a little bit and our team is going to go through these in a little bit more detail. So I'm just going to touch on these. But again, at the left side, you basically you see basically our suppliers, our partners, the Microsofts, the Ciscos, the HPs, right, the whole plethora of great partners that we have.
They're really providing the solutions that we need, They're providing those point solutions that we need so that we can actually create an entire solution for our clients. And at the end, of course, our clients are just looking for the outcome. Like I mentioned earlier, they don't really love technology. They just want, what's the outcome we're going get from this technology? And how we do this basically is in four solution areas.
We start off with basically the basics of saying, we've got to make sure we're providing the supply chain optimization on the left there. Right? That's keep the lights on. We've to have the most efficient e commerce engines for them, the the most efficient way for them to procure products. How do they want to procure?
We've got to have multiple avenues for them to do that. So supply chain optimization, our partners require us to do that. They really rely on us to do that. And our customers, of course, really are a important value that we can add to them. Then we move over to what we call connected workforce, and that's all about the modern workplace experience.
Right? Very different from years ago when you basically an employee came in and said, hope you're going to enjoy this, you know, this this black, device. Right? You know, whatever it is, nondescript device. Enjoy that, and here's here's all the applications running.
No longer you could do that. IT is too critical for a teammate. You got to make sure you're giving them choice, right? Many of them may want to use a Dell device, maybe they want to use a HP device, an Apple device. You got to provide choice.
And our customers are more and more looking at this device as a service. So how do we provide the complete ecosystem of imaging the products for them, providing the help desk support levels one, two and three, providing them full managed service, providing disposal, all those things we can meet the client at where they are to really provide how they want to manage that environment from a connected workforce point of view. Then you move over one slot there and you see basically cloud and data center transformation. Again, this is all about understanding the workloads for the clients, really understanding where are they, what are the workloads that they're running, which makes more sense, what are the cost factors they should be engaged in, do we need to help them modernize that application so it can go to the public cloud, Is that more efficient or does it make more sense to actually run-in a private cloud? So we help them through that journey on a continual basis.
So very, very important. As we talked and showed the data, hybrid cloud is going to be here for a long time. We need to make sure that we're playing in both private cloud as well as public cloud for our clients. And then digital innovation, of course, really is all about that whole IoT experience, that whole AI experience and how we can help clients. So very, very different world, right?
We've got over 1,000 basically architects and software developers in the company, right? That was not the old insight, right? So you have 1,000 people actually developing around the globe software applications to really help deliver that to our clients. And Matt's going to go through quite a few examples there to show you how we really deliver true value to our clients. So I want to just quickly talk about, Dell is one example of a key partner for us that actually plays in both supply chain optimization, connected workforce with all their products, as well as cloud and data center transformation.
On behalf of Dell Technologies, I want to thank you for the opportunity to be part of this fantastic event. Insight is one of our most strategic and trusted partners, and you have earned the coveted Titanium Black status to prove it. Over the past decade, we've done tremendous work together and fueled great momentum. Last year, Insight delivered more than $800,000,000 of Dell Technologies solutions. Results like this require strong alignment, and together, we're on a mission to help our customers transform into truly digital organizations.
We created Dell Technologies just for this opportunity. And with industry leading innovation, integration from the edge to the core to the cloud and the trust of very strong partners like Insight, I couldn't be more confident in our collective future.
So a couple of other proof points on the innovation that we're driving in the industry. On the left there, you could talk about Gartner. Gartner certainly being an area of expertise that our clients really look upon when they make decisions to determine who would provide the best service. Have these quadrants, magic quadrants that you've, I'm sure, heard about and where you get positioned in those. So we've been very fortunate to be involved in those the past few years in the, basically, managed workplace services quadrant for that, which is very important.
It gives us the ability to really go in there to our clients and that they know they have the confidence that we've met all those certifications, we've met all those standards, all those requirements, and our clients will actually give us an edge actually when clients are making those critical decisions there. Forrester is similar on the software side, and you can see where we basically selected this past year in agile software development. Again, you wouldn't have seen that ten years ago at Insight, that we would have gotten that kind of an accolade from Forrester on agile software development. So again, more and more recognition for what we're doing. On the far right, you can basically see all the accolades that we've gotten from Microsoft.
We've been Global IoT Partner of the Year, Global AI Partner of the Year, Modern Desktop Partner of the Year, App Development Partner of the Year. So really a very, very strong bond with Microsoft. They're a key partner in our whole environment, and we've really done very well with them and are really getting some good accolades. I want to share just again a little bit of a tidbit on Microsoft as well.
Hi. I'm Judson Alltop, and I'm responsible for Microsoft's commercial business globally. I wanted to take a moment to really thank Ken Lamnick and the entire Insight team for the fantastic partnership. And it's led to some real cutting edge work with Microsoft. In fact, when you think about artificial intelligence and DevOps driving so much of the future of the digital economy, Insight has engaged in over a thousand projects with us and 500 customers around the world.
What's most important about, this relationship, for me, it's the alignment of values. Microsoft is a values driven company. Our mission is to empower every person organization on the planet to achieve more. And in fact, Insight appreciates those same values. One great example of this is the work that we've done together at Steward Healthcare, saving lives and at the same time creating an ROI of over a $100,000,000 for the health care institution.
It just lines up so well with making a difference, which is the core tenant of Microsoft's values. We couldn't ask for a better partnership, a more strategic partnership, and a more global reaching partnership, and we're excited about what lies ahead. Thank you.
So we look at again our global footprint. What's important here is you'll see the Insight locations there, the little dots. We're basically in the locations where we're at 70% of the IT spend globally. So we really feel we've got the right footprint to be able to support our clients with a global footprint. What you see there sort of in the fuchsia color, of course, is the partner network that we have.
It's not economical for us to be in all those other locations, but we've got to support our clients because they may have a location there. We've got a very strong partner ecosystem. Of course, we're still ultimately responsible to deliver on those SLAs to our clients, but again, a very strong ecosystem we've built over the last probably twenty five years in the business. When you look at our client set and our client's aspect here, the left is sort of before PCM and the right is after PCM. You can see the global piece, of course, is still a critical piece of our business, but we start to balance our portfolio of clients globally a little bit more when we add PCM because they add so much more to that mid market space, which is really important to us.
So when you look at, of course, the commercial side of our business, which would really be sort of that SMB side of the business, And then, of course, the enterprise, which this is sort of everybody uses different sort of terminology, but this would sort of be 1,000 to 10,000 seats, which by a lot of standards, of course, is still mid market. This would certainly be a big tier of mid market. So when you look at that, we feel like we're really getting much better positioned to really support that sort of SMB and mid market space than we were on the left chart. So again, that was very strategically important for us as part of the acquisition. Again, here's a lot of the partner ecosystem.
We'll actually sell 5,000 different brands of products this year to our clients. Our clients have a lot of niche solutions that they depend upon us to be able to support. A lot of that is part of that whole supply chain optimization. They need somebody that can be the aggregation point. But very importantly, we've got to also provide the technologies that our clients need.
And we're not at a loss for any real technology that any of our clients need. We've got access to pretty much the I can't think of a partner that we don't have access to that our clients need at this point in time. Of course, some are very much more important. They drive more revenue. On the left side, the majors, they drive the largest portion of the IT industry revenue, and certainly they do for us as well.
And Cisco being a great example of one of those, I wanted to just hear a quick message from them as well.
Hi, I'm Chuck Robbins, Chairman and CEO of Cisco. At Cisco, our partners are so critical to all that we do, and Insight has been such an important partner for us. We've worked together for over twenty four years, and our joint commitment to the partnership has been essential to our mutual success. In today's world of massive connectivity, it's so important to stay agile, embrace new technologies and changing market transitions. Insight's global reach and scale help to provide access to critical end user markets around the world.
We have the opportunity to do business with Insight worldwide, jointly serving clients of various sizes and across many verticals. Insight has made key strategic investments which allows them to help clients modernize their workforce experience, assess and implement cloud and data center solutions, and help clients with their digital transformation. As a Cisco Gold certified partner, Insight continues to demonstrate commitment to excellence in supporting our mutual client success and strong strategic alignment across our organizations. As we continue our transition to software, helping our customers along their digital transformation and solving some of their toughest business challenges, we couldn't do this without insight support, feedback and alignment over the last several years. Thank you for the continued commitment to our partnership.
Moving on to the operational efficiency and financial rigor in our business. As you can see, of course, systems are a critical part of our business. We've got to really get that right. We run the SAP platform throughout North America and our Asia Pac business. Our European business is run with another ERP system on Dynamics.
They will actually migrate at some point in the future here that we've identified all to being on one SAP platform. We migrated from five ERP systems to two. As I mentioned earlier, we're going take the multitude of ERP systems from PCM. We'll all bring that on to the SAP platform as well. We basically took 43 web systems down to two and basically four data centers down to two.
So a lot of heavy lifting that is essential to really make sure you've got the efficiency and cost structure in place to really be able to support the business. Very pleased with the SAP platform. It really provides the basis and core of what we need to grow, and and scalability is never an issue when you talk about SAP. You can see that 60% of our business actually is done through e commerce, so not touching, right? Sort of an automated fashion.
So you can see the extensiveness of our e commerce engine, how important that is from a cost efficiency point of view and from an efficiency point of view that our clients really depend upon. You can see we've improved our cost structure by 400 basis points over the past five years, taking it down to 76% of our gross profit dollars. And then, of course, really making sure that we're investing in the managed services platforms that we talked about, things like ServiceNow, our cloud marketplace, which I touched on, and being able to build out the capabilities that we need and the tool sets we need to become the efficient partner that our clients need. You can see the digital experience, which Amy is going go into in quite a bit of detail, but basically 75% of our clients are being touched by the digital experience that we have. We'll talk about digital marketing, and that's where I talked about how important a companion that is to the sales effort.
No longer is sales sufficient. You've got to have capabilities on both fronts. Glynis will touch, of course, a lot about our class flow generation in her piece of the presentation. So we spent over $1,000,000,000 in the past five years allocating our capital. Of course, organic investments are our first priority, investing in our teams organically to make sure we can grow them, our systems, our tools, making sure that's the first line of business.
And then of course, the M and A investments, we're certainly very familiar with. And then making sure we're deploying cash back to the shareholders in the form of stock buybacks has been our main avenue for that. You can see over the last five years, we've basically bought 11,500,000 shares or $300,000,000 worth of our stock back. When you again look at the strategic assets that I just went through, the five areas, I think you can really see how well positioned we are to make sure that we take advantage of and continue to innovate, continue to make sure we're providing the growth solutions that our clients need. Those are really important.
You'll hear those from Steve, Wolfgang and Mike as they go through their presentations. Again, that platform of strategic assets are really critical to our future success. So in closing, from my piece, you can basically see that there's certainly four key metrics and I'll come back at the end and give you more specificity on these. But growing sales faster than the market, of course, is critical for us. Making sure we're expanding the EBITDA margin as a company, we want to make sure we're optimizing our return on invested capital and, of course, growing our services business as a percent of our total gross profit dollars as well.
So with that, I'm going to turn it over to Steve Dodonoff, who runs our North America business.
Bosses Day. So if you haven't wished your boss, happy happy Bosses Day, Ken. It should be like happy Leader Day. After ten years here, Ken's certainly done an amazing job with our company. So I'm very privileged to be here.
My name is Steve Dodenhof, and I lead the North America business. I have been at Insight more than eight years. I've been in the technology space for really my whole career. I covered software, systems integration, services, etcetera. So it's been a pleasure to lead the North America business.
And so let me just start by saying on behalf of the 5,500 teammates that I represent, I'm just going to share this section with you about orienting you around the North America business, our journey over the last five years, the progress that we've made, and to just reinforce this evolution is really driven by our customers and what's going on in the industry as a whole. So first off, in 2018, so this is pre PCM, the revenue for the North America business was north of $5,000,000,000 It certainly represents a significant piece of our company's business all up, so about 76%. If you think about Canada, which Ken talked about, Canada pre PCM was only 5% of the total in North America, but obviously we've doubled our size in Canada. We're going to move in Canada from kind of two companies that are about number eight each when we combine those to be number three. And so in that marketplace, it's very exciting for us and something that I'll speak to a little bit more.
Our go to markets are very aligned to the company with certainly a strong presence in the enterprise and global space. My counterparts Wolfgang and Mike, We work together to serve the larger enterprise needs. Our commercial space is going to get augmented quite substantially with the PCM acquisition. I think that's a great opportunity for us. That segment is the one that might be underserved relative to the innovation and the kind of cloud enablement that's happening today.
And so we see a lot of the assets that we've acquired and organized to be able to serve that. And then we do have a strong public sector footprint. As Ken mentioned, we announced our new leadership structure really a week after the acquisition and we put all public sector teams together under the PCM leadership and we're really excited about the opportunity to grow and scale there. On the right hand side, you can just see gross profit that we're generating. As Ken mentioned, kind of externally delivered gross profits, 43% of services, 56% made up of hardware and software.
And then kind of the middle, if you were just to extract all GP related to cloud, about 11%. We have evolved and I want to just take you quickly through this. It's very, very important, think, the innovation that's happening in the industry, the technology, but more importantly, what our customers are looking for. So of course, product, you saw 56%. It's important.
We're not saying that it's not and it won't continue to be important, but more and more of our clients are looking for outcomes. And so really getting that orientation much more towards the solutions focus where we're integrating products to deliver a client outcome has been more important. And I'll drill down on this area, pivoting slightly in our business and our go to market model from purely a sales and services model, which is kind of client segment to a solution segment. So the solution areas reflect this transition to focusing really business units around delivering an outcome. This does require us to be much more services led.
So starting with a consulting engagement, this idea of being a global intelligent technology solution provider, design, architect, implement, manage requires much more focus in on services. And you can see the services growth in terms of gross profit, percentage of the total. These are all a part of being a solutions services led business. And again, when you're leading with services, clients are looking for a managed outcome, so much more from transactional to recurring. In the North America business, about 35% of our gross profit is derived in the services business from a managed service outcome.
Of course, that keeps us connected to our clients and helps advise them on next generation technologies or areas within their infrastructure or their environment that could require further support. And then lastly, you saw some partner videos from people like Microsoft, Cisco. And these are important relationships for us and they've always been in traditional sense. But these titans are actually forming ecosystems. And so you see Microsoft very connected with people like NetApp Cisco and Cisco with Apple and NVIDIA for artificial intelligence data center.
So very important for partners of scale, to connect those together. Niche VARs who are, one OEM only are starting to struggle as these ecosystems are forming because the breadth and depth of capability required are certainly taxing. And this is where when Ken pointed out how we're growing share faster, we see pressure in that for the traditional bar to keep up. So really, over the last five years, I'm just going to speak to what we focused in on and the results that those produced. And one of the takeaways I'd like you to say is we've evolved over the last five years positioned the business quite well to support the future needs of the marketplace.
And we hope to kind of repeat these results as we move forward, certainly adding PCM. But really the client segmentation, so being disciplined about the customers that we want to go serve and why we want to serve them and the resources that we're going to aim at them. Trying to touch them, reach them, communicate them in a different and modern way. Amy will talk about the buyer journey, but the enterprise buyer journey, the commercial buyer journey is not unlike the consumer buyer journey. How we interact, how we look to engage with our clients is very similar to how they interact in their daily lives.
So our digital platform and simplifying simple things like technology acquisition, very important to us. As the marketplace has evolved, we've added capability both organically and through acquisitions and pivoted our go to market around the solution areas. And then of course, as Ken highlighted, certainly SG and A has been a key operational discipline as we do this have been real important levers for us to pull. The solutionary strategy really drives this simple concept, which is our long standing history in the industry over thirty one years and our client relationships matter. These deep long standing relationships matter but our clients are under a lot more pressure to transform and so these relationships are easily leveraged to bring new capabilities, new offerings and new ways in which to help them not only manage their business today but transform.
This is really the solution area concept that I'll drill in. The results from net sales are compounded annual growth rate in North America 9%, so organically 7%. Our EFO compounded annual growth rate is 11%. You can see our services growth continuing as we pivoted from kind of product to solutions in the services led approach. And as I highlighted before, 11% of our total gross profit with cloud and we see that continuing to grow.
Ken highlighted focus in on culture and our teammate engagement. It is a competitive marketplace. We're very proud of the fact that we're recognized both for diversity and just in the technology. So when we said number 23 in technology, that's everybody. That's not like channel.
That's OEMs, that whole list of people that you saw on the slide. So that is our teammates telling the marketplace that we like what's happening here and the clarity of the leadership. So very proud of that. I just kind of wrap this with this is the last five years as we've evolved. As you all know, the industry has been an amazing journey.
There's a lot more ahead and we think we're well positioned for that. We do something every year called the Intelligent Technology Index. I'd ask that you go to our website. You could download it. I think what's really interesting is what did our clients say on people who are buying technology four or five years ago versus what they're saying today.
And I think the needs and desires of our of of C levels and IT leadership and line of business leadership five years ago quite different. Obviously, cloud, mobility, security, these big trends that Ken talked about are reshaping how customers think and what they're looking for. These are a few data points that highlight some of the needs, but there's a depth of this across the board. And these really inform how we go to market and how we try to serve our customers in a unique way. And it just told us that there is quite a bit of focus still on optimization of the supply chain, so efficiency.
More and more technology needing to be bundled because really as a service when you think of managed service, it's clients saying, hey, look, the technology is getting integrated. It's different. It has to get accessed. It's accessing the cloud from an IT perspective, much more difficult to support. So I like it fully bundled so I don't really have to worry about it.
Data, everything about data, the growth of data, where is the data, how do I get to it, how do I make sure it's secure, very complex. And then of course, just in general, this transition from OpEx to CapEx. So these are quite diverse challenges. And if you're in IT leadership, this is a tough gig and a very, very demanding environment within the organization. So we really felt like it was important through our growth and our acquisitions that we rethink how we want to go to market.
So I want to just spend a minute on this. So the first kind of fundamental principle that I'd like you to think about is these could represent business units. These could represent of size and scale and you delivering unique outcomes. I mean, typically, the person who cares about this is procurement. How do I get an efficient drive my cost out?
This is typically IT decision makers thinking about, hey, we've got to move to modern cloud based applications for our employee and so we would need to deliver these in a different way. So this ends up being very much of an IT group. These are typically C levels because they're thinking about data, CISOs, security, transformation, agile IT, multi cloud. So there's really, really complex needs here. And then typically these are line of business leaders.
So significant people thinking about new lines of revenue, different ways to create loyalty. So the first big important point is our customers' needs are very unique and the decision makers within those customers are unique. And we wanted to organize our assets to take advantage of each of those with this core principle that these customer relationships can serve our business well by engaging these areas. So think of this as our traditional business. This is a services business, obviously much higher gross margin.
Think of this as the systems integration business, bundled hardware, software, infrastructure, cloud, and these are really innovators. And each of these fit together nicely so they can scale on their own, but the client relationships and connecting these are where the value is at because our customer really wants to manage and transform at the same time. And rather than be their own general contractor for 20 partners and do this, do that, and the risks associated with this isn't talking to this, we simplify that for them. And I'm going to give you an example of I want to introduce you to Banner Healthcare.
Banner Health's mission is making health care easier so life can be better. And one of the ways Insight has helped Banner achieve that is quite frankly by making IT easier, which frees us up as IT professionals to help make health care easier. Hi. I'm Liz Devereaux, senior director of IT infrastructure here at Banner Health. How the relationship with Insight started was as a procurement company.
As that relationship continued to grow over the years, we also started realizing that we had a a pretty good, what we would call a trusted partner in Insight. So we actually started asking Insight, hey. Can you help us with some other big decisions around perhaps technologies or standardization? That has been very successful as well. And again, continue to solidify and grow that relationship beyond just procurement.
The final pieces that we're working with Insight now on are actually kind of neat and are really adding a lot of value add. And that's in and around helping us be a bit more innovative as well as helping us be able to add capabilities, on our development side of the house and some of our cloud presence that we had never even considered doing with Insight a number of years ago because they have become that trusted partner and because they have brought the solutions to the table.
So this is a great example of a long standing client who's evolved and transformed, and we've, gone along with them on their journey. Everything from the traditional acquisition of technology to refreshing entire network and infrastructure, helping them build cloud platforms, and then actually now working on digital innovation solutions, to improve patient and, patient care and patient experience. Banner is a $7,000,000,000.50000 person company. Their CEO is a gentleman by the name of Peter Fine. He's quite the innovator.
And his view of their business is that they are a systems integrator whose product is health care services. And so customers are all innovating in new and exciting ways. And our journey with our customers very much reflect this classic relationship, new assets that we've added, organized in unique ways, and we support them on their journey and simplify the way in which they can work and not only manage their business but transform. So just in closing, our assets are quite aligned and our priorities are continue focusing in on teammate engagement and attracting talent into the business. Innovation.
The market is moving. What we worked on two or three years ago, quite a bit different than what we're working on today, and and continuing to try to bring modern solutions. So people in those four solution areas get up every day and think about what's happening in that space. What technologies are emerging that are important to our clients, and how we want to help them on their journey. It's not just a matter of offering and go sell it, it's actually a matter of constantly evolving.
We have a great opportunity with PCM in terms of the commercial space. This is really exciting for us because those same assets can serve the commercial marketplace. And by the way, most enterprises in some cases do have competency in some areas that we have. So the commercial space offers us really quite a bit of greenfield. They happen to be under the most pressure for this transformational efforts.
And so PCM will be onboarded into our solution area strategy. It's actually our experience up to this point is going to be quite seamless. The leadership organization was announced and integrated into that. It's landed quite nicely. And so we're certainly optimistic that our progress here is going to be great as we head into 2020.
And then continue to focus in on operational excellence. It's just one of the core tenants. Obviously, we have a 76% of our expenses are SG and A, so we would need to keep our minds eye on that. So I'm very excited about our progress in the last five years, more excited about the opportunity in our industry and the customer relationships that we have that we can help continue to manage and transform. So with that, I'd like to turn it over to my peer, Wolfgang Ebermann, who runs our EMEA business.
Thank you very much, Steve. If you might wonder, Wolfgang Ebermann, is that a German name? Yes, can confirm I was born in Germany. But actually, always, in my role, acted in international companies. I have been, for thirty years, in the IT industry, worked my way to Hewlett Packard and Microsoft, and for more than six years now at, at Insight.
When we think about Insight in EMEA, then we are talking about a company with a footprint of a $1,500,000,000 business operating in 14 countries. We started our journey in The UK, and that's why The UK business is still a big, you know, portion of our overall business. But if you're actually very proud with our footprint we built, since we are, in Europe, which is really well balanced across all the important countries in Europe. We are covering more than 60% of the IT spending in Europe with those entities where we have, you know, our own offices and our own presence. And, of course, we are covering the other countries through our strategic partnership as Ken highlighted.
And what's also important, over the last six years, we took our footprint also from our business point of view and expanded that significantly into the areas where we see the biggest growth opportunity and the biggest demand from our clients. Therefore, when you look at our gross profit contribution here, Services and Cloud is a significant contributor to our business in Europe already. You might think cloud is actually faster accelerating in Europe than it is in The U. S. It's actually true for some of the markets in Europe, but not for all.
There are a few countries in Europe who are fast tracking on cloud innovation such as The UK or the Nordics market, and there are a few who are basically starting. And you're going to see me talking about this, in a minute as well and how we are taking on progress on that. So I'm excited about the balance of our business and how we are taking advantage of the IT spending growth in services and in cloud already over the last five years. When we look at the way we conduct our business, as Steve highlighted, there is a real deep partnership between global clients who operate on a global scale. We strongly believe that global footprint is a strategic asset and Ken talked about that.
But at the same time, the success of our business requires to be balanced. Therefore, we have been spending and investing significantly in growing our market share beyond global into what we call the corporate as well as mid market space. So when you look at this pie chart on the right hand side, you know, we have a really important footprint around corporate and enterprises who don't have a local footprint but only operate in a specific country. And we also have a specific focus on public sector in selected markets. With that, when you look at the way we conduct our business, actually, feel pretty strong about that because we are not dependent on a few clients.
We actually have built a client portfolio which gives us the opportunity to grow our business and gain market share with our solution go to market. Similar to Steve, we are basically running on a continuous basis our own market research, which we call the Insight Intelligence Solutions Survey. And it's very interesting when we look at the feedback we are collecting from more than thousand clients around Europe, they clearly articulate, you know, that cloud is their number one priority in terms of investment. And it's very interesting. We just conducted the last survey just a couple of, weeks ago, And the growth of cloud investment is significantly accelerating even beyond what they have done over the last couple of years.
So I talked about some countries being legacy. This is now the prime. It's the key priority of any organizations in Europe in investing into, you know, becoming digital ready and using the cloud as the accelerator to do so. It's also interesting that our clients in Europe, you know, report back that they have a challenge. And their challenge is they need to still, as an IT department, keep the lights on, as Ken said, running the existing IT operation and be focused in helping the businesses to become digital ready with new IT investments.
And they have a skills problem and they have a resource problem. And they are really asking for partners helping them as a strategic advisory but also as an implementation and managed service partner. And with that, I think when we look at our product portfolio, and Steve, you know, already talked about how we set that up, I think this setup is the perfect opportunity for us as a partner to support our partner, our clients on their dual responsibility. Helping them and supporting them and keeping the lights on, but at the same time supporting them with our resources and allowing them through cloud innovation and insight services, you know, to drive towards a digital ready business. Now, the best way to describe that further, again, I want to share with you a client and it's just one example of many clients we have been working with over the last five years.
And this company is a company called Sun Brand Solutions. This company is in market for over one hundred years and they are an expert in brand and design. And they have a global footprint and they are actually engaging with companies such as Coca Cola right, and other key brands around the world in helping them to perfectly design the products. So let's see how they have been driving innovation because in being in market for over one hundred years, their investment in innovation and reinventing themselves seems to be the gold mine allowing them to stay competitive in a very challenging market. So let's have a look.
At we design and create packaging for our clients. Sunbranding has been around for over a hundred years. During this time, the business changed significantly. We have six offices worldwide. As a global operator, it is vital that our IT security is protecting all our offices.
In this day and age, a lot of companies are getting hacked again targeted. We need to have solutions to protect our business.
We implemented the solutions and branding because many businesses are facing shrinking IT budgets, shrinking resource, but the need for greater IT resilience and workplace efficiencies is ever increasing. This is where Insight can truly add value. The key solution we provided is a hosted security service that provides an advanced threat detection. This tracks all logs across the network for possible attacks. Through the service, Embran will receive twenty four seven proactive security monitoring and real time analytics.
One of the solutions we were looking at was a cloud based security solution where it would monitor all our endpoints. It would monitor all the logs to ensure that we wasn't getting hacked from the outside world. If we were, the cloud solution would alert us. There's a lot of benefits, which includes maintaining our ISO certification for twenty seven zero zero one, where we need to demonstrate that the intellectual property is safe and secure. This is good because it gives peace of mind to the clients.
The level of protection they now have and the level of savings we've delivered have enabled some branding to continue on the journey of constant improvement in the way they work.
There are many cost benefits associated with this solution, which includes not having six or seven secondurity staff monitoring all our systems. This equates to 6 figure saving for the business.
I have personally worked with some branding for the past three years. Throughout this time, Insight's understanding of next generation technologies has allowed us to deliver business efficiencies and reduce operational costs.
I enjoy working with Insight. I know I can count on them, I have confidence in them, and I trust them to provide the service I require.
I hope it highlights. It's a great example of just one of our clients we have been engaging with. We started with them as an IT supply partner, but we really evolved through our go to market model in supporting them in particular around cloud and data center transformation and driving that in a very secure fashion. That investment for us was really critical over the last five years. So we really transformed our business model against those four solution areas.
And we made a clear bet and focus on cloud as being the fastest growing category where we believe we need to be leading edge in helping our clients and take advantage of the agility the cloud provides. Secondly, at the same time, we had a very strong focus in Europe similar to The US and in all the other regions around operational excellence and digitalizing our business. You're gonna hear about digital marketing. This is a global implementation done in close partnership with Amy across the globe. But also digitalizing the way we drive procurement, you're gonna hear me talking about the way you know, how we're gonna drive supply chain optimization through digitalizing procurement.
Now the client segmentation I highlighted as well is critical, right? Being balanced in the way we conduct our business and not too dependent on one client, but having a great portfolio which allows us to present our strategic asset as a global partner for global clients and at the same time balance that with our in country engagement with enterprise and corporate clients. And last but not least, we accelerated our business through acquisitions like KAES, a cloud solution provider in The Netherlands, who helped us to basically drive additional capacity gain and capability gain through that. As a consequence of that, in constant dollar, you see us really driving our top line financial results. Top line growth, growing our top line more profitable and managing our costs well with a great CAGR on EFO, adjusted EFOs over the last five years.
But what I also feel important is the innovation aspect. So really growing our services business in a double digit and anchoring around that cloud business and generating 37% of our total GP out of that cloud innovation, here is a true success factor, which we built the strength on. We wanna continue to drive going forward. The foundation, very similar. What you heard, in Americas, you know, it's it's the teammates.
And investing into our teammates and making them excited and get them skilled to actually deliver on our promise to our clients has been core to our business. And we feel very excited, you know, about our recognition in The UK market, our, you know, as you saw, biggest footprint in Europe being the best place to work in the tech industry in 02/2019. Now taking this forward, our strategic assets, you know, are exactly the same in Europe. And that, I think, is again a strength of this company acting together, being globally aligned and working against those strategic assets and taking them forward into the next five years. So we're gonna keep focusing on our teammates.
It's important for accelerating our growth journey. We need to continue to invest, identify talents, and skill them. So people investment is important. Making them experience the beauty of their own growth within Insight is critical. Secondly, we wanna drive organic growth.
We're gonna continue to drive market share gain in particular in this corporate account segment, but also winning additional few global clients through our global handshake. There are very few, very few partners who actually have built that global footprint like we did across software and hardware. Would actually say we are the only one. I And think that's a real benefit of ours. We want to continue to grow in those four solution areas because when we look at our survey and study, it's very clear these are the full big requests where they're asking for help.
And we are perfectly positioned to do so. Now when we talk about digital innovation in Europe, we are not as advanced as Steve is in The U. S, but this is an area for us where we want to further invest and build our capabilities so that we can really run this across the globe. We're going to do this also making further search in the market with regards to finding best targets which we're going to bring into our business and helping us with that to accelerate it. And last but not least, of course, operation excellence and discipline is core.
Right? We want to help our clients to be digital ready. We're going to continue to focus on driving our digital excellence within our own company as well. So with that said, I feel very happy to introduce Mike Morgan, who's basically our representative for the APAC Region. Mike?
Cheers, Wolfgang.
Well, thanks, Wolfgang.
As Wolfgang mentioned, my name is Mike Morgan, and I'm the VP and Managing Director for Insights APAC operations. I've been with the business for just two point five years. And prior to that, I've spent my entire career leading high growth professional services business, largely listed businesses in the Australian market. So to give you an overview of how our APAC business is structured today and how we're looking to grow. Similar to Europe, we've homed in on our home market first, Australia, which represents 65% of our overall sales profile by country.
We're also exposed to four other countries, China being our next largest and our fastest growing at 13%. And China has been a very, very important part of our global story as most of our customers in China are U. S. Or European multinationals with significant investments in China looking for a bit of a home touch. Singapore, Hong Kong and New Zealand are also very high growth markets for us.
Singapore allows us to have a headquartered position exposing us to the whole of Southeast Asia and high growth economies in that market. And Hong Kong gives us exposure to the rest of North Asia. New Zealand follows in Australia as being the two most mature markets and structurally look very similar in market dynamics to The United States. So we're able to get lots of leverage and learnings from the things that we do so well here in The US. In terms of client sales mix, it's incredibly balanced across APAC.
41% of our business in the region is in public sector and most of that's actually in Australia. So we're very well positioned. In fact, we'd be the leader or one of the top two in almost every government jurisdiction in the Australian market. And we're also very, very strong in higher education, which we consider part of public sector. Our enterprise segment is 27% and our commercial at 32%.
Commercial is where we really see the growth and it's an untapped market, and we're seeing that the technology companies and the market itself are very focused on growing out that mid market and upper level of SMB. Global is very, very important to us, particularly as I mentioned up in Asia. It represents 21% of our footprint. And as Wolfgang alluded to, we are one of the very few companies who can support foreign multinationals at scale across the entire region in a consistent way with the way that we deal with our customers in their home countries. And across in looking at our gross profit mix, we've done a really good job of transforming this business, particularly in the last five years.
And you can see that today, at the 2018, services represented 70% of our total workload. Cloud is 39% of our mix and hardware and software, the balance at 30%. I'll talk about the five year journey in a moment. So drilling into how our solution areas land in APAC, it's slightly different with different levels scale by country, but we are very consistent from a go to market perspective. The APAC business grew out of the acquisition of software spectrum.
So we've really got a DNA in reselling Microsoft software, and we would be the number one provider of Microsoft software services still today across the region. So supply chain optimization from us really grew out of software, and we've added hardware into the mix much more recently. Hardware today is responsible for about 10% of our total business in APAC. So it's grown nicely in in recent years. We're also looking at growing non Microsoft publishers in the software category.
So whilst we've been very dependent on Microsoft in the past, we're now broadening that to tap into many of the 5,000 publishers that we're dealing with globally. And we're also looking to turbocharge percentages into the commercial segment. We have 16% market share in the enterprise segment in Microsoft software and only 6% in the small to medium or commercial sector. So obviously, there's a lot of growing room to be had there, and we're very focused on on taking our share there. In connected workforce, this is really an evolution from our Microsoft DNA into the modern workflow the modern workplace and modern workforce requirements.
Here, we're very lucky to be able to tap into a well articulated playbook that's been built for our connected workforce story in The US and Europe, and we're able to lift and shift that playbook into our businesses across the APAC region. So we're very focused on supporting that with the build out of managed services capability. Again, we're looking at minimum viable product for us in APAC, not reinvent ing wheels, but leveraging the significant investments we've made in other parts of the world to get really fast advantage that our local competitors can't compete with. In cloud and data center transformation, this also builds on our Microsoft heritage. So we are the leading provider in Microsoft Azure cloud services.
And again, in expansion terms, looking to grow that into the other contemporary providers, in particular Google and AWS. And very specific to the Asian region, we're looking deeply into the growth of the Alibaba Cloud which comes out of China and we have developers working in that space today. And then last but not least is our digital innovation business. We acquired a business as Ken mentioned called Ignia in September 2016. Igneo was one of the leading Microsoft partners delivering innovation solutions through projects, very heavily based in the Western in the West Australian part of Australia.
And if you know the geography of Australia, that's about the same distance from Sydney as LA is to New York. So quite an isolated part of the country, but we saw opportunity to take all of that innovation to shift it East to where the major markets are in the Australian business. And over 2018 and 2019, we've had some great success in building equal scale on the East Coast as we've had on the West. So we're really now looking to solidify that expansion and bring it into New Zealand and up into Asia. We're very excited about the opportunity that represents.
Building on the acquisition of Ignia required a different set of skills, and our digital innovation business is very much an IP led business. We need to have some genuine expertise, and that expertise needs to be industry led. So we've been very focused on understanding where we have IP and capital by industry. And certainly across the, existing Australian business, that's been primarily in industrial Internet of Things, helping manufacturers to be more efficient with their equipment. In higher education, helping universities with the end to end student life cycle through to student safety and student attraction and retention.
And one of the most exciting ones for us has been the mining industry. So coming out of the Western Australian part of of the Australian economy, that's where most of our miners, live and pull things out of the ground. And one of the biggest gold miners in the world is a company called Newcrest Mining. They've been a long term customer of Insight in a similar vein to earlier case studies. We've providing them with software and hardware solutions for many, many years.
But this case study I'd like to share with you now really highlights where we bring innovation to the table.
Using data science and Zuos Big Data Platform, we've been able to improve productivity and transform production at Cadia Goldmine. We are beginning to create a data model that analyzes our ore and predicts levels of our crushed orebins to reduce unplanned downtime, which is a significant cost in lost opportunity every year.
Newcrest is one of the world's largest gold miners, and today we're at the Cadia Valley operations standing above the largest underground mine We're always looking to improve our operations and safety outcomes, and technology and innovation are a critical part of that.
One of the challenges we were facing at Acadia was how to keep our crushers running twenty four seven and stop them from overfilling to keep production on track. We have a large, bin underground that feeds the mill. Very important to know the level of that bin. All solutions we tried have failed. Insight has been a key technology partner for a number of years.
We've been building our core Microsoft IoT platform and microservices architecture together, so we took on this challenge as a team.
Insight is one of our partners. Insight has some great skills around how they leverage data and analytics. Azure is a cloud solution, which gives our partners opportunity to really focus on the business problems they're trying to solve with the IoT solutions they're building, and it also enables that rapid development and innovation.
Using Azure, we collaborate with both Newcrest and their partners. We create advanced analytics in the cloud and push this intelligence closer to the mine. Using this data science platform, Newcrest have been able to operationalize many machine learning models, one of them being the cross door bin sensor solution. This took advantage of the 100,000 data points in the data lake from their operational assets, such as apron feeder speeds, power draw, and tons to predict the level of the crushed ore bin, ultimately reducing downtime for Newcrest.
It works very well. A model can predict the level of ore in the bin at 85% accuracy, and we can maintain full capacity for around four hours if the sensor goes down.
We are continually updating and recalibrating the model until we get a level of competency that we can fully automate it and introduce it into the control loop.
With the solution, they've been able to save literally millions of dollars.
We have less unplanned downtime and more time for our team to focus on more pressing issues.
With the number of sensors that are available today and the amount of information that's being captured, the ability to take that information, analyze it, and respond in near real time at the edge is really what Azure is driving.
So what the Azure data platform gives us is the ability to fast prototype, fail fast, realize the learnings from those failures, and realize the the value very quickly. We are so confident that we're now working towards fully automating our DevOps environment. Higher productivity, less downtime, more throughput. This is
a great outcome with Azure's AI, machine learning and IoT capabilities. We see a future where our mines are automated through data models in the cloud and delivered at the edge of the network through IoT platforms, making our mines safer and more productive.
So the mining industry is very new to technology, and it's just a great example of old world industries that are very manual and very asset intensive starting to learn the benefits as we move IT to the edge. When we talk about moving IT to the edge in an example like Newcrest, these crushers that we were seeing on the on the video screen are 1.5 kilometers underground. So very, high risk environments to be dealing with and not very not very easy environments to put physical sensors in place to start to take diagnostics. So the information that you saw in the demo that you saw there was actually very space trek. It's very Star Trek like AI that we've been able to build a digital twin to allow the mine to be able to manage scenarios in a safe environment and then in automatic sense, retrofit that to the way that they configure the crushers for better throughput.
So that's literally saved them tens of millions of dollars in lost machinery time and also, in some ways, importantly, reduce their safety record to close to zero incidents. So one we're very proud of and very repeatable. When I now look at some how we've been progressing over the last five years, you'll see from the metrics that you've seen already that our solution area strategy and alignment has been very, very key, really building out the capability and the scale in the four solution areas to bring those across all of our markets in APAC. The category expansion has been very important to us and we've had great success. If you looked at our business five years ago, you would say we were purely a Microsoft reseller.
And when you look at our organization today, you can see we now lead with services and our cloud penetration is amongst the highest of our peers across the region. The strategic acquisition of our digital innovation business through Igneer in 2016 has been incredibly successful. We've done a great job of not only finding that business, but integrating it, keeping the skills in house, retaining the team and then building and expanding that capability to other parts of the market. And in more recent times, really plugging that capability into the global grid and sharing with our digital innovation peers in North America and EMEA in both directions, which has been really profitable for us. And last but not least, really focusing on an operational discipline so that as we see those high levels of growth across our business, we're able to keep a lead on the costs and make sure that that retains profitability even though we're growing at hyperscale levels.
What that's generated in terms of results is a reasonably flat net sales performance, but given that we're 70% services, much of our revenue in the region is actually netted down. So we don't focus so much on the sales, much more on gross profit growth, which has been at a healthy CAGR of 6% over the five year period. By pivoting towards services, we've seen a nice improvement in our AFFO margin of 20 basis points, which is great and we expect that to continue to expand. In the innovation space, you've seen us expand into different solution areas. Services sales now represents has grown at 39% CAGR over the five year period and cloud represents 39% of our total GP.
So we're in a really nice spot from a positioning perspective. As we pivoted so hard towards services and services personnel now make up close to 50% of our headcount across the region and is certainly our fastest growing headcount, culture is incredibly important to be able to attract very hard to find talent and then having attracted them, make sure that they stay with us and remain engaged. So we're really proud of the work that we have done there. Five years ago, we had a market leading NPS across the region, and we've added 22 points to that over the last five years. So we're really in in the heady heights of strong employee engagement, which we're very protective of.
And we're great to see that recognized just this year with a recognition of the eleventh best place overall to work in Australia, not just in the tech sector, but in all companies. So that was a fantastic accolade that we were able to recognize this year. So in terms of how we leverage the strategic assets which are consistent globally, we're really down to three very strong priorities. The sales mix has diversified strongly over the last five years, but we think there's still room to be taken to the next level. We're So very focused on growing our hardware and our services lines at levels that are above the growth of our core business.
We still have plenty of headroom to grow our digital innovation capability. We've done a great job of growing it in Australia, but even in Australia in the cities in which we participate, which is all of the major ones, we have plenty of headroom. And then we have urgent demand coming from our customers in all of our other countries around the region. And then last but not least, really a disciplined execution across our operating model and we have a very focus a very strong focus on cash conversion and the cash cycle across the Asian countries in particular, where collecting money can sometimes be challenging, but we would be best in class in being able to do that through a disciplined effort from our leadership and our finance team. So hopefully, that gives you an appreciation of the APAC business.
I think that brings us now to a short break. So I'll let you have some refreshments and we'll see you back in ten to fifteen minutes. Thank you.
Welcome back from the break everyone. I join my colleagues in welcoming you to this really important day for Insight. I'm Amy Protexter. I am the Senior vice president of marketing and I also lead global brand web and digital marketing strategy for the company. And I've been with insight.
A little over five years just a little shy of Wolfgang's anniversary actually. And before I actually was in Marketing and communications and health care and education so been very new to the channel but I have found it to be. Incredibly rewarding and very exciting because I am a student of transformation and change and I think this is a an amazing industry to be part of right now. So when we do think about the change that's happening. The velocity of transformation all around us.
It's really not a surprise that the B2B fire has also fundamentally changed. I recently had the opportunity to hear J. McBain speak he's a forester analyst who specializes in the channel. And he made kind of a bold statement that said in the last eighteen months the channel has changed more. Than it had in the thirty seven previous years.
And he Offered these statistics by way of support of that. He said that 65% of tech decisions. Are now made by line of business leaders. And that 68% of business buyers really prefer to do research on their own. 73 find buying 73% find buying from the web more convenient.
And a full 80% of buyers report that sometimes sales people are just not specialized enough to answer their questions. 67% prefer not to interact with the sales rep at all. So for the purposes of today's presentation I really want to focus on this one statistic. The 68%. And ask the question.
Who serves that 68%. How do we get in front of buyers. In those all critical research phase is. To ensure that we're the ones that they call. It's no secret then either that marketing's role has had to change because of that and so in the old B2B buyer world.
Marketing really just kind of impact Things at the brand awareness level. And. Really was there to hand things off to sales for them to take it all the way through the funnel to purchase. But today marketing can penetrate the funnel much more deeply. Through digital marketing and some other strategies that I'll talk about this morning.
Taking buyers deeper into the funnel handing it off to sales for that all important last mile. Of research before they make a purchase. But also in some cases for some buyers and some purchases marketing can actually facilitate. A client's journey through the entire funnel. So this morning I'm just going to spend a few minutes and talk about three specific areas.
That insight has been very focused on from our marketing strategy to ensure that we're the ones who are serving that 68%. Those three are a powerful evolving brand, a robust multi function digital platform that drives client engagement. And simplified touchless buying experiences that meet all buyers where they are. Let's excuse me start with the brand so in 2015. Not long after I joined in site we undertook the first global rebrand in the company's.
History. And during that process we moved really from what had been a bit of a house of brands we had a lot of acquisitions. Multiple cultures within the organization and we moved to a branded house. And with that branded house we established a bold purpose and the three inspirational values which Ken shared with you in his presentation of hunger heart harmony. We also introduced a new visual identity.
In 2017 we began to move the brand from that reseller perspective to an IT solution provider. And that really began with the first strategic acquisitions we made in the last few years Blue metal and data link specifically. Doing so allowed us to kind of lead with more of a services message instead of product. And it also was the year that we introduced the intelligent technology index which you've heard referred to multiple times today an important Barometer for us to understand what our clients are looking for and what they need from us. In 2018 we began to amplify our solution areas so that was the year the company organized into four distinct solution areas.
We created value propositions compelling messages based on business outcomes for buyers in the various solution areas and we also Launched our first global brand campaign all you know in Europe APAC and North America. And then finally this year we're really positioned. As an intelligent technology solutions provider and we continue to look for ways to differentiate through thought leadership. Originally I've crafted white papers based on subject matter experts within our company. We also completed work on a global employee value proposition which helps us recruit and retain the kind of technical talent that we need to be that intelligent technology solution provider.
The brand certainly hasn't has had an impact on our company. In three really. Kind of interesting areas first of all in creating client loyalty. Our clients find our value is very compelling they look to work with companies. That stand for something and we hear that a lot.
We also have heard that clients have seen that we can be a strong transformational partner that we're there for them and that we have the steeper relationship that allows us. To come alongside them to implement sometimes pretty complex solutions. It's also creating a competitive advantage for us I think some clients are easily recognize and we have been through. Our own transformation at insight and therefore we are a good partner to help lead them through theirs. We also hear from our partners and I think you've heard a lot of that this morning in the videos.
That no one can do what we do we have really interesting breath of capabilities. That many of our traditional competitors competitors don't have today. And finally and our brand really drives employee engagement. You see a couple quotes here from teammates. One in EMEA who said I joined for the values I stay for the values.
And a US teammate who's actually had a fuchsia blazer custom made to represent the brand so there's a lot of enthusiasm for. For who inside is and what we stand for. The second area I wanted to speak about is this ongoing marketing engagement so. We know that our solution area enterprise clients spend three acts and our commercial clients spend four acts. When they're engaging with marketing.
So our goal is to continue to try to increase the penetration into our own account basis In these very segments. And we do so through a highly efficient highly scalable process Using a digital platform. This touchless automated Approach allows us to do things at at great scale. And get this ongoing communication going with clients so that we are always top of mind. That ongoing engagement along with some other factors drive a lot of.
A lot of spectacular results in lifetime value so our enterprise clients grow to 33 acts year one revenue. By year ten. By engaging with marketing. Deepening their relationship with their sales teams and starting to experience some of the other solution areas that we bring forward to them for their business. Commercial clients ramped to 8x in year ten but the The great total addressable market there.
Really gives us. You know a lot of optimism for the scale that digital marketing can provide in reaching those clients. That's there's just no way a sales person can touch the velocity of clients that digital marketing. Can can do. So to do that we use this.
Very integrated really sophisticated digital tool set. It has a lot of capabilities from personal isation to social amplification- SEO optimization and so forth and it really- helps us not only drive demand but also support a buyer's journey through an e commerce experience. That I'll talk about in a minute. We use that platform to engage in many different ways through many channels with many different strategies. So for our enterprise clients we tend to focus more on thought leadership.
And we also. Do a lot of demand generation campaigns related to the business outcomes our solution areas can provide. For commercial clients we tend to do more product merchandising on demand on a for a demand generation motion. But that motion also nets us a lot of net new clients. Through our digital advertising.
And SEO optimization. And we can do that at scale in a way that you know. Sales rep trying to dial out every day really can't do. We also Have a number of deep partner relationships in the marketing sector as well We have a couple of companies that Go really big with us and we do joint. Co branded campaigns to to drive demand But we have partners of all sizes and shapes.
That invest in things like digital advertising. Product merchandising. And some of those kinds of tactics with this so it it provides a lot of amplification of our message. In the market place through our partner dollars. But it also us to get net new marketing investments to help fuel.
Our marketing efforts. The third area is really this frictionless experience that we have built for our clients. Given that 73% of people find buying from the web more convenient. And we offer a variety of experiences just depending on the size of the client. So for our Global 50 fortune 500 we often do very complex integrations.
System to system integrations with automated workflow processes Logic in the back in the background. For commercial or I guess it would be a corporate clients in the one to 5,000 seat space. We do a more configured experience which gives them a lot of self serve capabilities. The ability to have a standardized catalog. To get some pretty robust global reporting about purchasing in their companies.
We also you've heard us Several of us speak about the cloud management platform that we built. That is a great self-service tool for all clients in managing their cloud consumption or their cloud licensing. It also allows us to reach the two tier market In some unique ways. And then finally for our smaller clients. We have a very frictionless B2C like experience.
That. Features some differentiated product sets for small businesses rating and reviews. Other things that help them make. Purchases quickly and easily with good information to help make decisions. PCM actually brought a lot of great things to the marketing team as well.
PCM has with their strength in that commercial market with our OEM partners. They have had access to differentiated product. For the commercial market set which will you know be taking advantage of in product merchandising. They also have a very robust platform to acquire new accounts. And they've had a methodology that leverages high velocity acquisition remarketing.
So once someone makes a purchase they're able to quickly. Get them to make a second and third purchase and that's a great methodology that will be adding to our kind of bag of. Of tricks if you will. And they also have some scalable low cost marketing support in the back end which which also helps us reach. Smaller and smaller partners at scale by helping them do some of their own marketing activities.
Through our marketing team. I'm most excited though about the 22,000,000 new marketable contacts that PCM. Is bringing to insight because all of that is fuel for the engine that I spoke about earlier. In driving engagement and ongoing communication with our clients. So inside has really become known in the channel.
For our marketing capability and as I mentioned we have a lot of partners. Who actually look to us to be their go to market partner in digital marketing because of our sophisticated tool set. And our past performance with marketing campaigns. You can see that Some of the largest global brands like Microsoft and Cisco actually partner with us very closely And we do a lot of Joint marketing with them with great success. We've also been Awarded this year a couple of very prestigious awards by our client our our partners.
So Cisco named us this year the global marketing partner of the year. And the global customer experience partner of the year. And earlier this year Microsoft named us the client experience worldwide finalist. One of two worldwide finalists For the second year in a row 2018 and 2019. So as insight continues to transform internally to help our clients As they transform their businesses we've been very intentional about how we serve that 68%.
How we can get our message to them in a timely relevant personalized way that mimics the experience they might have as a consumer And I as I hope I've explained to you adequately today just how we do that through our brand. Which has become a real differentiator for insight Our robust multi function digital platform that gives us great scale in communicating daily, weekly, monthly, ongoing with our clients. And finally this array of simplified buying experiences that help clients make purchases. And transactions when they need to. And the best part about that honestly is the fact that wraps our our account executives.
Get to to lose some of that transactional work. And have really meaningful conversations with clients. About the bigger issues they're facing the more complex solutions that they're looking to land. So out with that I'm going to turn the podium over to Wolfgang Eberman, who's going to start our discussion about more deep capabilities in our solution areas.
Thank you, Amy. Yes. You're welcome. You heard from Ken as well as from Amy that we wanna be valued by our clients as an intelligent solution provider in every market and globally in the way we operate. To prove that to our clients, those four solution areas are the way how we wanna help them to run their businesses smarter.
So that last session before we're gonna come to the important financial session, will again give you a little bit more insights on those four solution areas and why they are important for our clients and why we have embarked on a journey to really make them successful in partnership with our clients. In order to do this, Steve Dodenhoff is going to join me as well as Matt Jackson, who is our leader in digital innovation and the three of us is going to run you through that session. We as a company are valued by our clients as an IT supply partner of choice over the last thirty plus years. That was the DNA of Insight. It's a multibillion dollar business when we talk about supply chain optimization for us today, and it's gonna be a multibillion dollar business going forward.
Why? When we look again at our research, we do it across the globe as you learned, there are 52% of the IT decision makers who clearly articulate they need to improve their e procurement processes. Actually, only 18% of them have it fully automated today. If you think about cost efficiency and leaning your business, that's alert. And even more important, 54 of the IT professionals are asking for additional help, not just on supply, but helping them to optimize their cost around software and hardware.
They don't have the skill set and the resources internally. They don't have, for that reason, all the assets they need. So they are searching for partners, trusted partners, independent providers who are gonna help them to drive optimization. That by itself is a core reason why we strongly believe going forward, supply chain remains an important business of ours. And for that reason, we're gonna focus on that.
Now how do we focus focus on that? I mean, we're gonna ensure that supply chain remains a core focus of our four solution go to market, and we are adding services around our procurement offer to our clients which address the current challenges where they need additional support. One of them is around procurement services where, you know, it's very clear they they wanna automate and they wanna optimize their processes. And our ecommerce platform, the way Amy talked about, is a very important asset to automate and lean. On top of that, you know, when we talk about supply around IT, we clearly talk about software and hardware.
And around those two product lines, we have built Lifecycle Services as an independent provider for our clients to help them to optimize their software purchase. In particular, in a hybrid cloud world, there's an increasing demand also on managing that cloud consumption in a cost effective way where they miss expertise, and we're gonna help them to do this as a service from inside. Or when it comes to hardware supply, they look for agility and asset management. And again, something which we can provide with our config centers around the world and where we can provide hardware asset management from tagging all the way to helping them managing their asset and budget on an ongoing basis. These are important services which we can provide to our clients, which, you know, differentiates us also in market.
So with that, our aim clearly is when we think about supply chain optimization, we wanna help our clients to optimize their spending, rationalize their supply chain, standardize around the right IT product, and be compliant in the way they manage their IT going forward. These are important services. If we provide that to them, you know, they're gonna see a real benefit cost wise and innovation wise. Now I want to basically roll, and highlight a client. It's BioQuell, who has been partnering with us again, since many, many, many years.
They are a leading provider providing services, innovative services around product and services to hospitals and pharmaceuticals around the world. And they have been embarking with us on a journey as well starting from the procurement side and then, you know, embarking with us and helping them to drive innovation. So let's have a look at BioQual's CEO.
BioQual are pioneers in hydrogen peroxide vapor biotechnology and biodecontamination. Today, we're global leaders in providing products and services to hospitals, pharmaceutical companies to keep patients safe and to keep the drug production facilities safe.
BioQual and Insight have had a long relationship spanning nearly fifteen years, and a relationship built on trust meant that when they faced a new challenge, they came to us to support in solution.
The IT challenges that we faced when I first started here was that there was an aging service state. We also wanted to improve our disaster recovery and business continuity, also consolidate our licensing with Microsoft. We wanted a system that would allow us to virtualize our our current systems, and part of that was to look at a hyperconverged system as that would do was to improve our network efficiency.
Before the Insight Solutions, it was hard to get get the hardware in to be able to roll out the applications we required, which then meant that, timescales and, projects were hard to deliver.
With the hyperconverged system in place, we have been able to roll out systems a lot more quickly and keep on top of updates to the the underlying hardware, and we're also seeing benefits in terms of power and aircon usage within the server.
How this helps us provide a better customer experience is our agility now is a lot better than it has ever been before. We can make very quick and fast changes to our systems to match not only the marketplace but our customer needs.
The Office three sixty five solution has benefited the business by initially allowing us to get on top of our Microsoft licensing, and then looking to move to the Office three sixty five platform.
The benefits of our solution means that BioQual can be faster in their market space, more agile, in a cost effective solution, and allow them to understand their clients' needs in a much better way.
The business is moving very fast. Technology is moving fast. We have to keep pace with that. So transformation is absolutely key to the continuing success. A key part of our company values is customer centricity, and this really helps us focus on what our customers want and require from us now and in the future.
I think this is a great example which highlights, you know, our product portfolio starting with the supply chain because we really help them to cost efficiently acquire hardware and software. But not only helping them to cost efficiently acquire, but working with our intelligent solution offering to help them to bring agility to their business through innovation, which is a clear business outcome and differentiator. Now I think from that point of view, when you look at our portfolio offering, there's a real benefit for clients like the one you just listened to. We are a partner who can help them to build intelligent solutions, architect them, design them, implement and manage them, plus providing them the product support, whether it's software and hardware. There are very few companies who actually can do both.
You will find some great consulting houses who can architect and design and then need to hand it over to someone else to implement and manage. There are great transactional partners who are strong on supply chain delivery but have no consulting and delivery managed service capabilities. Our strength is the end. And I think that makes us unique in helping our clients in delivering their business outcome with fast innovation and with that driving agility because that's is truly important today. And in order to give you some more insights on the other solution, scenarios, I wanna now bring, Steve back on stage because he's gonna give you some more of those examples around connected workforce cloud and data center transformation.
Yep. Thank you, Will. So I am I'm gonna cover, connected workforce and, cloud and data center transformation. Before I get there, I do wanna maybe highlight one point that, I didn't I didn't really nail, which was we talked about the solution areas and really what our clients are looking for, more from fewer people. This is actually the same thing that our OEM partners are looking for.
Think about the channel landscape and the channel as a whole over the last thirty years. Their strategy has always been to take their products to market, yet our biggest OEMs are looking for how do we have channel partners who can evolve with our technology and make sure that as we evolve new innovation, the set of channel partners who can actually bring that to market in a meaningful way is getting more narrow and narrow. We really do think our positioning both helps us with our clients, but also helps our partners consolidate and really leverage fewer and fewer people to get the technology because Cisco, Microsoft, they all spoke to, were actually participating in all four of these areas. And as Wolfgang highlighted today, historically, the channel is niches in each. So we think this is a powerful opportunity for us both with our clients and the partners that we've long served.
So I have connected workforce, and I have, cloud and data center transformation. Couple of customer, videos to highlight this. I'm not gonna do these stats because I actually had a session of somebody commented to me in the room, And I wanna just share this because this is the this is the real time data for what's happening in the connected workforce and the challenge. This was a financial institution, large, just did their net promoter score internal, teammates,
how
are we doing across all these different areas, and actually commented that IT was under a lot of pressure because they scored the lowest from the employees around the technology that the employees were using. So maybe typical traditional institutions struggling with delivering modern day, the modern day workplace. And this is the pressure that's going on with the business. I will kind of speak to why is that happening. These are the problems, you know, young millennials coming in, people looking to work in technology companies and innovation.
And so the devices that they're using that are being provided by the enterprise need to be much more modern, intuitive, exciting. And so here's the challenge with IT in all businesses. For years and years and years, the way it works is you buy technology, you load up the enterprise, all the applications that you as a worker sit down and you plug into. Today, nobody goes into work and plugs into anything. All of the infrastructure that's put in place assumes you're sitting there and all the security associated with it, all the applications, everything that you access has been designed because generally physically you're there.
And now everybody's mobile. The applications you access are in the cloud. The support for those applications are unique to the old applications that you would. And so there's just a huge demand and transformation going on. The pressure is really on.
And this is why we formed the Connected Workforce to deliver a modern experience and help IT solve that through bundled services and managed outcomes. So whether it's fully managed devices, managed mobility, tablets, things without keyboards, phones, managed desktops, managed deployments, and managed collaboration. This is really helping IT say we can do the whole integration, deliver and support the end user completely, and you can focus in on more strategic things. This transformation inside enterprise IT is very challenging. And with cloud, connected workforce is really important, asset that we have.
So client experience, teammate engagement, all a part of this. I wanna show a video. This is Digital Realty. Digital Realty is a $3,000,000,000, service provider of ours. And so let's roll it, and I'll highlight a couple of things that we're doing here.
We're off to a really good start with Insight. They bring a deep technical bench that helps us expand our reach of IT services across the company. I'm Ed Diver. I'm the chief information officer for Digital Realty. We're a global data center provider that provides services for our customers across two ten data centers in 14 countries across the world.
Our business is growing rapidly. I needed a partner that I could work closely with to expand the IT services footprint across the world. Insight is such a company that we've brought on board to help us expand the reach of my staff in every country that we service. As a result of the partnership between our two companies, Insight will become an extension of the IT team across the world. In the first phase of our program, we converted the IT service desk over to the Insight team.
The transition was smooth, It was easy for my staff, and my employees across the company have already noticed a dramatic shift in the services and capabilities that we offer out to the business. And Insight was a key component of that success across the company.
So they're in the cloud hosting business. There's three things that we're actually doing with them. We're actually participating in three solution areas. So traditionally, supply chain, helping them access technology. What Ed referred to was we're actually supporting their internal employees.
So 1,500 people call us for level one, level two help desk in terms of keeping them productive while IT can focus in on their day to day job. And then the third is actually architecting cloud solutions on behalf of their end clients. So more and more of our clients are looking to offload that basic work associated with deploying technology in a managed way and end user support. I'm going to highlight a different example and just walk you through this large national well known franchise. And there's really two problem statements that we're solving for Number one, at the franchise level, obviously, the technology aptitude of the employees unknown could be good, maybe not turnover quite high.
But this idea of consistency of how in which they build sandwiches and the customer experience with those, the general training, all these kinds of things, quite a bit of challenge. They have this one technical and kind of teammate challenge and the other is just financial, which is, you know, franchisees aren't loaded with lots of CapEx money. They're not the first to jump in and say we want to spend a lot of money upfront. And so we partnered with this company to design a completely enabled, what we call mobile device management solution around Apple technology, where in the old days, they would have to solve all these problems. Which technology to buy, bring it in, put all the images, all the applications, ship it out one at a time.
Or if it breaks, what do I do? How do I support all the people in the 42,000 franchises? That's problem. A So we take all of that and do that on their behalf. So when it arrives at the at the franchise location, all the new employees are able to just simply go on, take the training, take take care of all the issues that they need, learn and develop, and if there's turnover, go ahead and it's there for them.
We manage it, so if anything changes with the applications, sure the applications are updated. We have it securely managed so we can shut that device down if somebody potentially walked out of the store with it. We could secure that if it breaks, they ship it back to us. Just simplifying everything about it in a managed way. And instead of the CapEx, it's $25 a month for a three year period and then it gets So to the franchisee, that's a simple way to acquire something and actually improve the experience without getting obligated to a big financial expense.
Okay. So that's Connected Workforce helping fully manage bundled solutions at the workforce level. And now I wanna just talk about cloud and data center transformation. We've given you some stats. Cybersecurity, very important.
People moving to multi cloud. Where is the data? So it's not just a matter of going to cloud. It's actually much more complicated than that. And it starts with what workloads can go.
And then once they go, where do you get the data differently? How do you secure that? It's quite complex. And we're seeing more and more organizations having gone to the cloud now rethink what pieces actually should be on premise and what pieces should be in the cloud. And so our whole practice in this area is really focused in on that journey because you cannot just do it all at once.
And so here's a really good example of the kind of I'll give you the example in just a sec. But the challenges are I have all these enterprise applications, all the stuff that my employees access today, my customers. Before I can even go to the cloud, which ones could run-in the cloud? It's not a one size fits all for sure. Then the security associated with it.
And what's the right infrastructure? In this multi cloud world, some stuff will probably be in Microsoft, some will be in Google, some will be in Amazon. Each one of those has different attributes. Managing all that is very, very challenging. And so our whole role in cloud and data center transformation is this consulting led role with the managed services outcome.
In the end, there's a big piece of infrastructure that gets sold to support it, but it's very much of a services led strategy. And all we're trying to drive towards is helping the business innovate and be agile. I think in the Newcrest Mining one, they talked about DevOps, which is really this concept of continuous software development, quick turns, efficiently getting products to market. And this is what we're trying to solve for all companies who are trying to innovate. So you probably know this brand.
Let's roll this tape.
I would say the thing
that I value the most about Insight is our common culture. Right? We have this culture of can do and going the extra mile, which we found also in Insight. Hi. My name is Anthony Tsai.
I'm the Global Director of IT here at AB InBev. Welcome to The Beer Garage. The Beer Garage is AB InBev's tech innovation lab out here in Silicon Valley. We actually did a couple projects with Insight that across multiple areas. Some of it was on UI UX design, and some of it was on actually creating a platform that allowed us to scale things really quickly and securely.
The designers and engineers were able to reduce the time it took for them to create an MVP by 75%, which is enormous when you multiply that across the number of teams around the world and also the number of customers that we serve. To be able to do this at scale in a consistent manner in a secure fashion is really valuable to a company as large as ours. Insight has a wide set of resources and talented that we're able to work with. This ability to get this variety of resources together from one vendor who already knew how to work well together, to work together then with AB InBev was really unique and was refreshing for me. Insight always stepped up to my request.
They were able to deliver whether it was resources, whether it was timing, or innovation. So I definitely think working together with them was crucial to our success and that of our customers.
So we're working with ABN Bev in all four areas of our kind of solution area strategy. There are a couple of things about that video that I think are important. One, he started with culture, and the cultural alignment is important to us. Just speaks to how, the relationship in more complex high risk areas. They want to know that they have somebody who's going to be equally committed to success.
The second thing he used a bunch of acronyms, I'll try to break those down a little bit for you. And then third, honestly, is this is a great example of all companies need to be technology companies. Here's global beer distributor, massive in scale, yet they're thinking constantly about innovation. And all that they're doing is really around software, software development and data to serve their customers in the marketplace. So I just want to explain what we did with this client.
It started with a simple declaration at AB InBev. Remember, they're global. They've done tons of acquisitions, lots of disparate systems, tons of costs. And the first declaration at the C level was we got to go to the cloud, move 100% to the cloud. Before you go there, you really have to start with this idea of, well, before we move everything, we need to have a data strategy and a data platform.
Because in the end, if we move there, we've gotta access all the data that's important to run our business. So we started in the cloud data center transformation area, creating an enterprise data warehouse and thinking through the strategy for data access, where the data needed to be on premise, in the cloud, every time applications were developed, how do we capture the data in a meaningful way. So this is really the basis for customers going to the cloud data management platform, and our cloud data center transformation team has great expertise. The second thing that's required is go into the enterprise and look at all the workloads, all the applications. Some are developed in all kinds of different technologies, open source, you know, Microsoft centric, and figure out which workloads can go, which ones need to stay on premise, which ones would have to be modernized.
And this is a lot of consulting work here, but ultimately starting to move those to the clouds in an efficient, effective way. These two things are really the setup for creating a modern development environment for all this innovation that he spoke about, which is we want software people to be writing new applications. We want to be able to get the data and the access quickly. So when he talked about MVP, that's like a minimum viable product. So think of software development.
Hey, want to get something very quickly so people can look at it and say we like it. It works. Here's the roadmap, go. So reducing that from six months, you know, to something like a month, month and a half, and that really just creates innovation in the enterprise. The frequency, obviously, of release cycles, cloud native applications, can constantly innovate and update.
So this is empowering an organization to really truly drive their business and commonality of brands. We said UI, UX is just customer experience in a consistent way. And the DevOps platform through automation is really the key kind of strategic intent. Matt leads our digital innovation group, which plays a key role in this area, I'm going to have him highlight some of the current examples we have from an industry perspective. So here's Matt.
And Matt, by the way, because he's in digital innovation, he gets to wear jeans.
I actually dressed up. I didn't wear jeans today, but no tie. So as Sue said, I'm Matt Jackson. I'm VP of services for digital innovation. I helped start BlueMetal back in 2010 and then came on board, with Insight when we were acquired in 2015.
So it's been a you've heard about the journey. I've lived it firsthand, and, it's been an exciting exciting ride. So digital innovation and really with this whole solution area strategy all up, think the best way to describe it is just tell stories of how we've helped clients succeed like ABI. So each of the stories I'll talk you through today, you know, starts with understanding our clients' challenges, really meeting them where their business is. We have a team of industry analysts, industry aligned sellers.
So to Amy's staff that they don't wanna talk to a seller, if the seller can bring value to the equation, then they do wanna have that conversation. So making sure that we're aligning to understand, you know, what disruption is happening in their market, what do they need to do to stay ahead, and then designing a solution that meets those needs. And that solution, you know, from my perspective, includes a lot of developers writing code. But I think you'll see in the examples, it really realizes its full value when we can pull through all those different capabilities that Insight has to serve ultimately an outcome for the client. And I think that's where we're pivoting from kind of the traditional channel is that these conversations are really outcome based.
It's, hey. We need to achieve x. You know, I the technology is great, but I don't have the time to figure out all the bits and pieces that need to go into it. Can you help us? And so the first example I wanna give you, and and this is kind of a a setup that, you know, on average, an IoT project requires at least 10 different vendors to see it through to completion.
So you think about the complexity. We're talking about devices, cloud, you know, SIs, integrating all the different components. And if we can abstract that complexity away from the client, then they start to see the value. And then, you know, I'll get into the details. We can start to realize different business models to drive profitability back to insight.
So I wanna tee up an important client, city of Houston that we've been working with for a few months, and just to give you an idea of the complexity they face and and really how they had to drive a specific outcome. So play that.
It's absolutely imperative to keep public spaces safe. BeSafe Technologies is a company that provides emergency preparedness plans to first responders, whether that be police, fire, EMS.
Priority.
A challenge a first responder might run into in managing information in time of crisis is being able to access building floor plans or any pertinent contact information. There was really nothing
standardized, no way to get information out to a police officer or a firefighter. InSight, we're a super aggregator. We've been in the IT industry for over thirty years. We've worked with BeSafe and other partners to create a system where you can share information. ActiveShield is a module with Insight's connected safety platform.
What we've been able to do is take these traditional PDF floor plans and create a virtual digital twin of those. All of this is hosted enabled on the Microsoft Azure cloud platform. As a result of having a digital twin, first responders can safely share and collaborate in real time the information that they need to build and help people. The Insight Connected Safety platform allows us to interconnect all of these various different devices and IoT sensors and to create a single view of what's going on in real time.
With Insight, we were able to build a third party solution accelerator called Project Edison. We all came together and BeSafe's platform that had existed for twenty years was just the other piece of this puzzle. Being able to leverage that platform with IoT and connected devices, there was a synergy there.
In a real life situation, in case there is something happening in Hallway 100, the principal, the Aldine Police or Aldine Administration will be able to send an alert to all the class in their school with the specific instruction what you need to do step by step.
You're going to automatically see some cost advantage. It will allow us to move more in an expedient way to know what we need to do as a district for the safety and security of our students and staff. This is applicable to factories, retail, schools, campuses, cities.
ActiveShield IoT integrated devices is 100% the future of public safety in any space. Insight, connected safety,
and eSafe technologies help save lives based on the Microsoft Azure platform. I think it's going to be revolutionary in terms of how people respond to an emergency in a public location.
Great. So we we chose that use case because I think it tells a a couple of really important stories. The first is the human element. You know, we we wanna live in an environment where we don't need these solutions in our schools, but the reality is we do. And principals and school administrators don't have the ability to hunt through a bunch of different technologies and and select the smart lights and the smart locks and the smart boards and the cameras and make that all work in one cohesive solution.
So we worked with the city of Houston to design a solution as you saw in that, that really drove the outcome of a safer school and a connected community. So the ability when something happens, right, if there's a gunshot or if there's a screen, to detect that through a cognitive audio audio cognitive sensor in the ceiling in the hallway. Tie that into the lighting system so they can identify, you know, safe zones, green lights in the hallways, danger zones, red lights in the hallways, tied into the smart boards. So if you're in a classroom, if you're a teacher at the, you know, school lunchroom, you can actually see that there's a lockdown. And everybody's coordinated within the school as well as the first responders.
So police and fire have apps that tie into the floor plans where they can see real time data about the sensors. They can tie into camera feeds and actually as they're on their way to to address the situation, start to see real time what's happening on the ground within the schools. So, you know, the outcome there is is obvious. You know? And it's a situation I think a lot of organizations face where they just can't deal with the complexity.
They just want a safer environment. They want a connected community. And Insight, I think you've seen today, has all the capabilities to deliver on this type of solution. And that's really kinda teeing into the next story that this tells. It was a quick part of the video, but I think you saw how the same type of solution can be leveraged for things like manufacturing and retail.
You know, the biggest uptick we're seeing, with this solution is actually within, retail and, restaurants in particular. So it's not necessarily the, you know, the, you know, blackboards and the, you know, you know, smart locks, but they're looking at temperature sensors on, you know, their refrigerators, on their ovens. How often are people going in and out of the store so they can track traffic? So there's a reusable IP component to this solution as well that's really critical for insight, which is that we can connect in and leverage this IP, the relationships that we have with our, you know, thousands and thousands of partners to offer it over and over and over again with varying different use cases. So we can build that industry expertise.
In the case of, this solution, we partnered with that B Safe firm, which has decades of experience in public safety to develop that expertise, and we can drive those outcomes across many different industries. So I'll talk a little bit about this, in some of the future ones, but it's really important that we're transforming the conversation from, hey. We can sell you this, and we can sell you that, to we can drive this outcome, and we've got this reusable asset. And, oh, by the way, we can help you manage it into the future. So that was a great example of kind of the intelligent edge.
And they talked about kind of ARVR with the digital twins. A lot of cool technology in that. This is a great example of of the power of AI. So I think a lot of our clients are challenged to understand how do they translate this cool new technology called artificial intelligence into their day to day business. Does it mean that, like, their business is just gonna go away because robots are gonna do it for them, or is it some way that they can augment the capabilities of what they already do?
So Bibli was an organization I I say organization. It was a person. Rebecca came to us, and she said she had heard of us because of our reputation in the health care space, work we had done at places like Stewart Healthcare, which I think Judson referenced in the Microsoft video. And they said we have this idea. We think there's this untapped potential to share data across clinical trials.
There's no organization, no reference today where pharmaceutical companies and resource organizations can share de identified data about their trials so they can do secondary analysis and validation of those trials. And if we could just convince all of these pharmaceutical companies to get along, they could upload their data, and then the benefits would be, you know, kinda unmatched. We could really get artificial intelligence, kind of these these technologies that are really typically only available to large organizations making huge investments, and we can democratize that and get it out into the hands of researchers, you know, within pharma and within, you know, research institutions. The only problem is, we don't have any clients yet, and we don't have any funding. Right?
Okay. Well, interesting problem. I see the promise of it. I think we've got some cool technology people, but our industry experts work with them literally to write the grants, to get the funding, to go in front of the pharmaceutical companies to get them signed up. And we actually launched it at the National Institutes of Health annual conference in DC a year ago.
We've got 20 organizations signed up, representing tens of thousands of individual researchers. So the solution that we developed, you know, groundbreaking, but I I think what was most important is that we're able to kind of partner with that client to understand their business problem, develop the solution. They have exactly zero people in IT. They have zero developers. They have no capacity to manage the solution.
So today, we're working with them to onboard new clients. We are transacting all the cloud and all of the back end software that they need to support this. We're working with them on the hosting. We're working with them on continued services down the road. So every time a new pharmaceutical company or researcher comes on board, there's an onboarding services opportunity.
And then finally, the managed services. So we're making sure this thing is up and running, and we're handling any of the support as users come in and actually leverage the the platform. And just to note, I talked about AI. I skipped the details a little bit. So the idea is you're uploading massive quantities of data into the cloud, and then a researcher can log in, search for a specific dataset, download that to a virtual instance of that data with all of the data and I data and AI capabilities and tool sets enabled within that environment.
So they can literally just click through, say go, load up that dataset, and immediately have all the tools necessary to run the analysis against these huge datasets. So again, I think you see obviously the cool technology, how it benefits Insight, but the outcome we drive here is, you know, safer drug trials, safer medicine for people, and more access to validate clinical trials. And so we talked about I think Ken early on, talked about the technologies that are driving the tens of billions of the devices, that, the clients need today to to run their businesses. We talked about, you know, IoT. We talked about ARVR.
We talked about AI. The last piece is is automation. And I think automation really requires you to bundle all of these capabilities together to to realize the value of the solution. You can't have automation without AI. You can't automate devices unless there is a device, so IoT is there.
ARVR in terms of the ability to kind of monitor these devices, have those digital twins, all comes together in this case study. So this is, one of the largest, railway operators in The United States. And their business problem was, first of all, operationally, managing all those tracks. I think that they talk about how many tracks is something like, you know, millions of miles of tracks that they manage. And they have those trucks with the silly wheels.
You know, they drive down the tracks, and they look for any issues, and they check the switches. And it's a really manually intensive process. But more than that, they lose at least four teammates per year in workplace incidents. And so they came and said, you know, operations aside, our teammates are dying on the job, and we need to make this more efficient. And so they had started to look at drones.
You know, there's the line of sight drones, you get the drones and you fly them over the tracks. But the reality is you're still flying the drone. So there's still somebody out in the field, and you're still looking at the image from the drone and trying to detect stuff. So I said, hey. What if we can move all of that to an automated state?
So we worked with them to build cognitive services on the edge, so to put it in the drone. So as the drone is flying along the track, they actually got f f FAA permission to do non line of sight so they could actually fly these things over a 100 miles without having the operator on-site. So they fly along the tracks, and it's actually looking and scanning. We built a a machine learning algorithm that detects when the switches are off. So it looks for switches on the tracks and can actually understand, you know, through that modeling that there's a problem on the track and alert an operation center immediately to send somebody out there to fix it.
So not only did we save on all the cost of sending the crews out, but now we're detecting things real time because those things are just flying along the tracks and identifying issues where, you know, humans doing it alone might have missed some of those things. The else other thing we're doing is as all the rail cars go through stations, we've got a camera set up that's taking images of all the wheels. Because one of the biggest issues for derailments, obviously, the switches, but then wheels become out of balance, and they can hop off the track. So every time they go through a station, we're taking a picture of a wheel, comparing it to a model, and looking for any defects in the wheel. So we can instantly identify, you know, when a railcar is potentially having issues that might cause it to run off the track.
So think about all the operational savings. Think about, you know, all of the potential, you know, man hours as well as potentially lives saved. And I think this one really drives, like, again, that outcome required us to partner with them to find the solution, and really help them manage this thing as it made it to production. So hopefully, you saw a few themes there. Right?
The first theme is we're really engaging on that digital experience. So we're partnering with our clients upfront. I think this is a differentiator for us in all these situations because we're able to drive, you know, higher percentage of our business around services. These are really interesting projects that keep our teammates excited. They're great stories to tell to investors and partners, right, that gets them excited.
But it pushes the dial in terms of the gross profit when you're talking about those services. So we're able to engage them on that business problem, drive the value of the conversation up, and then pull in all those disruptive technologies. And that's where those 5,000 partners come in. So whether you're talking about IoT or data and AI, those are all opportunities for us to transact, and kind of, you know, obscure the the details. Not you know, they don't know how the sausage is made, which has allows us to kinda drive higher margins in the hardware and software that we pull through in these solutions.
And I think the the key one here, continuous services, you could also call that managed services, but it's really a bigger umbrella. You know, these technology solutions that we're developing, you know, clients don't really care how it's made. They don't care what technology is behind the scenes. You know, they wanna know, first of all, can they realize the value of it? So we have a huge, organizational change management organization within digital innovation that works with clients to understand how are these technologies, like the automation piece, going to change their business so that as they adopt it, we're not just putting people out of work.
We're reallocating them to other tasks, and they understand how they can work these new solutions into their daily lives. So organizational change management combined with managed services where clients like actually, all three of the clients you saw here, they don't wanna manage those solutions in the future. They don't wanna have to know if, you know, there's an issue up in Azure or if a die device goes down. They wanna just know that it's handled. And they wanna pay us, you know, $25 per month per store to make that happen, to make that all go away.
And so for us, that drives, you know, higher margins. It drives, recurring revenue, right, around that. And I think one of the most interesting things is this IP that we're building. So I've got a thousand developers on my team, and they're building IP. They wanna write code.
They wanna solve problems. And what's interesting, once we solve one of these problems and we can harness that IP, then we can repeat it over and over and over again. So it drives higher margins for our big clients. But with integration of accounts like PCM, think of the opportunity to drive some of these solutions that would have only been available to large enterprises with huge budgets down to that mid market space, and all of a sudden, we have access to thousands of clients that could never even envision taking on a solution like this before, but we can drive that to that new expanded client base. So kinda in summary, hopefully, these stories kinda wrapped all the solution area, you know, strategy together so you understand, as as Steve said, each of our solution areas can live on its own.
We can have a relationship with the client. We can build a solution and deliver value. But when we tie all of them together, it creates kind of an unfair advantage for Insight. So the relationships that we have through our legacy Insight SEO accounts as well as that new PCM portfolio allows us to deliver connected workforce projects so that we can go in and make sure that they get the value out of the investment they just made. But it also allows us to cross sell our, you know, cloud and data center and digital innovation capabilities so that we can deliver these types of solutions and really, you know, blow out the the opportunity within each of those accounts that, you know, we've we've had access to for years, but this strategy is allowing us to fundamentally change the relationship.
So as you can tell, I'm pretty excited. I've seen this transition happen over the last four years, and I just see it accelerating in the future. So with that, I think, I get to introduce Glynis Bryan for the part that you're actually all here to hear about. Right?
Thanks, Matt. Morning. I think it's still morning. And thank you very much for giving us your time this morning. I think that I would hope that based on the stories that you've heard here today, we actually, when we were putting this together, thought that stories from clients about what we do for clients and how we drive business outcomes would be a better way to demonstrate the capabilities that over the last five years we have really ended up developing organically and through acquisitions, putting in place, and then growing it in a way that allows us then to do replicatable solutions.
Years ago when Matt came into the company, he and I had a conversation about snowflakes. And he said, Glynis, we don't like the word snowflake. We like bespoke solutions. And I said, well, I want to have a solution that's replicatable. So he didn't we didn't get here because Glynis wanted a solution that was replicatable.
But but, ultimately, part of the journey that we've been on is bringing assets into our portfolio, companies like Blue Metal, intelligent technology solution architects and engineers like Matt into our portfolio so that we can actually get to the stage where over time, we can actually make these replicatable solutions available to a broader base of clients and hence accelerate what for us is gonna be GP gross margin expansion as well as EBITDA margin expansion and increased shareholder value. So I'm gonna walk you through the financial section. Somebody maybe you have it on the table? Has it been handed out yet? Oh, at the end?
Jeez. You get to wait until the end. Okay. Just a couple of things before I kind of set it up for you. I'm gonna walk you through our history the last five years, just giving you a little bit of an overview about how the tool set and the assets that we put together have generated returns over that time period.
I'm gonna walk you through a little bit around PCM, not so much the strategic pieces that Ken talked about, but more about the synergies and our level of confidence with regard to achieving those. I'm then gonna give you the long term targets that we have discussed. I'm gonna wrap that into a conversation around the new debt structure that we have in place today, and then I'm gonna wrap it up with our long term capital deployment philosophy. So with that, I will go ahead and get started. So over the last five years, we have actually I have to be in the light of the camera.
Over the last five years, we have actually done a really good job with regard to our revenue growth, 7% on an organic basis, 8% in constant currency. When you look at that 8% in constant currency, there's been ups and downs in any year. When we look at the FX market, it is volatile. So I think what the last five years have shown is that overall, despite the volatility that existed in the f s FX market, our constant current currency growth rate of 7% is pretty close to our US dollar growth rate of 7%. Why is that important?
That's important because we report our numbers actually in US dollars. So at the end of the day, we translate that to US dollars, and that is what we report to you, our shareholders. That's what drives our EPS. So we will have volatility. As you can see today, the euro and sterling are down relative to where it was last year, but that's a part of the industry that we plan.
And I will make the definitive statement that today we do not hedge future exposure. We hedge known exposure and do a pretty good job of hedging our known exposure. Cross currencies, if we sell in a different currency and we have exposure, but we don't hedge our budget and we don't hedge budgeted EFO. Just to clarify that for everybody. When you move on to gross profit, you will see that on a gross profit basis, our CAGR over that same time period is 7%.
It's actually a little bit higher than 7%, but using rounded numbers, it rounds down to 7%. And with that, it's almost a billion dollars, $994,000,000, almost a billion dollars, and our gross margin has expanded to 14%. All of that combined with SG and A control, which as you can see has declined by 30 basis points as a percentage of revenue, all of that leads to EFO expansion, earnings from operations or EBIT in in your terminology, expansion of 12%. And we've given you a target back in 2011 that said we believe this business can get to three and a half percent operating income. And at the 2018, we're at 3.4%.
We're gonna be resetting that bar for you this in this session as we go forward. When you look through all of this, diluted EPS has grown at a CAGR of 20%, and we ended 2018 with $4.63 of EPS. That's a combination of the portfolio of businesses that we've acquired, the gross margin improvements that we've made, the revenue growth that I talked about at the beginning, as well as share repurchases that Ken mentioned right at the beginning. We've repurchased 11,500,000.0 shares of our stock over the time period for $300,000,000. All of that has contributed to the improvement in our EPS that you're seeing here on the screen at 20% over that time period and significant growth.
We should have put the growth rate on there. Going on to ROIC. When we started this journey, many, many years before 2013, we were below 9.3%. Our WACC at the time was around 10%. So we started a journey that said our WACC was below.
Our our ROIC was below the 10% WACC, which we use as a benchmark. Kind of between eight and ten depending on what's happening in the debt markets and the equity markets. But in that in that time frame, we've actually through concerted effort, but through the growth in our net income as well as controlling our capital deployment, cash flow from operations, etcetera. We actually have grown our ROIC 760 basis points, and we ended 2018 at 16.9%. All of that also translates into the improvement that you're seeing in our adjusted free cash flow in the packet that you'll get at the end of the day and on the website.
Adjustments are detailed in there in terms of what we're using in terms of adjusted free cash flow, but that's actually grown to $260,000,000 and that was a record in 2018. So before I move on from here, because I'm gonna walk
you through a little bit of
Gore P stuff, always talk about build revenue versus net revenue, net sales. When you look at these results, I just wanna reiterate what I said at the start of this of my session. And, really, what all the leaders here today have talked about as they've talked through how it is they bring value to our clients and how they bring value to our business clients. So my role in finance over that five year period has been to be able to fund the deals, sometimes source the deals, sometimes determine of the 15 deals that may come through your office in a week, which ones are worthwhile pursuing. Blue metal would have been one of those.
PCM was a multiyear journey with Ken. But as you think through the pieces and the dynamics about what it is that comes into our portfolio, how it is we need to invest in systems to better be able to do subscription in the cloud, how we actually have tools and technical resources that we hire. When we made the decision to acquire IGNIA in Australia. All of those things come together in terms of generating this result. And at the very start of this session, Ken started out with culture.
Many of our clients, as we've gone through the process, have talked about culture and the mesh of cultures between Insight and their particular organization. The value that we're able to deliver to our clients today and ultimately, hence, to our shareholders comes with, I think, and I'm a finance geek at the end of the day, comes from the culture that we have in our organization, that comes from the tone at the top that's set by our executive team, primarily Ken, that's set by our executive team, that drives through to the employees or teammates as we call them in our organization, the engagement of those teammates that actually help us generate the results that you're seeing here. I'm gonna move on and talk to you today about client bills versus net sales. So when you look at this graphic, twenty thirteen twenty eighteen, the gray bars represent client build. You should think about client build as being raw raw revenue before any netting that's required the composition of our net sales over the same time period.
And what you will see is that the software element within net sales is declining. Part of that is because of the netting that occurs with, like, SaaS applications or infrastructure as a service applications. That conversion that we've talked about from on prem software to the cloud, on prem infrastructure going to the cloud, all of that results in a netting in terms of GP and revenue are the same. So what you see is that the CAGR we talked about in US dollars of 7%, the actual client build revenue is actually going at a faster pace than that, which we're not allowed to talk about publicly. So I just wanted to make sure that this concept was embedded in your mind because it actually permeates some other metrics that we have.
So when you think about this, as we have more netted revenue, our ability any metric that we have as a percentage of of revenue is under pressure. We're still gonna continue to grow. We're not chain backing off of our growth as you will see when we go through those the next couple of slides around our long term targets. But the netting effect, even though we're growing at a pace that is in excess of the 7%, that netting effect is how we report our numbers externally and how we're held accountable ultimately to your shareholders. One of the other things that becomes we're netting and build revenue, client build revenue sales, client build relative to our our net sales.
One of the ways that it becomes important also is in our receivables. So when you think about and hence our our day sales outstanding and hence our cash conversion cycle. So when you think about client build, that actually says that is the AR that we record on our books that we can build to the client. However, what we actually record as revenue gets netted. And when you net that revenue, there's a delta between what you the receivable to your client versus the net revenue that we've booked such that that netting effect has about on average about seven to ten days impact on our cash conversion cycle.
So I just wanna point out a couple of things on this graph that are different from the other graphs that you're gonna be looking at, the other charts. This is twenty twenty twenty thirteen. Q four twenty thirteen, it's a balance sheet metrics at the point in time. This is 1718, and then the two quarters of '19. So what you need to look at is this bar.
This gray bar, the top of the gray bar, for those people on the webcast that can't maybe see what I'm pointing at. The top of the gray bar is relatively consistent. The the purple pieces that represent our billed revenue vary, but what we look at not what we look at. We we actually measure ourselves on the net revenue because that's what we have to net sales, that's what we have to report. But I just want you to understand that we've been relatively consistent with our cash conversion cycle as it relates to the gross revenue.
And this is just an explanation for you of the difference between and the impact of the client build revenue, which I just called gross, but the client build relative to the net sales. So just very briefly on PCM. We closed the acquisition on August 30. We've been unclear when it was going to close. We're waiting on approvals from regulatory authorities.
We closed the acquisition on August 30. As part of that, we actually took out a new debt facility, primarily the ABL, that we used to finance this. I will talk a little bit more about that as we go forward. We bought it for four hundred and seventy four, seventy five million dollars of equity as we had talked to you about. And then from a net debt cash cost perspective, another $158,000,000 for a total of 633,000,000 in terms of the overall purchase price associated with this.
We have $10,400,000 of costs that we have recorded against this acquisition going into q three. We told you an anticipation of 25,000,000 previously. That's still to come. It's just not recorded yet. This these are just the costs recorded through the actual q three.
We will not be we've not reported our results yet. We will be reporting our q three results on November 6, and don't have anything really further to say with regard to those results because it's still in process, and we're still working through the dynamics of the PCM quarter. So what I will say is I think following up on what Ken said, and maybe it was also Steve, that it's while it's early days, we're six weeks into the acquisition. There've been no surprises. It's been very consistent with our belief about what we're gonna find when we go went into it.
In fact, in some cases, it's better than what we had anticipated when we went into it. They're excited to be a part of Insight, and they are really responding very well to the welcome that we at Insight have given them because part of the integration effort that we go through is, you know, our senior leaders all traveling out to as many locations as they can get to, making sure that there's interaction with the teammates on the ground, making sure that they understand the insight, the way we interact with our teammates and the way we want to have that open dialogue with our teammates, they've responded really well to that. And I think that's going to be coming through in terms of no defections. Ken gets a retention or attrition report every week. And so far, over the six week period, we've done very well with regard to retaining our teammates.
And as Steve said, the org structure from a field org sales structure is pretty much in place while we evaluate what our next steps are gonna be. We're still committed to the 70,000,000 of savings. The $70,000,000 of savings at the 2021 is what we have committed to. We said roughly 50% of that was gonna be achieved in 2020, so about $35,000,000 is our expectation at the 2020. We have also said publicly that we think that that is gonna be on an adjusted EBITDA basis sorry.
EPS. Adjusted EPS basis around 70¢. On a GAAP basis, we believe it's going to be around 35¢. The difference primarily being around amortization and onetime costs. So still expecting to get all those synergies.
We've actually now gone through a more detailed analysis about where those synergies are coming from. And while there are lot of people included in those synergies, there are systems inefficiencies that are also included efficiencies in in those synergies that we have now identified more specifically. We're gonna be going through and by consolidating onto one platform for North America by the end of the second quarter of next year and one platform for Europe. There's about $60,000,000 of revenue in Europe that will go on the Dynamics platform initially. But most of the business is here in North America, and that will be done by the end of the second quarter.
We believe that we'll get lots of efficiencies there because one of the things that they have is they have many systems, probably five or six major systems, but in total, probably about 12 different systems that we believe we will get lots of synergies from as we bring those all together. And don't get concerned about the 12 systems because some of them may have $2,000,000 worth, but it's still something we have to address. Okay? So it's not like 12 systems with a lot of dollars in there. There are five major systems that hold most of the dollars.
That's exactly what we thought when we were doing the acquisition. So that's very consistent with what we thought about. And then some of these other small systems will just get wrapped into the integration as we move forward and don't really contain a lot of revenue as we talk about that. We still believe that the gross margin, they have 15.9% gross margin. And when we talk about what the impact is of PCM on our overall portfolio, that commercial segment, as we bring that into our portfolio and as we bring the entire PCM business into our portfolio, we believe we'll benefit from that incremental margin, about 40 basis points in total as a net impact when that's brought into our overall portfolio.
And as Matt talked about, there's an incremental opportunity, we believe, to be able to actually sell into some of those clients, some non bespoke, some some of the solutions that we've developed for larger clients into that same population. I think that's all I have there. I was gonna ask you if you have any questions, but that's not allowed. I'm not going to go in and talk to you about the actual targets that I'm going be sharing with you. Ken had set this up at the very end of his presentation and said, hey, we're going to be giving you these four elements.
We're going to be giving you targets associated with these four elements. I'm going to walk you through the composition of the four elements that get us to the targets that you're going to be seeing. And two things to note up front. This does not include any further acquisitions besides PCM. So the last acquisition that's incorporated in here is PCM, which we closed on August.
It also does not include any share repurchases. So the last share repurchase is a share repurchase we did of 28 just under $28,000,000 associated with the convert. I'm gonna talk to you a little bit later about the convert. And it assumes a tax rate, as we've said, consistently of 24 25 to 26% on average in each year. So those are the underlying principles that drive at a macro level these numbers, and I'm gonna walk you through each one starting with grow sales faster than the market.
So the top line is we anticipate over the period that we will be able to grow sales at an eight to 10% CAGR. Net sales at an eight to 10% CAGR. How do we actually end up getting there? I'm gonna give you a couple little definitions that will follow through all the slides to make it a little bit easier for me to talk to it. When we think about core business, this core business represents, from a supply chain perspective, the SEO business.
Sorry. From a solutionary perspective, the SEO business. When we think about end market expansion, this is primarily bringing PCM into our portfolio and the expansion that we think we can get with PCM and the leverage that we can get out of PCM going forward. And when we talk about innovation, innovation for us relates to cloud and data center transformation, digital information, and connected workforce. Now the reason that we're I'm giving you this is because we're not gonna be giving you results on a go forward basis by solution area.
But all the conversations that you've heard today as we've talked through different examples by clients center around solution areas. How you actually end up seeing the solution area translate is gonna be in a metric that you'll see later, services as a percent of total GP, and also this innovation bar as it relates to revenue and as it relates to EBITDA. So over the course of the five year period, we end up with a CAGR of eight to 10%. Just to refresh everybody's memory, we bought PCM in essentially September 1, four months of 2019, full year in 2020. Therefore, that drives a higher growth rate early in the period.
But over the extended period, we've assumed the CAGR is going be the 8% to 10%. When we think about EBITDA, and one of the things you will notice is that we're looking focused now on an EBITDA metric as opposed to an EFO or EBIT metric. That's how we're gonna be talking we'll share all numbers with you. But in terms of targets, this is a target we're gonna be looking at and holding ourselves accountable for as an EBITDA metric. And we anticipate over the same period that we'll be able to expand EBITDA five to five expand it to five EBITDA margin to five to five and a half percent.
We're currently sitting at 3.9. And when you look at the bars that are represented here, and I will walk you through those bars, they're actually there's a relay it's relational. Right? So we're gonna grow grow SEO. But in terms of SEO expansion of EBITDA, it's not gonna be that significant.
It's the lowest it's the lowest margin segment of our business. It's the largest segment of our business. But in terms of EBITDA expansion, margin expansion, it doesn't add that much to EBITDA margin expansion. When you look at PCM, PCM here is a combination of the PCM business that we've acquired as well as the PCM cost synergies, the $70,000,000 that we talked about that we're gonna get out of this business over a two year period, but this is a CAGR over five years. So sorry.
It's not. It's a representation of what we think we can achieve with gross margin over five years. So I want you to think about the size of the bar as being an input into the how how critical is it ultimately with regard to driving to the expansion of our EBITDA margin. So when you get to innovation, you will remember, if I go back to this slide, that this bar is a revenue bar. It's relatively small.
It's the smallest bar on this page in terms of the expansion associated with net sales. But when you look at the, EBITDA, which is a reflection ultimately of the gross margin contribution that is coming from these innovation areas, you can see that it's a more significant driver of EBITDA margin expansion. So when we share the numbers with you for 2013 through 2018, Ken showed you a slide at the beginning, oh, I did as well, that said EFO gross margin grew by 40 basis points from 13.6 to 1414%. What we're saying in that five year period, 40 basis points gross margin expansion. What we're saying here is that we anticipate embedded in these numbers that gross margin will expand by a 100 to 200 basis points.
That is about around the mix of business and the synergies that we're gonna be driving through ultimately as we go on our journey. This operational excellence piece is really the base inside business and the continued focus that we have on operational excellence in terms of automation, what we're going to be doing around bots, how we're going be leveraging technology and tools and processes to actually drive better operational execution in the business. But when you look at the walk from 3.9% to five and a half to five to five and a half, think about it as being primarily two thirds to 75% gross margin and 25% operating income. From an ROIC perspective, we ended 2018 at 16.9. And with PCM, because we're adding in PCM of the all the funding associated with p p PCM and the assets associated with PCM and not getting 20 all of the savings that we anticipate coming from PCM, it actually our ROIC actually takes a little bit of a dip in 2019 and in 2020.
And that little dip, to clarify, is about 14%. That says that Insight is in the 14% to 15% range of ROIC, so it's down from the 16.9%, still well above our WACC, as I told you at the beginning, kind of in the 8% to 10% range. And over the course of time, we actually go back up once we start getting the synergies, the full run rate of synergies in 2022. In 2021, by 2022, we're once again increasing our ROIC. Now we're still gonna be making investments in the business because we have a belief, as many of you may also have a belief, that there's a certain amount of ROIC.
You get to a certain point of ROIC, a certain percentage above your WACC, and incrementally, the value from from doing this as opposed to investing more in the business and potentially expanding the business further. There's a trade off that you have to evaluate there. And in general, something in the range of high teens is a good place for us to be while continuing to invest in the business going forward. The other thing I would mention is that part of the driver of this expansion is that in the absence of acquisitions, our business generates a lot of cash. Actually, our business generates a lot of cash all the time.
That's why we pay down debt so quickly when we do an acquisition. So when you look at this this walk here and the improvement in ROC to 19 to 21%, a lot of that is driven by the fact that we will have a lot of cash. Our business will generate a lot of cash. And this model does not assume a redeployment of that cash. Maybe a little bit of share buybacks as you'll see shortly.
But it doesn't assume a consistent redeployment of that cash. And without that consistent redeployment of cash, it generates this higher, higher, and higher ROIC. So one of the other metrics that we're sharing with you, because this is how you'll be able to gauge the value and the improvement and the expansion of the solution areas that we've all talked about here today, and is looking at our services gross profit as a percentage of total gross profit. So at the start of the presentation, Ken told you that in 2018, services gross profit, not revenue, but gross profit as a percentage of total GP, was 46%. So over the course of the period, we're anticipating that that services, 46 of total GP will grow to 50 to 52% of total GP.
And that's primarily gonna be coming through some expansion of the core, the end market, market, as well as innovation. Those are pretty critical drivers for us with regard to services and how it is we envision that's going to be driving the transition of our business from product, software hardware only, only, to more services as a percentage of overall portfolio. This transition to services as a higher percentage of our portfolio is important in terms of driving our gross margin expansion and, hence, EBITDA margin expansion that I talked to you about before. When we were thinking about acquisitions and just looking our debt structure in total. We had started an evaluation probably two years ago looking at a convert as one as one alternative for a debt structure.
And then when the PCM acquisition came down the pike and we were looking at our overall debt structure, we realized that we needed to significantly expand the debt structure to actually acquire PCM. The convert and the ABL are kind of two separate decisions. One was opportunistic. We've done a lot research on the convert market. The dynamics, the economics in the convert market were great, so we took advantage of those.
But the actual funding for the acquisition, the PCM acquisition that we did, came through at two point 1,250,000,000.00 ABL that we took on to ultimately fund the the acquisition of PCM and to fund our normal working capital needs. We used to have this asset securitization facility, and we revolving a revolving credit line. And we terminated both of those, replaced those with the the ABL. It expanded them also with the ABL. So there were 600,000,000 in total.
We now have $1,250,000 of capacity under the ABL. It is a more flexible structure that we can use. We can flex down with regard to, lowering the overall size of the facility. And at any point in time, we can flex up, ultimately to meet needs if we have another acquisition down the pike. I wanna be really clear.
We don't anticipate until that we we've incorporated PCM into our portfolio that we're gonna be doing any large acquisitions, just to be clear. But we also looked at the convert and had been looking at the convert over a couple a couple years, but our share price was never really at the level that we felt comfortable about executing against it. So what happened most recently, and it just coincidentally coincided with the PCM acquisition, what happened most recently is that the actual convert market, the economics were really tight. So we went out, and when we had been looking at the market before, we're kind of in the one to one and a quarter coupon range. If we wanted to have a five year non call at three, we'd have to pay up for that.
When we looked at the premium, they kinda convert initial convert premium. We're in the lower end of the thirties. So when we actually looked at the dynamics in the market most recently, one, we have the opportunity to get a fixed rate coupon over five and a half years for 75 basis points. We determined we wanted a fixed rate tranche in our portfolio. So a fixed rate tranche in our portfolio at 75 basis points, we thought was a a beautiful thing to have in our portfolio.
And I say it's a beautiful thing to have in our portfolio because it actually says that we we will be in a net cash position. I'm not I we will be in a net cash position. We will pay off the debt for PCM probably within three years as we have told you, given our cash flow scenarios. That is the expectation that we have. We will then be in a net cash position as we move forward even with the convert on our portfolio.
So some would say, well, why have the convert? Because we're setting ourselves up today for what could be possible in the future as we continue to build out the portfolio that we now have and as we continue to drive the business towards achieving the numbers that I had laid out. So today, it was a cost effective way of us getting to five and a half term debt at 75 basis points, and we made sure to actually put a warrant structure in place so that the actual convert premium that would impact our shareholders is a $103.12. That is actually the conversion price that you need to worry about with regard to whether you're gonna be diluted or not as we go forward. And I think that five and a half year non call three with a $103 and 50 and 12¢ as the, essential strike price for the convert is a great place for Insight to be and is a good cost effective, addition to our overall portfolio.
When we did the PCM acquisition, we actually ended up with leverage at 2.5 times the actual day that we funded it. Many of you may not know this, but August is a high peak for debt on anybody in the channel who has Microsoft exposure. That's just a fact. It's a time when the June ends up being paid to Microsoft. So it's peak debt for Insight.
It's peak debt for PCM. It's peak debt for anybody in the channel that does business with Microsoft. Hence, our debt structure at the August when we funded this deal is a little bit higher than normal, but we have no doubt that we will pay that down as we would normally in the normal course of our business. And as we report out through September and through December, you will see that the debt's gonna start coming down pretty rapidly. I'm gonna talk about the our disciplined capital allocation philosophy.
And for those of you who've been following InsightBelow, you will notice that there are four criteria here as opposed to the normal three that we've had historically. So just to run through them, invest organically has always been one of our priorities. Pursue strategic m and a has always been one of our priorities. We've inserted pay down debt as a third critical priority for us, and then we have returned excess cash to shareholders. So I'm gonna walk you through each one, but what is new is that for Insight, we don't normally operate two and a half times leverage.
And we wanna make sure that we have a a process in place that will drive to the debt pay down. We feel pretty confident that we're gonna get there, but it's now one of our key capital deployment philosophies. So we feel even more confident that we're gonna be driving to that solution. So invest organically. We've talked about this before.
At the beginning of the slide, we showed you a couple different places that we at at Ken's presentation, a couple different places where we have made investments organically. The whole build out of our digital innovation stack sorry, our digital marketing stack, the tools that we have across the business, the ecommerce platform that we have, the tools that we have around that we put in place that we built out ourselves with regards to supporting cloud so that we're not dependent on a third party to provide that. All of those are part of the organic investments that we would make from a systems tools perspective. In addition to that, we're going be hiring resources, many more many smart guys to support the digital innovation business to actually create those replicable solutions that we have talked about. First, to create the bespoke solution and then to create a replicable solution from that that we can market to a broader audience.
That's the places where we think we're gonna be investing in the near term as it relates to our organic investments. And around acquisitions, because we've just completed PCM, I'm gonna take a couple minutes just to remind you about how it is we think about our organic about m and a so that we're all clear in terms of the framework that we used for PCM that has not changed. So first of all, we talk about cultural fit. From the presentation today, you will know that that cultural fit is a key tenet for us here at Insight. We actually focus on that very significantly.
And when we look back at acquisitions that have been successful for us and not so successful for us, one of the critical pieces that we can point to is if there's not that cultural fit, the acquisition is not successful when we bring it into our portfolio. So that's the first tenant that we look at in terms of the the people in the business, not necessarily the management team, but the people in the business, and whether there's a cultural fit there. The second thing that we look at is what is the strategic fit. And that gets to, is it a scale acquisition? And we've determined that we would do those, not every year, a scale acquisition?
Is it a capabilities acquisition? Is it a geo specific acquisition? Is it geo specific in capabilities? That also happens. But we go through a process to say, does it fit within the strategic tenants that we've outlay laid out with regard to how we're gonna be approaching this.
And on PCM, one of the big things that PCM did for us is it actually gave us that commercial slash mid market slash corporate play that we've talked about that is smaller subset of clients that ends up diluting the large enterprise focus that we have and gives us a population of clients, net new clients coming into our portfolio, very limited client overlap that we can actually sell into, that we can sell these solutions that we've into that population and do and actually expand the services that we're doing with those clients. But immediately coming in, it helps us from an overall gross margin perspective because of the client base that they're bringing in. I am not speeding up. Okay. Another one of the other critical tenants for us ultimately is around the finance financial components of it.
So I'll briefly talk you through what our key financial criteria are. We expect the acquisition, any one of acquisitions that we do, to be accretive in the first full year of acquisition. All in. Meaning, including intangible amortization, etcetera, in the first full year. So for PCM, we bought it in in September.
For 2020, we expect it to be accretive at the EPS line in the first full year subsequent to acquisition. And we expect that it will generate a return that is at least 300 to 400 basis points higher than our WACC. Now our WACC today, you will say, is higher than that. But I I would do very few projects if I were analyzing them at 17%. But if I can analyze a project in the 13 to 14% range, that is a great return on capital that I have that I can bring into the business that actually I can then expand with regard to getting more value out of it as it's rolled into our portfolio and we're able to leverage our skill set into their business and their particular skill set into ours.
So those are some critical points for us around acquisition. The second part that we've added imagine a slash there. The second part that the third fourth part is actually around integration. So one of the things that we actually today have a real muscle around is actually integrating acquisitions. So we do I'm not sure.
We've we've screened tens, not hundreds, but we've seen sixty, seventy different acquisitions throughout the last three or four years on the path to figure out which are the ones we actually want to acquire. After the screening and we've made the decision about what it is we wanna acquire, which company we wanna acquire, and what they're gonna be doing to the portfolio, we gear up this communications effort that's led by Amy and her marketing team. And we gear up this communications effort with regard to communicating with the teammates of the acquired companies coming in. People like Matt that spoke to you today about BlueMetal and digital innovation. He came from BlueMetal.
He's now the leader in our digital innovation solution area. Many of the teammates that we have retained reported through Matt in that thousand person organization. It's been expanded, of course, but reported through Matt in that thousand person organization that we talked about in terms of architects, engineers, software developers, app developers, etcetera. That is what we do when we do acquisitions. And I think what I want you to walk away with is that there are two things I want you to remember.
When we do capability type acquisitions, a la BlueMetal, a la Cardinal, a la Ignia, capabilities, specific capabilities that we're bringing into the business because if we made a determination, it's better for us to buy it than it is we is for us to build it. When we've made that determination, they tend to be small. We're not making big bets on those companies. We're we're at smaller dollars. They're usually profitable.
They're coming into our portfolio. We have a strategy about how it is we can leverage them in our portfolio. When you see us do larger companies, a la PCM or a la DataLink, it's usually around cost synergies. And we feel pretty comfortable that we can drive the cost synergies that we always represent to you as our shareholders. So in data link, we said we're gonna drive to $20,000,000 of cost synergies over a two year period.
I think we achieved $2,425,000,000 dollars of cost synergies. I say that to you not because I want you to walk away thinking we're gonna overachieve on PCM. I say that to you because I want you to understand that we take the cost synergies and the information that we share with you with regard to how it is we're gonna drive results. We take it really seriously. And one of the things that we do is we have a whole team internally that is assigned to individual components of our integration plan, and they drive that to conclusion.
There's a systems team. There's a finance team. There's an AR team. There's a sales tax team. I could go on and on.
There are 38 different work streams associated with the PCM acquisition outside of sales outside of sales as we drive to the synergies that we wanna achieve in our acquisitions going forward. It is a thoughtful, detailed plan with a leader that drives that execution, and we have a meeting every two weeks now. Used to be every week, but every two weeks now. Between now and the end of two year period, we will have that meeting on a go forward basis until it is complete. The other thing I wanna talk about is the debt pay down.
We actually believe in maintaining a modest leverage. What does modest leverage mean? For us, it means less than 1%, excluding acquisitions. Clearly, we go higher to facilitate an acquisition, but given our business, it pay we paid on debt very quickly in our acquisitions. So somewhere around less than 1% range is where we end up.
One one one times is where we will end up. And short of a deal or returning capital to shareholders, on average, we will be sub one one times as we think about this. And then after we've satisfied all of these other obligations, any excess capital, we will return some percentage of that to our shareholders. That is all I have for you today. I know that we've gone long.
I apologize for that. One of the things I do wanna leave with you is just to summarize again. Ken's gonna come up, and he's gonna give a quick summary at the end. But from a pure CFO finance perspective, I have never been as excited about our business as I am right now. We have a we have accumulated over the last five years a series of assets, as we've talked about them today, of companies that we brought into our portfolio, changed our go to market philosophy with regard to how we actually interact with our clients, changed how we interact with our teammates, have a very different internal culture now as it relates to our teammates.
And I don't feel as I feel as confident now as I ever have at Insight with regard to our ability to take that hill and generate the numbers that I shared with you in the force in the four targets that we talked about. With that, I'll turn it over to Ken for the wrap up. And then we'll have q and a, and then lunch.
So you basically see the growth rates 8% to 10%. You look at expanding EBITDA to 5% to 5.5%. Return on invested capital, right? You've already seen that we're at 17%. We'll go down a little bit because of the PCM acquisition, but we'll take that back up to the 19% to 21% range.
And then of course, services being a percent of our gross profit at the 50% to 52% range, so nice increases that we're planning on. Quickly, summary, hopefully you can see that this isn't your grandfather's insight anymore, right? We've pretty transformed the business pretty dramatically over the last period of time, and I think we've showed some really good evidence of that, of what we're doing. We're really providing a lot of value to our partners, significant value, of course, to our clients, which has enabled us over the past five years to really deliver some very solid financial results. We think with the culture, the leadership aspects you've seen, you've got a good glimpse, of course, of the leadership team that's running Insight today, and you look at the five strategic assets that we talked about and went through in each of our presentations, we really think that's really going to provide an incredible platform for us to continue to innovate, continue to grow, and of course, deliver the superior financial results that you all expect from us.
With that, we want to thank you again for all your time and attention and interest, of course, and insight. I know we're running a little bit late, so we'll answer a few questions. I'll ask Glynis and Helen to come up. We'll only do a few questions here, but we'll stay around towards the end if anybody has any specific questions because you do want to be respectful of your time. So Helen and Glynis.
Thank you very much. I just wanted to maybe rewind back and talk about the targets a little bit. I know at the prior Analyst Day, you talked about an EFO margin. At the time, it was in the high 2s with the goal to get to the 3.5%. Still not quite there yet, so the pushback that we might get is how this new goal, which seems to indicate more aggressive expansion than the last goal should play out differently.
So maybe just talk about the planning process to, this versus the prior goal and what underlies the confidence and achievement of this new goal.
Yes. We should make sure to clarify that it's, it's EBITDA. So we're going from current EBITDA at three nine to that new range. But, Glynis, I'll let you
Yes. So it is an increase in the underlying improvement. Right? Relative last time, we're at three and a half percent EFO, 2.9, 2.8. So it was a 70 basis point improvement that we were looking at then when we gave you that guidance in 02/2011.
Today, when we're giving you the guidance of the three and a the five to five and a half percent EBITDA margin, that's made up of a couple of things that we have some relative confidence in. One, PCM is coming into our portfolio. We have a strategy around integrating acquisitions that we're confident in with regard to being able to get 40 ish basis points just rolling them in. No incremental synergies. No incremental revenue associated with that.
We also have the innovation solution areas that I talked to about, cloud and data center transformation, digital innovation, and connected workforce. And today, we've done a lot of work in terms of bringing these these assets into our portfolio and actually leverage the capability across between DI and CDCT is my favorite integration point, actually, integration point, and leveraging those so that we have these more non bespoke solutions that we can actually leverage into clients. And so by expanding our revenue growth, our revenue growth in those three solution areas is high single digit to low double digit growth at a higher rate than the rest of our portfolio. Please remember that the core supply chain business is a big part of our portfolio, but we're accelerating growth in those solution areas, and that accelerated growth does drive incremental gross margin. And we'll have a little bit of gross margin expansion, obviously, associated with supply chain optimization.
And there's a netting effect. As we have continued to have netting of our revenue, that netted revenue provides also an improvement in our overall gross margin and, hence, also in our EBITDA margin.
Okay. And maybe just a quick follow-up for Ken, a strategic question. It sounds like you remain committed to kind of the cost efficient supply chain plus the enabled digital business model. Did you evaluate why you need to do both versus maybe doubling down on one only, maybe like an Accenture type model where you just focus on services and leverage the distributors for the supply part, for example?
There's actually been some history of course, CompuCom probably being one of the best examples in our industry they pivoted to try to become just a services oriented company. I think what we learned from that lesson was that they basically opened it up for companies like yourselves to come in to do all the product, and then of course we're immediately doing services with it. We think actually being the general contractor for clients really has resonated, and as Matt touched on in a few examples, we can actually do the digital innovation work, but then make sure we're there for that stream of hardware revenue that's being generated as well as the managed services. We'll be able to complement that full line, we think, really positions us well because there aren't many people that can really do that. And I know when we talk to our partners, they get very excited about the fact that, gosh, we gotta do all these handoffs, We never know how it's really coming together.
The company can really do that, our clients certainly are gravitating towards that. It's been a very thoughtful approach because we've looked at that. Of course, if you look at just the services business, it looks fantastic. Think CompuCom found they started to lose that generation capability. They were just staying with the same core clients they've always had, where they weren't able to really generate those new ones.
In our business, that's critical. That supply chain optimization is an incredible feeding ground for us to really develop and extend other solution areas into that.
The chart that Amy showed that showed the lifetime value of a client, our data shows, we've looked at our data relative to acquisitions that we've done in enterprise space and our data shows us that we win a client based on a single point solution. And the way we grow and win within that client is just continuing to earn the right to compete. But one of the ways we do that is bring additional value. And over time, the way we bring additional value has has evolved where where it was, you know, initially the networking bar type services. Now it's much more around helping clients get to that digital digital ready.
So we already have this great base of clients, and we've earned the right to compete. And it's our job to continue to bring value to them.
Yeah. Or Matt? Do you have a mic?
I got a mic.
Bill has one. Oh, okay. I'm sorry.
Oh, so hi. This is Paul Chung, JPMorgan. So Sure. Just on the pace of kinda gross margin growth. I know you mentioned kind of initial bump from PCM, and then you have some of the synergies coming through in 2020, 2021.
But, you know, how should we frame the pace of kinda gross margin growth? I kinda assume it'll be heavily weighted more so in the first couple years, but if you could talk about the pace over the five year time frame. Well,
I think that we get to somewhere in the 100 to a 200 basis point overall improvement in gross margin. We get about 40 basis points from PCM initially in the twenty one, twenty two year time frame, plus some gross margin expansion. But I would say if you're thinking about the 100, then maybe it's, you know, pro rata thereafter, if you wanna think about it in terms of timing like that. Bill? Oman.
Oman, I'm sorry. Thank
you. Given that it was hard to grab the mic, I'll take three questions right out of the queue. The first one is is you have a thousand software developers today that you talked about. How many did you have two years ago and how many four years ago? And then the second question is relative to revenue split.
I don't believe you ever talked about the supply chain optimization versus the connected workforce versus the cloud and client data transmission. Those four buckets, but you spent a lot of the presentation addressing those categories buckets. From a strategic perspective. Can you break that down for us in essentially a pie chart, revenue split? And then lastly, you gave the client build rate, not gross revenue.
Right? Client, build rate, or bill rate. What was that growth rate over the five year period?
Well, that particular answer, we're not allowed to say. Literally. Like, as we talk to our lawyers and we talk to our accountants, we can talk to you about our next sales growth rate. We can talk to you about the fact that that segment of client build is growing at a faster rate. We can't actually talk to the the rate of growth.
So so the client bill rate is faster?
It is growing at a faster rate. The CAGR over that five year period. To share. Yes. The specific number.
It is growing at a faster rate. That's why we tried to show you the magnitude of the bars to illustrate it, but we're not able to to actually say it.
It was actually a relative dis depiction of the mix of revenue versus gross build, client build revenue. So essentially, the way to think about it is clients have been adopting cloud solutions over the last four or five years. You've heard us talk a lot about that on our conference calls. And what's happening then is we're seeing on premise software solutions move from from net revenue to I'm sorry, from a gross revenue to a net revenue recognition. That's the biggest single driver is that that cloud adoption over over that period.
Clint, do wanna address the breakdown of solution area revenue?
I think we're gonna have to come back to you. So, if we come back to you with that it's interesting. We, debated heavily whether we should do that or not. We were given guidance, from some other shareholders that said, I'm never gonna wanna know that because I can't compare you to anybody if I talk to you about that. So we actually went down the path of saying, hey.
We're gonna use this services metric as a as a way for you to measure the success of that because it as services grows, it is going to grow because of those solution areas that we talked about. So I think we just have to go back and make a determination about whether we are gonna just put it out there on the website potentially, and then we'll just
because some of it's a competitive aspect as well. We're signaling to all of our competitors some pretty important information. So that's what we debate back and forth internally. Stay tuned, I guess, would be the answer.
Answer.
Yeah. On the software developer side, so if you went back before Matt's company was the first addition to the team five years ago?
Years. Two thousand four years ago.
Four years ago, there were zero. We didn't have any real software development. We may have had a couple of stragglers somewhere, but that wasn't by by design. It was very, minimal if we had any. And then, of course, we've scaled that in four years to over a thousand.
The real benefit is for us is actually is we couldn't have built what Matt's company built. We couldn't have hired a person like Matt out of the blue and Matt, we want you to come do this. So what am I coming here for? Know? She needed to start with some scale of sorts.
And then from there, what the benefit is, as Matt will take, being one of the oldest company, you know, capital is very scarce. They can't just grow as fast as they want. So we're able to actually, you know, take the handcuffs off there as long as they're producing the right returns. We're able to invest a lot more. A good example is Mike's business with Igni.
I think Mike Igni is a 130 sort of you know? And and we've really been able to scale that, you know, dramatically from Perth to Melbourne to Sydney and now on and on and on. So we take a footprint, a really good footprint, that gives us the base to then hire organically from that. So that's really what the strategy has been. So you'll continue to see us invest there.
And Wolfgang's doing the same thing in Europe.
And just to add on to that, we bought a company, Cardinal Solutions, in 2017 that was also a digital innovation company that rolls into that digital solution area, and that's part of what also gave us scale around the thousand Yeah.
They have
they have 475
people.
That was last August.
So that that that actually is what helped build out that scale. And now we and when they came into the portfolio, Matt was
a guinea pig. I mean, Blue Metal was a
guinea pig. When Cardinal came into the portfolio, they had in a road map that had been created by virtue of Blue Metal coming in, BlueMetal, a divis an an Insight company, BlueMetal, a division of Insight, digital innovation, ultimately as the overall umbrella. And they actually were excited to come into a digital innovation group that existed within a company where there was access to capital and the willingness to actually add people and resources to build up the technology.
Matt. Yeah. Thanks. Matt Sheerin with Stifel. Just another question regarding the opportunities with PCM, particularly on the services side, the the growth projections that you have.
How much of that is contingent on your cross selling? And if you look at PCM, what's the, if you've looked at it, what's the attach rate of services that their customer base versus your attach rate and the opportunity there?
I don't know if we know their exact attach rate. I would say it's lower just based on the size of their business and the and the percentage of services that they have. We're running at around 12% overall, if you wanna think about it that way. And they're they're sub 10, so there's that difference to start off with. I think the bigger difference is the types of services that they're attaching relative to the types of services that we're attaching.
So we didn't make a huge assumption with regard to building up DI services in PCM per se. The focus of PCM in the first two years that we have them in our portfolio is going to be around getting to the cost savings that we have committed to the street, to you guys, with regard to what we want to do there. And then we will start doing cross selling. We'll start doing that motion because they're very excited, actually, to be a part of the Insight portfolio and actually engage in with the different solution teams about what they want to get. But our focus, as it was with data link, is very focused on getting the cross getting the synergies.
And then once we feel comfortable that those are baked, those are in the bank, or they're coming, we've actually made the actions that will drive to that answer by the 2021, then we can focus much more effectively on getting to the revenue synergies. And Ken can speak more to the
revenue synergies. So, Matt, you remember Sarcom, right, from years ago? So they acquired Sarcom years ago, and that really gave them sort of that connected workforce capability. So that's where we saw real strength. You look at most of the services in that strength, they've got a lot of good managed services offering, really helping sort of that modern client experience that we talked about.
So that's going to really augment what we've done in a big fashion. We like that service capability and the motion they have around building managed services to all those offerings.
The way to think about that is they really had developed a standardized motion for wrapping managed services around cloud consumption with a SKU based offering that allowed them to go deep in the market and to scale the delivery part in a centralized way. And so for us, we've built our expertise on the higher end of technical skills and project and consulting and have built enterprise level managed services. But being able to skew that up and drive it down market is a real opportunity for us both in our existing SMB client base as well as taking our solutions into their clients.
Okay. And just a question regarding hardware and how the role that that plays. You talked about the supply chain optimization role that you play. We've also had a nice tailwind of IT spending, hardware spending, refresh both notebooks and PCs and servers. There's concerns about the lower hardware spend last next year and perhaps beyond that.
How does that play into your business model in terms of the mix of business? Lower hardware, perhaps lower opportunities to sell other services?
The whole aspect of desktops and OPEX has always been the largest hardware segment in the channel and will continue to be the largest segment, right, because it's agnostic to the cloud. So certainly we're a very strong player in that space. PCM actually has a lot of capability there, so we're really pleased about driving that more towards a managed service. So that part looks actually very solid. I think the question you always get asked is where are we at in this PC refresh cycle?
The best data we have as far as Win 10 migrations from Microsoft, which is very compelling, especially from a security point of view for clients. But, you know, they're going end of life next year with, you know, 02/2007, so they're they're moving off that platform and supporting it. So there's probably the best estimates I get from HP and Dell as well as even Microsoft is anywhere from fifty fifty to 60% through to win 10 migration. So that means there's anywhere from probably 30 to 40% left because there's always gonna be 10% that don't go. So that's still a pretty good tailwind, for a while in regards to more refresh coming from a desktop and notebook device point of view.
We're pretty excited about that. The interesting part when we look at what's happening in the cloud is I showed the graph. It's still a hybrid cloud world. So we, you know, we certainly watch the data. We see the data on storage.
We see the data on servers. But we believe there's still it's a significant business, and we believe if you saw that pie chart, that we think there's a a big opportunity for us to take share in that space? Right? We've got the resources, the capability, the scale. So we're not walking away at all from that business and try to run from that.
We're basically saying, hey, we gotta continue to drive that as we see, again, private cloud not going away anytime soon, and it will be a hybrid cloud world. We're certainly cognizant of, you know, what the graphs are telling us. Some of the data isn't reflect completely what we see in the market. But the part, I guess, you know, I'd like to mention on the hardware side, is what you're seeing, though, in some of the examples, you know, Matt talked about from an IoT perspective is it's driving new hardware into areas that never had hardware before. Alright.
One of the examples we we talk about is smart wells. So we did Matt's team IoT enabled a large oil company's oil wells. They were getting two data points a day. Matt's team went in, did a nice project for them, and now they get twenty four seven data. Health of a well is pretty important.
Their ROI was phenomenal that they get. Well, each one of those wells happen to have 20,000 wells. Right? Each one of those wells needs an edge gateway. It's not magic.
Right? Something's gotta happen there. They never bought hardware in their life before. So I think that in some ways, we're underestimating what this intelligent edge is gonna do from a hardware perspective because it's still so early days and early innings. So we continue to remain bullish that that's going to drive different levels of consumption.
So when we say it's really not about data centers as much anymore, it's centers of data. And there's going be huge amount of centers of data. So a data center might look different. You know, at the edge in an oil well, that's gonna be a different data center, but it needs the same functionality. It needs compute.
It needs storage. It needs networking. It's gonna need security. It's just gonna be a different form factor. So people like HP, HPE, people like Dell are very, very into this now, developing these sort of special purpose devices that work at the edge.
Cisco is very involved in that. So I think stay tuned because as I mentioned, the intelligent edge is just on the cusp, and it's really starting to happen in a big way. And you saw that with some case examples that, you know, the team actually covered for you to say, hey. This is pretty powerful. So that will drive, I think, a lot more hardware than the IDCs or Gartner's are yet getting their arms around what that really means.
Okay. So, again, we'd really like to thank you for your time and attention. We'll stay around a little bit if anybody has any individual questions. And I think there's lunch outside for you on the way out. So thanks very much.
Thank you.