EDITORIAL - Snail-like Compaq starts direct sell
It's been predicted in these pages for some time now, but the death knell for the channel model has been well and truly sounded. Compaq is to sell direct to its enterprise customers in Europe by September, using the Web and the, consolidated channel model it has recently unveiled in the US.
The writing may have been on the wall for those of us perceptive enough to decipher the portents, but official confirmation is always a different beast as speculation becomes uncomfortable fact. Some would say that just because Compaq has decided to take a direct hand in supplying top accounts - accounts currently being served by Vars - does not automatically signal a fundamental change throughout the channel. Unfortunately, they would be wrong.
When the market leader takes a scalpel to its direct channel partnerships - slashed from 39 to four partners in the US - you can be sure that the reasons are good. In Compaq's case, it's just too slow to deal with Dell and the others. Picture sloth-like Frank Bruno trying to tag slippery Prince Naseem and you can see the type of Compaq/Dell embarrassment we are looking at. Compaq knows it's too cumbersome, thanks to a combination of badly integrated acquisitions (Digital), massive overheads, and supply chain problems. The slashing of its channel on the one hand, followed by its leap into online sales on the other, are all viewed by Compaq as life-saving exercises to lose some of that flab.
Perfect business sense. Not good news for the channel, but definitely sensible.
To think that the others, Hewlett Packard, IBM, etc. are not going to follow a similar Weight Watchers plan is naive. It's time for Vars to start looking at different sources of revenue. This does not mean drop everything and run in a panic down the services and training route, but assessing the options should at least be underway. Here's how it plays out. Vendors are not making enough money from kit and the margins on that kit are sinking fast. The channel is also, and not surprisingly, unhappy with the shrinking margins.
Since it's unlikely that this trend is going to change, the vendors have turned to the Web, an ultra cheap sales vehicle that also boosts their profile with customers. This way they can sell kit directly through a new route, annoying their channel partners, but it's still the best chance they have of putting a tiny smile back on their shareholders' faces. Combine these online efforts with the onset of a channel cull and you can see that its time for Vars to evaluate involuntary retirement or a change in business. The distributors have already started. They're now building their own boxes and evaluating the possibility of cutting administration costs by dealing with Vars over the Web, among other things.
Some Vars are already trying to expand their ranges, according to the latest channel research by Compubase, on behalf of PC Dealer. Services and IT training are hot tickets right now as resellers concentrate less on the value, and more on the added side of their business. It only makes sense to expand, but it's not something that can be accomplished overnight. Expertise costs money, as does training programmes, certification from vendors, facilities and marketing. A good first step for any reseller looking to get into training would be to check with some national bodies to find out what the skills opportunity is. A second, and more important step, would be to take a long hard look at your books to see if learning about a product is more profitable than flogging it. Most of you will find it is.