Direct in their selling but not their relations

It's time vendors were more honest with their channel partners.

At a time when coming out in one way or another seems to be the order of the day, PC vendors are starting to come to terms with their own more recent preference - selling direct.

Getting them to admit as much to their partners - and PC Dealer has tried almost unceasingly in the past to make them do the decent thing - has been an uphill struggle that is only now beginning to see respite. Now that IBM and its rivals have been given the blessing of market researchers to proceed with their direct strategies, everyone can breathe a sigh of relief.

For several years now, IBM, Compaq and HP have known that, for themselves at least, a direct selling strategy was inevitable. They just haven't been straight with themselves or their channel partners.

More recently, however, the likes of IDC have given vendors the opportunity to be more up-front about their intentions. Much like the politicians, they have introduced the concept of a third way - namely, the hybrid channel.

When PC Dealer first offered the insight that Compaq was being unfaithful to its partners, the industry's reactions to the newspaper were a mixture of contempt, for daring to suggest such an apparently far-fetched thing, and a nagging realisation that things were about to change fundamentally between vendors, distributors and resellers. (PC Dealer, 19 March 1997).

As it turned out, there was something in our assertions. From then on, Compaq tried every trick in its strategy book not to be heard uttering the d-word. It even went so far as to pronounce its move as 'quasi-direct', where it would sell direct to the SME market but get the channel to fulfil orders. Compaq's play on semantics and level of patronisation towards partners and press gained it few friends.

Unfortunately, the vendor has continued to deny, on and off, that it is, was and will be selling direct, depending on who you talk to and when. With the IBM Direct fiasco still fresh in the industry's mind, is constant denial any wonder, whenever the d-word gets mentioned?

Vendors operating in the UK have been insisting lately that going direct is strictly a 'US-centric' strategy and relations with the channel over here are so wonderful that cutting it out would be a mistake. But time and time again, these US initiatives haven turned up in the UK.

Then the story turned into a tale of how vendors would only service large multinational, corporate accounts direct, in a bid to stave off Dell. IBM set the ball rolling in June when it unveiled its Netfinity Direct initiative, in which it would sell NT-based servers along with desktops and laptops, as and when required. Compaq and HP soon followed suit and the vendor bigwigs took turns to justify this recent outbreak of truth.

Lew Platt, chief executive of Hewlett Packard, euphemistically said at the Gartner Group's annual US Symposium in Florida in October that the company was changing its relationship with the channel: 'Certain products only sold through the channel just a year ago and our direct salesforce was not allowed to deal in them. From today, it will be encouraged to talk to customers about those products.'

Doug LeGrande, general manager of the IBM personal systems group EMEA, said earlier this month that the vendor had 'stopped saying no to customers who want to buy direct'. That statement was made a week after IBM lost a $70 million supply contract with oil giant Mobil to Dell.

But what about channel assembly and build-to-order/configure-to-order?

Weren't they supposed to redress the advantage Dell had in being able to deliver PCs to customers within 48 hours? These initiatives were initially touted as the way in which indirect vendors would take the fight to the likes of Dell and beat it, by eradicating channel inefficiencies. They were supposed to result in reduced lead times less resource tied up in inventory and so on. But reports that have come out since the schemes kicked off suggest vendors are not reaping the benefits they had projected. And it didn't stop Dell in its tracks for a minute.

Bernd Bischoff, vice president and general manager of the commercial channels organisation at HP, claimed last month that Dell did not win business because it sold direct, but because it was more efficient. Maybe he was right. Because there is something Dell hasn't been telling you.

It may not like to dwell on this nugget of fact, but it does sell indirect too. The 'direct vendor' had up to 15 per cent of its sales via the indirect channel. It has been notorious for sniffing around Compaq resellers and capitalising on the incoherence they face with their vendor. More recently, Dell forged a high-profile pact with Wang Global, and what is Wang Global if it is not a large reseller?

In the end, Dell's sales strategy is no different from that of IBM, Compaq or HP - to an extent, they all sell direct and indirect. But in this age of mix and match, they are all vindicated. Among others, John Gantz, vice president of IDC, has declared the hybrid channel open. 'One channel will not do. The way a vendor will sell in future has to be through a multiple channel, with a hybrid mix of electronic commerce and customer intimacy,' he said.

But before vendors go ahead with strategies that will hopefully see them into the next millennium, all we ask is that they tell the truth to their partners. That is the least any partnership can ask for.