European View - Jan Pote

Netscape is no more. Following the 'clearance' sale to AOL (and Sun Microsystems), the internet pioneer has disappeared. In an earlier column (PC Dealer, 11 February 1998) I wrote that Netscape could only survive if it became a genuine niche player or started supporting the channel fully. My third option was that it would be taken over. There was never a clear channel strategy, nor a clear niche orientation. Exit Netscape, swallowed up by AOL.

The big loser in all this is IBM. The vendor passed up a great opportunity here, as it would have been an ideal partner for Netscape, rather than AOL. Big Blue is still not a genuine brand on the Net, while Netscape is - or rather, was. Moreover, Netscape had good products. Just imagine: Netscape, an IBM division. Four bull's-eyes! One for Netscape because it would have had financial security (and money for vital R&D). Another bull for IBM because in one fell swoop it would have been inextricably linked to the internet. A third bull because, at last, users would have had a sizeable software partner in addition to Microsoft. And finally another bull, because IBM is already a very sound channel partner.

No use crying over spilt milk, though. The fact that the Netscape products are almost certainly lost to the channel is more significant. Navigator will be monopolised by AOL and AOL has nothing to do with resellers. The high-end Netscape products will be sold via the Sun channel, which has an important sales model - direct sales. Yes, Sun does have distributors that sell to resellers and yes, Sun does have a whole range of Vars, but Sun is not a channel-driven company (and there are no indications that this will be any different in the near future). It does not have a clear strategy for the sale of Netscape software. In other words, it's bad news for the channel.

And that's not all. Compaq has gone flat out in its direct sales model - its hypocrisy is boundless. Initially, it said the direct sales model was merely by way of an experiment. Then stated that it would only be used for specific products in the consumer market. Now it is directed to all SMEs, a market segment that was solely restricted to resellers - or at least, that is what Compaq made out.

Andreas Barth, senior vice president and general manager for EMEA at Compaq, stated in his presentation at Euro Channels that 'in global accounts, the reseller has a limited role'. He must now change his discourse to 'in the SME market, the reseller probably also has a limited role'. These are silly statements by an experienced Compaq manager.

For that matter, I have always opposed a hybrid channel model - one in which everything is allowed, such as direct sales, sales through direct partners, sales through distributors, but nothing is really done properly.

After vacillating for a long time, IBM has finally started to run with the pack. A deal with oil giant Mobil which it eventually lost to Dell (a contract worth $75 million) was the final straw. Once again, I will reiterate that the direct sales method is not the right strategy to compete with Dell.

I wonder what Compaq and IBM would make of the following suggestion: decrease the number of resellers and distributors that don't sell your products and spend a lot more attention on the ones that do. Actually, I am making a plea here to start working with resellers again that want to stick to a limited number of brands (for example, IBM for computers, Lexmark for printers and, of course, a whole series of other vendors, but without these constituting the largest part of the turnover). In fact, most resellers originated in this way.

This kind of policy has consequences for everyone. Resellers have to remain faithful to the brand they chose: they have to promote it, build up technical competence and sell, sell, sell.

Vendors can no longer give the product to 1,000 resellers per country; instead they have to make sure there is a continuous flow of products (remember - no products means no income for the reseller), support resellers through thick and thin, organise joint marketing promotions, and so on. Admit it, this idea is appealing and is worth investigating. I can already picture the scene: 'Dear client, go to a Compaq centre near you'.

Novell, which only recently shed a group of distributors, is heading in that direction. Of course, certain scandalmongers have said Novell was forced into this rationalisation to cut costs (in other words, less headcount on less channel partners). This is possible, but tell me, what company doesn't want to cut costs? Moreover, Novell is listed on Nasdaq and can hardly afford not to grow - hence the following scenario: cost cutting and growth.

Novell will have to go further than simply get rid of distributors. To make a real success of its strategy, it will also have to cut down on the number of resellers, keeping only those who genuinely support the range of products, concentrating on active promotion, sales, acquiring technical expertise, and so on.

Is this not the way it should always be though?