Compaq resellers are being forced to stop configuring its PCs with onto resellers' shoulders. third-party components as a result of a clause in the vendor's Ts&Cs which is threatening to invalidate warranties on the hardware.
To qualify as a Compaq authorised service provider, a reseller must 'not configure Compaq products with non-Compaq items without advising its customer that this may invalidate Compaq's warranty, if it leads to malfunctioning or damage of the Compaq products'.
But according to sources, the clause limits the range of components that can be used, such as memory, CD-Rom drives and networking cards. Resellers believe it will even cover non-Compaq peripherals and force customers into the arms of rival vendors.
One reseller, who expressed his disbelief at the clause, demonstrated its ramifications: 'You sell a machine that has no standard CD-Rom drive, or has third-party memory or network cards. That happens all the time. That clearly does not invalidate the warranty. The vendor could be on very shaky ground here.'
A City reseller added that the choice of third-party components was usually made by the customer. 'Compaq might do an alternative product, but customers could insist on 3Com for their networking cards, for example. The clause is farcical,' he said.
Insiders saw the clause as a renewed push by Compaq to increase interest in its own third-party products. The vendor recently had a high-profile launch of its storage systems and has also restructured its networking operation.
According to one reseller, Compaq had previously attempted to prevent the use of other vendors' components with its machines, but had trouble making it stick legally.
'It used to do it years ago and we made it produce a White Paper in 1996 as a result. Compaq realised it was unreasonable but now it is trying to do it again,' he added.
One reseller claimed it had lost a large customer recently because its warranties had been invalidated. 'We tell our clients it will affect their guarantees and they don't like that. Ironically, Compaq kit is reliable but it's terrible on after-sales service,' he added.
Alison Heath, UK sales director at Kingston Technology, said: 'The clause could make MIS managers nervous about putting third-party products in Compaq kit. But it is worded in such a way that it doesn't prohibit third part inclusion.'
She added that in the event of a breakdown of a Compaq machine due to a Kingston product, it would offer the same terms as Compaq: 'It offers replacement parts and labour. If our third-party product causes the failure then we can offer a 100 per cent lifetime warranty.'
Compaq was unavailable for comment.
DELL SETS PRECEDENT FOR COMPAQ DIRECT SELLING WEBSITE
Compaq has followed Dell's example and launched an internet-based operation, responsible for selling products, systems and services direct to customers over the Web.
The Compaq.com division will be aimed at consumers and corporates and is in addition to Compaq Plus Direct, a Web-based programme the vendor launched last year, aimed at SMEs.
Kenny Kurtzman, formerly vice president and general manager of Compaq's small and medium business division, was named as vice president and general manager of the venture.
While it will focus initially on selling online to the US market, localised European versions of Compaq.com are expected to appear during the first half of 1999.
But analysts have expressed fears that the division will cause upset among the hardware supplier's channel. Rob Enderle, analyst at Giga Information Group, said: 'From the first blush, it looks adequate and well thought out. Now it remains to be seen if Compaq can keep the channel from having a cow.'
Andy Brown, analyst at IDC, added: 'Compaq has seen the success Dell has had with its Premier Pages model and that worries it.'
Christine Arrington, analyst at IDC, stated: 'I think it's a risk that Compaq has to take. The internet has become a critical channel into small business and consumers.'
In an attempt to soften the blow to the channel, Compaq is offering its resellers a rebate if they refer a customer to its Website.
Under the Compaq Direct Plus scheme launched in the US, resellers receive an agency fee of six per cent for notebooks and desktop sales and 10 per cent for servers. If the customer continues to buy from Compaq, the reseller will receive a further percentage kick-back.
One reseller commented: 'This move has ignited channel concern but unfortunately, I think that it is a fact of life for us. Manufacturers feel that they have to sell direct but they cannot do so without upsetting its existing partners.'
By Dominique Deckmyn in Silicon Valley and Lisa Barnett.
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