For the past nine months Digital has been making aggressive moves to step up its sales of services through the channel. The company's multivendor customer services division announced an initiative designed to simplify the sale of services for Digital products.
Digital provided distributors with service boxes designed to eliminate the lengthy paper-chase involved with selling services. The service boxes up-grade the user's product warranty, including free replacement of parts and an option of same-day or next-day service.
The service boxes contain the necessary registration cards and Ts&Cs, so the distributor does not have to constantly refer to Digital. In June, the company extended the service to include support for Novell products including Netware 4 and Groupwise 4.1.
One of the major problems for companies selling maintenance agreements and for users wishing to buy support has been the complexity of the paperwork.
During the 1970s IBM's maintenance policy meant that each time a new terminal, printer, keyboard or other such device was added to the system the customer had to take out a separate contract. For larger installations this created banks of filing cabinets containing individual contracts on which an annual maintenance fee was payable. One user discovered he was paying maintenance for a punch card reader 10 years after it had ceased to be used because nobody had cancelled the IBM contract. Pressure from the IBM Computer Users Association eventually forced the company to simplify the process.
On the face of it the service boxes programme seems a cosmetic change, but the reseller channel views it as extremely important. 'It is ideal for the user and excellent for the channel, which has always tended to ignore extending warranties because of the amount of paperwork involved.
'Now you can buy a packaged service from Digital for Alpha for everything that is inside the box,' says Phil Goodman, marketing manager for Metrologie.
The service box contains all the details the vendor needs, including part numbers, price and margins. If the user wishes to upgrade his or her system then the new configuration is also covered.
Not wishing to be outdone, Digital's network product business unit announced a certification programme for selected resellers and systems integrators.
It set the accreditation standards deliberately high to ensure that customers receive the best service.
To achieve certification, Digital's partners must meet set sales and technical competency standards. Resellers must have a minimum of 30 per cent turnover from networking products and systems, at least two years of trading and must agree to a Digital Networks business plan.
In return the reseller offers to provide business development funding, sales leads, incentives, preferential discount structure and training.
According to Howard Griffiths, UK channel manager for Digital's network product business, the programme was set up to ensure that Digital's network resellers had sufficient breadth of knowledge in all aspects of network integration.
There are currently about 30 resellers in the scheme with another seven going through a fast-track learning process. 'We are not trying to do what 3Com does and have hundreds of resellers. I think there are only about 50 resellers in the UK capable of offering the sort of service we want. If I'm wrong and there are 80 then I shall be very happy,' he says.
Griffiths believes Digital is not fully acknowledged as a networking company and is still perceived as a company selling hardware. In fact, during the 70s and 80s the company was seen by observers as one of the premier networking companies among the mid-range systems manufacturers because of its involvement with Ethernet, a high-speed local area network developed by Xerox, Digital and Intel. But Griffiths feels Digital failed to capitalise on its early experience with Ethernet to promote itself as a networking company.
'Ethernet was a means of shifting Vaxes. That was where the money was,' he says. In today's environment, with most manufacturers aiming at selling 50 per cent plus of their products through the channel, the ability to offer after-sales service is vital.
Some dealers believe Digital has invested new life into its channel strategy.
At a partners' forum conference held last month in Barcelona, Digital's senior executives from the US and Europe outlined their plans for the channel.
Jim Metcalf, a director of Datech 2000 who was present at the conference, said: 'There are some significant moves from Digital. It is becoming more partner friendly and partner-centric.' One of the changes Digital has made is to offer greater incentives to its own salesforce if they push Digital products through the channel.
Like most companies Digital is determined to push more products through the channel rather than direct. But Metcalf says this requires a fundamental change in Digital's culture. 'The culture lags behind the changes in Digital's pay structure, but it is becoming more partner focused.'
Martin Finn, commercial director of Hamilton Rentals, believes Digital has got its channel strategy right. 'Seventy-five per cent of Digital's fulfilment of main systems is through the channel. In the network and communications division and the PC division it's 100 per cent.
'They've achieved this without losing market share,' he says. Finn claims Digital has gained market share from mainframe systems suppliers looking to downsize their systems.
Earlier this month Digital capitalised on its successes by slashing the price of its Alpha mid-range server systems by up to 20 per cent. David Cousins, Digital Alpha server marketing manager, says the reductions will enable Digital to compete more aggressively with Compaq and Hewlett Packard.
'The resellers' profit margins would remain the same under the new pricing scheme,' he says.
Finn says Digital was among the first companies to realise the channel was the best route to the user, but he warns there is a price to pay.
Because Digital is moving away from direct sales the burden of pre-sales and post-sales support lies with the dealer. 'You only make money if you invest.'
Finn claims Digital's strategy is better than that of Compaq and HP.
'Compaq is a 100 per cent dealer operation. Unfortunately, because it comes from that background, the quality of support and investment is not as high as it is with some other companies,' he says.
According to Finn, Digital has the edge over HP, the company's major rival which knocked it out of the number two position in the IT manufacturers league table. 'HP began selling through resellers later than Digital.
Two years ago, 25 per cent of its products were sold through resellers.
Today it is about 60 per cent,' he says.
Digital has always emphasised selling through the channel but its relationship with its resellers has not always been good. New Computer Hardware: Options and Comparisons, a report published by UK consultants Bloor Research, highlights some of Digital's past mistakes. Following the financial disasters of 1992 to 1994 Digital placed a new emphasis on the reseller channel. It shed personnel and sold some of its product lines. As a result it came to rely more on the indirect selling mechanism.
'As part of the restructuring, it has a new emphasis on indirect sales via Vars,' the report states. Relying on the channel more in the future will allow it to keep the cost of its own direct salesforce low, but Digital will have to deal with Vars more consistently if it is to achieve success through them. To this end, it has put in place accreditation procedures which should bring some benefit.
Digital's troubles are now largely behind it and with the powerful 64-bit Alpha boxes, commitment to NT as a primary operating system and a close alliance with Microsoft the company looks set to prosper once again.
Digital has always been innovative but has been slow to respond to the industry's change of direction. It pioneered clustering of machines to increase capacity before other companies had even thought about the technology.
On the other hand it failed, largely due to the dominance of its founder Ken Olsen who failed to take advantage of the move towards open systems and Unix. The company led the IT world in 64-bit computing with the launch of Alpha systems in 1992.
'Digital has always been an excellent engineering company,' the report states. It has met with adversity by leapfrogging the market with its Alpha 64-bit chip. It has a residual strength in network technology and in services such as systems integration, facilities management and maintenance.
But the world is now a much tougher place for Digital and its resellers.
Not only does the company have to compete with HP, it also faces pressure from Compaq and IBM. Compaq's high-end servers compete head on with the Alpha, while IBM's new Multiprise 2000 mainframe system threatens Digital from above.
Re-forging its partnership with resellers may be the only way Digital can fight off the triple threat from Compaq, HP and IBM. It must strengthen its links with resellers. While initiatives like the service boxes are good news for the channel and customers, some feel Digital is not marketing the scheme efficiently. 'We are not selling as many as we should because Digital is not pushing the service boxes hard enough,' says one disgruntled reseller.
If Digital is to remain a major force in the industry then it must look to the channel to re-establish its reputation. 'Those that have been in IT for decades will find it difficult to imagine the industry without Digital as a key player. This surely will not happen, but exactly what will happen is still a matter for some conjecture,' the Bloor report accurately concludes.
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