Editorial: dealing with the devil

If Dell is viewed as the devil to the channel, Gateway is seen as its little brother - a Lucifer Minor, perhaps.

In the past couple of years, the two companies have grown at a frightening rate, taking market share from the biggest indirect PC vendors, and prompting talk of the demise of the reseller and the triumph of one side over the other.

Observers believe PCs will become commodities, implying that the Var's input will no longer be required and that the cost of Var services will render indirect vendors' kit too expensive to be competitive. Only last week, research company IDC said PC growth rates mean direct sales will overtake indirect sales in the US by 2001.

But the assumption that the direct vendors will take all business from resellers is flawed. Clearly, resellers of pure hardware may not make as much money as before, but shrinking margins have seen a shift from relying on as simple a business model as just selling PCs. A few resellers can happily survive assembling and selling their own kit, but the days when anyone could cash in on anything with a monitor ended years ago.

For Dell and Gateway, managing rapid growth - and the internal issues that come with it - has been difficult. The implications of such growth for customers is another problem altogether and, in retrospect, direct sellers have always struggled to cope with the growth in support issues that came with the rise in sales.

On top of that, business customers want software integration and most of them believe only Vars can competently deliver systems that run Microsoft, Oracle and Novell together.

That's why Dell and Gateway have been quietly building reseller channels. It's why Gateway appointed former ALR distributor Norwood Adam to provide support to its UK reseller partners, and why Dell is due to launch a scheme for partners this month that delivers installation and integration services.

Dell's scheme - which stays true to the company's roots because Vars make no margin on hardware - relies on the demand for the vendor to act as the carrot for the channel and Dell claims only five per cent of its business is indirect.

To Var staff working with Dell it may have felt like they were dealing with the devil, but if Satan runs a multibillion pound business these days, who can blame them?