EDITORIAL - A year of change for the channel

Big deals and big consequences have dominated channel life in the past couple of weeks. Tech Data finally landed a $6 billion, three-year deal with integrator GE Capital IT Solutions to cover product fulfilment, systems configuration and assembly. Here's one distributor that will be buying the drinks for a while to come.

This reinforces the trend that's seen industry giants turn towards services and away from anything that could affect their core business. The deal means GECITS no longer needs to stock, configure or assemble the products it sells.

Tech Data is not the only distributor to make a killing in recent weeks.

Following Compaq's almost complete withdrawal from direct dealings with the channel by slashing its number of direct partners from 39 to four, Ingram Micro has been celebrating its position as one of those lucky four.

Ingram has predicted that its elevated status will mean a cool $4 billion on the bottom line, since all those previously dealing with Compaq directly will have to find a different way to get hold of the products. In fact, Ingram only has to maintain its 60 per cent market share for that extra cash to come rolling into its strapped coffers.

But every silver lining has a cloud. Ingram HQ may be talking about a bright future, but job cuts announced last week mean that many at Ingram UK will be facing a far bleaker time ahead.

The Compaq decision is the start of an epidemic that is going to sweep through the channel and the industry as a whole in the coming year. Everyone is playing a very conservative game this year. Controlling overheads and making efficiencies have gone from being just plain, good old-fashioned management practice to being obsessive compulsive disorders. Compaq is only lighting the way for others to follow.

At the risk of sounding like another movie in the Godzilla franchise, the Day of the MegaDisti has arrived. Ingram is in a good position to receive a similar kind of deal from other companies looking to trim their costs and complexity.

Compaq's way out has managed to support the channel, while withdrawing from direct dealings with it. The decision allows it to cut down on the financial costs and headaches of dealing directly with so many eager resellers and distributors, but retain its status by elevating a big distributor to God status. It also allows Compaq to radically reduce the amount of stock lying about in warehouses. This decision may be Ingram's cash cow, but for Compaq it provides a chance to fend off its streamlined challenger, Dell.

Another area likely to see the appointment of more mega-distributors is networking. It is predicted by some UK networking distributors that the big networking vendors are going to start rationalising their channel soon.

It may not make sense to many resellers, and could in fact damage the channel in the long run, but financial worries are top of the list for many vendors. When you listen to resellers there are always complaints along the lines of: the bigger the vendor, the worse the relationship. Maybe certain distributors should become the voice of the vendor - they understand the needs of resellers better than most.

Dealing directly with the channel works effectively for some, but not all. Whereas Hewlett Packard seems to have a reasonably coherent, open policy towards the channel, Compaq is an example of how not to deal with your partners - just look at the way it introduced a Web-based selling operation behind the channel's back.

Whether distributors are the best face for many vendors makes no difference because it's very likely that it's going to happen anyway.