Fortune favours the brave

Dell is scaring the hell out of other vendors.

But their response has been slow - and it's all because of resellers.

Well, almost. Few companies have dared to react - the bravest has been Unisys, which has handed over production to Hewlett Packard and most of its accounts to the channel.

HP has at least refreshed its range, but it's not moved to counter the rise of Dell in any other way. IBM is improving its build-to-order programme, but progress seems to be slow. Compaq is doing very little as well, because it doesn't know what to do. In the absence of any innovative ideas, or the courage to change everything, vendors are talking about SME market programmes. But that's not really vendor business - it will be distributors that look after SMEs because they have the product range, the warehousing and the credit lines.

There may well be growth in the SME market, but how much? With new tax laws hitting the self-employed hard this month after two years of growth, the year 2000 coming and economic uncertainty, it's not going to compensate for the downturn we'll see in the saturated corporate market.

Global deals on pricing and desktop standards, the control of purchasing through procurement rather than IT and the idea of thin-client computing is stifling growth. This is why we are still seeing consolidation among corporate resellers.

In a market growing at perhaps 12 per cent, Dell's European sales are growing at about 60 per cent year on year, and it claims it is doing more than #4 million worth of business a day over the Web in Europe. The UK is its strongest market - 70 per cent of sales go to the corporate sector.

On top of all this, and because it does not have a channel per se, Dell can get products to the market faster and it can be much more dynamic about its pricing. The company's cost model remains vastly superior to Compaq's or IBM's - while they fiddle around trying to introduce BTO and build flexibility into their pricing structures, Dell is making hay, while Compaq and IBM are losing ground is the channel.

They are still scared of going direct, but they will have to change to compete with Dell.

Compaq is again rumoured to be planning the introduction of a direct, online ordering service.

But dealers will fulfil the orders and the cost will still be higher than going direct to the user. IBM is, similarly, going nowhere with its programmes.

Both companies are, of course, reluctant to go direct, not only because they want to avoid upsetting corporate dealers, but because reacting would mean a significant change in their business model. It would cost money and probably get bad publicity.

So, there you are, it's all your fault - almost. But then again, how much money have you made out of PC sales this month? Or maybe a better question would be, how many of you have not made money because the customer bought off Dell?

Simon Meredith is a freelance IT journalist.