Leader: Can Compaq Count Its Chickens?
Compaq has really caused a ruck in the SME market with last week?s announcement that it will be selling direct. The Compaq fox has entered the hen house by the back door, but the noise can be heard all over the channel farmyard. I cannot but feel that the vendor has made this move just as the Italian chickens were coming home, not to roost but to get roasted.
Compaq is obviously worried by the progress made by Dell into the SME market. But the company has always said it is 100 per cent behind its channel, and it has also steadfastly maintained that it would never sell direct.
The alarm bells started ringing last summer when Compaq said Dell?s progress into the channel was worrying, and it would have to alter its business model to allow the firm to focus its efforts and compete on the same level. At the time, rumour was rife that a direct sell model was imminent.
As we predicted last week, the fateful meeting of Compaq?s channel partners on 20 March revealed that the vendor was now going direct. Compaq had telegraphed its intentions well ahead. It also intends to open a telesales operation which will act as a lead generating site initially, but by September will be able to take orders for hardware.
For the moment, this direct operation will target the SME. It will only sell small quantities of kit per order and will only offer a limited choice. Anyone wanting special configurations will have their order passed to a reseller.
This will not effect Computacenter, as it sells into major corporate users. But any reseller trying to sell into the SME market will now find it is competing with Compaq. And there will be tears.
When Compaq takes an order it will get one of its resellers to supply the goods. The reseller will get paid a fee for this. This is very similar to the IBM Direct operation, but IBM abandoned this about 18 months ago because it didn?t sell much kit and caused endless channel conflict.
Compaq has said that it will sell kit at fixed prices which will be widely advertised. It has said it will not discount these prices. So, if it doesn?t work they will not cut prices to boost the demand through its direct operation. I remember the Italian chicken Olivetti tried a similar tactic. Looks like more shake-out this year than I would have predicted two months ago.