Compaq is preparing to hack back its European distribution channel.
This is as a result of pressure from Dell and its direct model. And because of Compaq’s acquisition of Digital. and that company's sales force which also pushed much of its product, particularly high-performance products, directly to the customer. (see Newswire 10 August)
Now Digital's services business, which sells direct, is being merged into the Compaq product business, to create the huge enterprise solutions and services group (ESSG) - two thirds of Compaq's business. (see vnunet.com 8 September)
Compaq is faced with a conundrum: how will it sell its products and services to particular customers? With or without the assistance of the indirect channel? This is the job of Gareth Cadwallader, newly appointed director of ESSG, who admits the company is finding it difficult to set hard and fast rules as it establishes its model.
With a history that includes a stint in Hewlett Packard's predominantly direct Unix business, as director of Digital's direct customer services division, and as the head of UK's largest reseller, Computacentre (both the international business (ICG) and the UK services business), Cadwallader is sensitive to both sides of the indirect/direct sales debate that is under way at Compaq.
"We have done a lot of research both worldwide and in the UK to find out how customers want to buy," he explained. "In the large and very large customers space we get a pretty consistent answer. 35% of the market want to buy in a disaggregated fashion, i.e. buy the basic product and strip it of channel value, and 65% want to continue to buy in a channel assisted model."
The customer choice model will allow customers to decide whether they buy goods directly from Compaq, over the web or phone, or with the assistance of a reseller. The customer choice operation is currently in phase one, the trial period, which is due for completion this quarter.
Phase two is scheduled for completion before the end of the year, and further details are expected this month. It will be co-ordinated through Compaq's Glasgow call-centre. Responsibility for the running of the call-centre and customer choice trials lies with David Wright, director for commercial PCs, who replaced David Petts, who is now in charge of worldwide marketing for PCs, based in Houston.
Supply and demand
"We've done some piloting, we've done some trials and we've taken some orders," Cadwallader told VNUNet. "But so far we haven't found a flood of customers who tell us that we must do business this way or else. So while we need to be decisive and establish this customer choice model, we are taking it at a sensible pace: that way, we can really understand what people want.
“This direct/indirect thing is a simplified bullet point, a thought bubble; what customers are really looking for is the best overall supply chain, a value chain that delivers the technology package they need in the most effective way."
But selling direct to customers does not necessarily disenfranchise the channel altogether. "We’re finding that a lot of work we're doing is tying the channel back in. The customers thinks, right, I can buy this direct or over the web, but who is going to install it for me and where am I going to get system support from? That's funny, I need our channel again."
Compaq's move towards the customer choice model has caused unease in the channel. "There's always a tension in the relationship and this has put a little bit of frisson in that tension. Some things are inevitable. There’s no way that we are going to start doing sales over the web without the channel getting anxious.
“But there's a difference between asking if they understand what we’re doing, and are they happy as sand-boys? There's an understanding that in a volume market, customers are going to disaggregate: Compaq can’t deny them that choice. But that doesn't mean they're not all happy.
“It’s our task to reach a more stable model while keeping the confidence of our partners. I don't want to appear complacent - we’re paddling very fast under the water to keep that relationship going," he admitted.
The vendor has been spending a lot of time and money on account-handling sessions and account-mapping sessions with its partners. But there’s no hard-and-fast recipe for success.
"Every account is different, and every channel partner is different. These things tend to start with the big-volume deals. You have to muddle through each deal, while trying to keep the customer loyal to the Compaq brand and maintaining the confidence of the channel partner."
At your service
Customers are no longer prepared to pay a premium for the delivery of product at a given time in a particular place. While Compaq is keen not to tell its partners how to run their business, it offers programs like system service partner (SSP) for organisations and accredited service engineer (ASE) for individuals, which it hopes will help partners find a new niche in the value chain.
At more than 1500 ASEs in the UK, Compaq claims to have the largest network of accredited service engineers in the channel; the program is currently being expended into Tru64 skills.
Cadwallader does not believe that the integration of Compaq's direct service business into the product business will alienate the very SSP resellers that it is trying to encourage.
"Last autumn we had anxiety, anxiety, anxiety and we did a lot of relationship building. I wouldn't say there isn't a single contract that we haven't competed on, but the conflict over services has been this years' non-issue. In a fragmented market we all have low market shares. There’s plenty of room for all to play."
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