Rudedog,
Hi Jim, Take a look at this post: siliconinvestor.com. "From today forward, enterprise customers can expect to get more value for equivalent or better technology when they buy from Dell," said Michael Dell"
"I believe that this is a play for a segment of the enterprise market, but may work against Dell in the high end, where the customers are not buying technology per se or price performance. The margins that Sun and IBM charge in the high end do not just disappear, they go to provide services and ongoing customer support that the high end customers demand. "
Rudedog is at it again. This is BS! The higher margins in the enterprise do not go to provide additional services. All the real services they offer are paid for at HIGH Premiums. The high prices for enterprise hardware subsidizes R&D, high cost of sales, and inefficiency in the channel for enterprise systems. In particular, it is costly to have multiple resellers together with the sales rep from CPQ or IBM stumbling over each other, trying to share the revenue stream and dividing up the hardware and service sales between them. The customers want price and delivery, with product quality and maintainability being key issues. The build to order model puts the MFG in the position that they have to maintain inventories to meet the delivery requirements throughout the channel. This adds inventory carrying charges and obsolescence costs, all of which are magnified by the multiplicity of resellers who want a piece of the business. The Manufacturer can't control them or parcel the business out, so he sells product to all of them and lets them compete, while giving price protection, adding to his costs. It is a mess. One potential solution would be to change the contracts offering exclusive territories and limited account bases, with only one reseller for any given account or geographic area. This would cut down on the competition, and reduce the potential for excess inventory in the channel. It would also give the manufacturer greater control over sales and support tactics. Unfortunately, short of buying your own channel, it is impossible, maybe even illegal to control where and to whom the resellers sell,or how much product they have on hand to meet the selling opportunities. Bear in mind that between two resellers, it is the one who can deliver that will get the order, price being comparable.
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