Compaq's new approach to begin next quarter.
March 15, 1999, Issue: 833
Section: News
Changing Models For Changing Times: Compaq Embraces
New Model While Channel tries To Adapt
Craig Zarley & Jerry Rosa
Houston -- Compaq Computer Corp. is racing to implement a new business
model that will meld seemingly disparate programs such as DirectPlus,
co-location and channel assembly into a single strategy.
The move will see the vendor assume ownership of Compaq inventory
throughout the supply chain, said Bob Fernander, vice president of Compaq's
commercial business unit for North America.
As part of the plan, which will begin to take shape in the next quarter,
Houston-based Compaq said it plans to begin eliminating channel inventory by
shipping Compaq systems directly to customers using co-located resellers as
third-party service providers.
Compaq dubs the new push "collaborative selling." But in effect, the plan is the
culmination of a three-year struggle on the part of all PC vendors to leverage
the channel to build a sales and logistical engine more powerful than the classic
direct-sales model. As the new model unfolds, it likely will spell the end of the
classic two-tier distribution model that has seen vendors ship systems to channel
warehouses and then to end-user customers or VARs, said channel and vendor
executives.
In its place will be a clearer definition of what roles each party brings to the
product fulfillment equation and an admission that a combination of the direct
and indirect models offers the most efficient solution, they said.
"The main thing is the reseller model is kaput. And so is the direct model," said
Ed Anderson, president and chief executive of CompuCom Systems Inc.,
Dallas. "The new model is a hybrid model. Some people call it a co-direct
model. Co-location is an example of an activity that can be co-direct, where you
get the best of the manufacturer and the best of the channel."
Len Smith, chief technology officer of Inacom Corp., Omaha, Neb., said
vendors and the channel need to break down the barriers between themselves in
the eyes of the customer. "It's no longer a question of what's the fax number on
top of the [purchase order]," he said. "But when we're tight with our partners,
we can decide what needs to be done and who is the best partner to deliver it."
While Compaq is striving to be first to articulate the new model, other vendors
such as Dell Computer Corp., IBM Corp. and Hewlett-Packard Co. appear
focused on a similar strategy (see sidebar this page).
Compaq, for its part, is seeking to solve the channel inventory dilemma by
retaining ownership of Compaq inventory throughout the supply chain.
"If you take inventory out of the picture, what element of value do the partners
bring in terms of their customers and the vendor, and how do we collaborate in
a way to exploit each others' core competencies?" said Fernander.
The answer is for Compaq to exploit its current co-location program by melding
it with its DirectPlus initiative in a new collaborative Compaq/channel selling
model, he said. A logistical linchpin of the new model will be PartnerDirect, a
program that will be detailed by Compaq on March 29 (CRN, Feb. 15). Under
that plan, VARs will be able to order Prosignias directly from Compaq in the
same way that end users can order them from DirectPlus.
"Prosignia will be the lead platform for our evolving strategies," said Fernander,
adding that other Compaq systems will be rolled into the new model over time.
"PartnerDirect will use a co-locate, CCP [Channel Configuration Program] kind
of logic . . . to sell directly to resellers from Compaq, using distributors who are
co-located."
As part of the new model, Compaq will own all Compaq-branded components
and the co-located partners will work on a service level agreement with
Compaq, Fernander said. "We are trying to get the risk for partners managing
materials out of the equation and put it on Compaq," he said. "Then channel
partners can worry about third-party stuff."
Beginning in April, Compaq also will shift to a single sales quota for each of its
geographic regions. Currently, resellers, DirectPlus and telemarketing reps
operating in the same region all have separate quotas, he said. Under the new
plan, all sales will count toward a single regional quota, making it easier for
Compaq and the channel to collaborate, Fernander said. |
