Compaq (Part 2)
by: Old_Blue_iiis (82/M/Hoboken, New Jersey)
74934 of 74935
...We don't expect significant changes in the other channel segments
(integrators/VARs, direct marketers and retailers), other than now buying
through distributors. VARs/integrators and other resellers no longer
purchasing directly from Compaq will now purchase through Compaq's chosen
distributors at prices likely intended to keep the playing field level rather
than create new winners and losers. (The winners and losers would be among the
distributors themselves. Their role is to sell to the VARs/integrators and
other resellers.) The wild card is CompuCom who is the one integrator now
operating a co-location facility at Compaq. Since CompuCom has successfully co-
located at Compaq, it's possible that CompuCom will continue to buy direct from
Compaq, which could provide CompuCom some level of cost advantage vis--vis
other integrators.
The new team at Compaq is making the tough decisions and making them
quickly. The market should view this as positive. It's probably no coincidence
that Compaq's boldest channel-related announcement in years will come only
three weeks after Ben Rosen's team stepped in. We'd been hearing speculation
about channel consolidation for months but got no resolution under the old
regime. We're hearing that decisions on organizational changes, manufacturing
strategies and the DEC integration are also being made at an accelerated pace.
What's co-location? It increases efficiency by removing steps from the
distribution process. Under co-location, a channel company (e.g., Ingram, Tech
Data, CompuCom) physically locates itself in Compaq's factory to perform final
product assembly and configuration, which typically includes loading custom
software images. Product is shipped from the co-location facility directly to
the end-user in most cases. Recall that without co-location, a system often
travels from Compaq to several different locations within the channel before
finally reaching the end-user, a journey that can easily take from four to
eight weeks. A stop along the way typically includes a corporate reseller who
handles the final configuration of the system, a service not available
(economically, anyway) from the PC vendors themselves. Since the product is
shipped directly from the co-location facility to the end-user, co-location in
theory allows significantly lower inventory levels and a streamlined supply
chain. (See our March 15, 1999 Compaq First Call for more detail.)
Posted: 05/07/99, 1:24PM EDT as a reply to: Msg 74933 by Old_Blue_iiis
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