"The old model of making PCs is no longer viable," Mr Anderson of IDC said.
Ed:
Let us see.
IBM=80% through channels,20% direct
CPQ=2/3 rd through channels, 1/3rd through who knows what?
HPW=100% now under 'construction' (read'reorganization'),Not yet a direct model company,
and then comes DELL =100% Direct---Hummm wonder who got them beat.
..they say the old model of making PC is no longer viable,funny Danny boy thinks CPQ is a lesser risk than DELL,quite a perspective!!!
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Tuesday, April 20, 1999
ENTERPRISE
Crunch time for resellers as direct PC selling grows
CAROLYN ONG
Technology Post-Hong Kong.
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Computer resellers in Hong Kong will have to reinvent themselves as personal-computer makers increasingly adopt a more direct sales model.
Three of the four biggest PC makers worldwide - Dell, IBM and Compaq - are taking the direct route. Hewlett-Packard is adopting a wait-and-see approach.
Dell pioneered the direct model, which cuts out the middleman by using the lower-cost system of Internet technology and call centres to sell to their customers.
IBM officials were emphatic its direct-sales drive announced last week would be limited to North America and that it would take time before the direct model was adopted in Asia, where almost 80 per cent of PCs were sold through traditional channels.
IBM operates on-line PC shops in Japan, Australia and Singapore and a spokesman said it planned to set up at least one in the Greater China market this year.
However, revenues from regional PC shops were "not very significant", the spokesman said.
"It's really only a matter of time before they go direct," IDC Asia-Pacific director of computing systems research Dane Anderson said.
System-Pro, an IBM PC reseller, accepts that its relationship with IBM could be changed.
"There is that chance," its marketing services manager Claudius Lam said, referring to the possibility IBM eventually might side-step SAR resellers to go direct.
Compaq, which went direct about six months ago, already has adopted the direct model in Asia for its global accounts.
IBM also will sell directly to its top enterprise customers, by appointing one reseller in each country to handle these large accounts.
Two-thirds of Compaq's PC sales still are done through value-added resellers and distributors.
"The trend to go direct is inevitable," its Greater China marketing director, Tony Leung, said. "Database technology allowed us to touch spaces we weren't able to, such as custom-building and specifying configurations.
"Supply-chain management is the other thing that enabled us to take an order and start building. As a result, we are better able to deal with obsolescence," he said.
Compaq does not have plans to cut the number of resellers in Hong Kong as it moves towards a more direct approach.
The company's PC sales in recent years have been outpaced by direct-sellers such as Dell, and analysts have criticised it for sticking to its higher-cost, retailer distribution.
"If you are either one or the other, you are limiting yourself on access to your customers," Compaq chief executive Eckhard Pfeiffer said.
Mr Leung said that, unlike Dell, when Compaq went direct it would not bypass its resellers.
"We have a partner-direct initiative which connects our customer-choice model to our partners' system so that they can input orders from their customers on-line," he said.
Compaq's customer-choice model is a supply-chain management model.
"There are some things that value-added resellers can do that we cannot, such as adding value, providing further customisation and support services," Mr Leung said.
System-Pro's Mr Lam agrees. "Basically, we have to provide more services and value-added to become more competitive. We have to expand our services offerings, keep adding value and attention-to-detail.
"The fact is we have an established customer base - so PC vendors will not be in a hurry to cut us off for at least another two to three years."
Beyond that, "we have to become more than just a box-mover", he said.
"In fact, we are doing more than just selling a PC right now. We are adding more and more value to each box that we sell these days and we are continually updating our services portfolio."
There is recognition that both PC makers and vendors must move beyond the box-selling mentality.
"The old model of making PCs is no longer viable," Mr Anderson of IDC said. The cut-throat PC market was among the toughest in the IT industry.
PC makers were being squeezed to the point of surrender as margins shrank because of the free fall of PC prices and the increasingly intense competition from no-name brands.
"The trend is for PC vendors to thicken their revenue streams from selling the accompanying services, support and accessories for PCs, instead of just the box alone," he said.
Compaq and Dell both have virtual malls catering to consumers - shopping. com and gigabuys.com respectively - that offer on-line shoppers more than just PCs.
The idea is to provide customers with a one-stop, on-line destination where they can get PC accessories from digital cameras to inkjet colour cartridges.
IBM, arguably the best-known e-commerce marketer, had no plans to set up such sites, company officials said.
Mr Anderson said he expected the role of resellers to be radically transformed in the next five years.
"We'll see them providing more PC-related services and value," he said.
Mr Lam, of System-Pro, said: "There is no doubt that we [resellers] have to become specialists in adding value, in becoming service providers." |
