Reams of paper and barrels of ink have been used in the analysis of the Sunday Afternoon Massacre that led to Eckhard Pfeiffer's abrupt departure from the helm of Compaq. We all know about Compaq's disappointing financials, Ben Rosen's decisive actions and the way the stock market collectively shrugged. What you might not have realised until now is that the entire affair is the fault of resellers.
As I listened to a variety of financial analysts dissecting the remains of Pfeiffer's tenure at the top of Compaq, I was struck by their agreement on some basic premises. The reasoning ran something like this:
Compaq is at a disadvantage compared with direct PC sellers like Dell and Gateway.
Compaq tried to change to a more direct model for selling systems.
Compaq's selfish reseller channel wouldn't let it change.
Compaq was left with a confused and ineffective overall distribution strategy.
Eckhard Pfeiffer had to pay.
The logic spun by these pundits, "reseller channel = death for vendors", is rapidly taking on the same certainty that is normally associated with Newton's laws of motion. It's worthwhile to take a look at what's going on to understand how relationships between vendors and integrators are going to change in the next year or two.
First, all levels of computing power will be sold over the Internet. At IBM's business-partner conference, Big Blue was blunt: "If all you're doing is ful- filling orders, we don't need you." Operating systems have evolved to the point that resellers aren't needed to simply get most systems up and running, and vendors are tired of giving points on sales where nothing more complex than shipping and uncrating is going on.
Most resellers are finally resigned to the fact that desktop-PC sales have moved to a direct model. What everyone, including midrange SIs, should realise, however, is that departmental servers all the way up to mainframes will be - and in some cases already are - an Internet sale. Now, not every complex system will be sold this way, but when customers just need additional capacity to bolster an established application, then it's likely to be a direct sale. Customers want the convenience, vendors want the points, and, frankly, what product-centric integrators want in this matter is irrelevant.
And if that doesn't complicate life enough, every vendor large enough to have a printed letterhead is expanding its services operation. CEOs look at the revenues (and profits) from organisations like IBM Global Services and see a path to happier shareholders and richer stock options. Between financial analysts, the Internet, and vendor service organisations, it would be easy to think that all of the news is bad for the channel. In truth, the news is only bad for product-sales-dependent integrators.
Most vendors still really want third-party sales and support. Particularly when it comes to putting enterprise systems on the computer-room floor, they recognise that they can never build a service organisation that is big enough, or gets close enough to the customer, to win and keep all the accounts they need.
What vendors will demand, though, is that their channel partners concentrate on solutions, ranging from business process to architecture to implementation. The channel simply must become solutions-oriented if it's going to survive. Integrators who thrive in this new channel will be those who make the decision to move their business before their particular vendor partners force the issue.
Curtis F. Franklin is Executive director, technology, of ARN's US sister publication Solutions Integrator