Compaq's Sweetwater deal muddies channel

Compaq's Sweetwater deal muddies channel

Compaq has stunned the channel with the revelation it has appointed IT distributor Sweetwater to renew its attack on the small-to-medium business market.

As reported exclusively on ARNnet last Thursday, Compaq partnered with what it calls an "aggregator" to target Australia's large SMB initially with two product lines, the Deskpro SB (small business) and Armada 100s, and may increase this in the future.

Sweetwater has been formed by the head of IT distributor Triforce, Abbas Aly.

Compaq's general manager of enterprise, Greg Healy, was careful to explain that the term aggregator describes a form of value-added distribution and approach to market that differs from that of its existing distributors, such as Tech Pacific and Ingram Micro.

"We don't want to position [Sweetwater] as another distributor," he said. "Sweetwater will meet a very specific need." Healy said the company's unique proposition is its existing business relationships and "terms of trade".

"I see it as business as usual," Healy said with reference to Compaq's determination to conquer the white-box market with its own brand.

However, according to an ARN source who did not wish to be named, an IT aggregator is viewed suspiciously by most distributors because it sits between the vendor and distributor and can potentially command greater discounts than those available to traditional distributors.

Meanwhile, Sweetwater's appointment raises serious questions about the success of Compaq's existing distributors in the SMB segment.

Fiona Dicker, general manager of Compaq distributor Dicker Data, said she didn't understand the rationale behind the vendor's move, commenting that SMBs are her company's primary focus.

"We've just taken 2200 desktops from them," she said of a Compaq end-of-life clearance sale currently being pushed through the channel.

And with distribution performance up 30 to 50 per cent on last year, she said the decision was even more puzzling and would ask Compaq for clarification.

David Cullen, managing director of Compaq's number one distributor Tech Pacific, was also seeking clarification from Compaq.

"Explain which segments [Tech Pacific] doesn't address," he asked.

"I think there is potential for confusion and I'm sure [Compaq] will clarify it very quickly."

He questioned the use of the term "aggregator", calling it an "off the cuff" term and a "good answer to create confusion". "It has no real meaning behind it," he said.

Sweetwater's appointment is likely to create further confusion in the Compaq channel since it has only just settled down after coping with the introduction of Compaq Connect direct retail stores and its online direct sales initiative.

Cullen indicated Compaq is showing signs its channel strategy is not clear. "Where there is confusion you can lose market share," he said.

Healy was careful to explain the decision follows six months of research into how Compaq can more effectively target the small business segment.

Healy and Compaq's manager of new channels, Rosalie Boyd, are largely responsible for Sweetwater's appointment.

He defended the decision and any possible issues Compaq's channel may have with Sweetwater.

"A one size fits all is clearly not going to work," he explained. He cited Compaq Connect stores as another controversial direct model that has eventually been accepted by the channel.

"I don't see how what we are doing is very different," he said.

When asked what impact the new company will have on existing distributors such as Tech Pacific and Ingram Micro, he agreed the companies will work side by side. Healy would not be drawn, however, on ARN's suggestion that it indicates Tech Pacific and Ingram Micro have not successfully sold the Deskpro and Armada products. "They've had access to those products for some time," he said.

In an interview with ARN, Aly distanced Sweetwater from his other company Triforce but did not detail any further information about the company. "Sweetwater is not owned by Triforce," he said.

Healy said Aly has a "range of organisations" and Triforce will remain one of them. "Sweetwater will meet a very specific need."

And when asked by ARN, Healy said Compaq is not financially backing the company and does not require it to exclusively stock Compaq product. "We don't invest in the independent channels out there," he said.

"We don't force sole relationships on independent channel companies."

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