Getting good technical support on a consistent basis is, as any reseller will tell you, a challenge of Olympic proportions. As preliminary research for this story I set out to expose the "evil beasts of vendor-land". With dozens of horror stories from dealers swirling in my head, I started by dialling the number to IBM's service centre.
I was primed to sit on hold for 20 minutes before being told that my laptop was out of warranty, and that I'd better hand over my credit card details or risk being hung up on. Succumbing to a moment of devilment, I hit the option for business partners and dealers instead of end users. When I heard the muzak, I was settling in for the long haul.
Quite suddenly, less than two minutes into the whole experience to be exact, the woeful music was cut short and I was chatting to an amiable service guy who, rather than throwing me off the line as soon as he discovered I'd pushed into the dealer queue, talked me out of spending money on parts and service. "It sounds like a glitch in your software," he said. "Get all your important files onto floppy quick smart and run the recovery disk. If you're still having problems give me a call back." Shocked, I thanked him and put the phone down, feeling totally thwarted. This wasn't the way it was supposed to play out.
According to Chris Herbert, analyst for channel research firm Inform, the local notebook market is expected to play an important part in keeping the overall PC market buoyant this year. It makes a good case for vendors to ensure their service models work smoothly. However, in the channel's case these models are dependent on the cooperation of two, and sometimes three or four, different organisations.
"Support has layers of complexities," says Graham Tierney, technical services manager for Toshiba, Australia's top-selling notebook manufacturer and all-round channel sweetheart. Regardless of which methodology vendors choose - authorised services agents, return to base, onsite service or a hybrid of all three - half the job is making it clear to dealers that this is the way the system operates. "Aggravation occurs when resellers don't understand the servicing process," Tierney says.
Few notebook vendors can match Toshiba's ability to offer resellers a stake in the service proceedings without getting panicky over losing control. Toshiba encourages the establishment of regional service centres, some of which do exceedingly well off selling extended warranty and service. Future Group's North Queensland branch, for example, claims to turn over $10,000 a month on Toshiba service warranties. "We did $300,000 worth of Toshiba business in January 2002 alone," says Future's CEO, Tony Pynsent. "Twenty-three out of twenty-four Harvey Norman stores in Queensland use Future as their service agent. When they get a machine in they unwrap it, put a Future sticker on it and wrap it back up again for sale."
Pynsent says he is continually trying other notebook vendors. "As a general rule most of them build up hope, offer you a certain price or whatever, and then don't fulfil on it," he says. In his one and only attempt to deal with Hewlett-Packard he claims he was "back-doored" on the tender by the HP sales rep who gave confidential pricing information to a direct dealer in order to take a greater percentage from the sale. When I recite the scenario to HP's head of mobile computing, Geoff Steele, he says HP has strong channel relations and drives the bulk of its mobile business, both sales and service, through Business Partners. The vendor is cagey when it comes to specifying the criteria for this status but industry speculation sets it at around $150 million per annum in volume sales, well out of reach for many dedicated notebook sellers.
"I couldn't tell you anything about HP's notebooks or service structure because we don't even get a look-in," says John Crabtraa, national sales manager for Mercury Group (also known as Laptop Land). "It's a shame because I'd love to be able to service their machines." It's also a shame for HP, considering the significant boost Mercury Group, one of the nation's largest resellers of laptop computers, would lend to the vendor's relatively low-key notebook range.
Steele does admit, however, that as a late entrant into the mobile space, HP is lagging a little in terms of product range and is still sounding out its service structure. "It's only in the last couple of months that we've got into onsite service. The pilot was run on the East Coast (Sydney, Melbourne, Canberra and Brisbane) and we'll be rolling that out now nationwide," he says.
Movers and shakedowns
Despite riding the learning curve, HP was the biggest mover in the mobile computing market over 2001, more than doubling unit sales and climbing 5 percentage points, according to Inform. Its success was at the expense of IBM, the biggest loser over 2001, which dropped 21 per cent in volume and lost 8 percentage points in market share.
Denis Kerr, executive director of Sharp Australia, a niche player in ultra-lightweight notebooks, believes IBM's loss stems from its attempt to move to a Dell model. "The mass market has the lowest possible return but everyone is trying to compete in it. If you're not making any money out of the product you can't support the equipment properly. What's more, these vendors are cutting their resellers' margins - in government and education deals they opt for return-to-base repairs to keep costs down but at the same time take away from their services agents in that area," he says.
Kerr recently withdrew Sharp's notebook range from Harvey Norman because the retailer's trading requirements - exit strategies and automatic reductions - were too demanding. "The market's moving so quickly that over the space of two weeks you can drop $400 off the price of a notebook. Disties and resellers don't want to take the risk and are asking for price protection," Kerr says.
According to Michael Ritchie, sales manager for Pioneer Computers, this is also the reason that vendors opt for return-to-base repairs. "Service agents have to hold parts in stock, which is expensive. If a model is discontinued it leaves us with a huge inventory which we can't get rid of, and subsequently a huge loss," he says.
In one respect Ritchie is right: the swift supply of parts is one of notebook repairers' biggest problems. While they are fairly lenient toward vendors that run out of stock as an exception, repeat offenders, such as NEC, whose amalgamation with Packard Bell has left it struggling to maintain clarity, get quickly labelled as slow and careless and a brand to avoid.
However, Mercury's Crabtraa disagrees that return-to-base service is cheaper for vendors. "They don't do it better and they don't do it cheaper. If they could, show me some hardcore evidence," he says. With some of its biggest clients moving to IBM machines, Mercury Group is desperate to obtain an IBM service licence. "Our customers are asking IBM to let us provide the service because we're better at it. But IBM takes the attitude that their guys have to do it, it's a global directive and that's that.
"Sometimes it's like dealing with the CIA," Crabtraa says. "A lot of the high-powered execs are very blinkered about the service industry and they don't want to make decisions. I'm sorry but that's not good enough for me - I'm trying to run a business here and expand."
Meanwhile, the current discount environment has given white-box manufacturers a leg-up, especially since their links to Taiwan and Korea mean easy access to high-speed processors and components. Pioneer will release a P4 laptop at the end of this month, reportedly the first on the market, and is likely to undercut tier-one vendors by its traditional $1000-$1500.
With this kind of pressure, the mission is to stay competitive. Compaq's Australia/NZ support centre manager, Dan Verdberg, says Compaq is likely to move to a charge model for non-warranty-related calls, such as misguided software installs/configurations or compatibility issues.
"We end up supporting Microsoft software which we happen to sell with the machine and then the customer gets upset because they didn't do their homework about exactly which problems are covered by us. We do our best to resolve software issues simply as a customer service issue but the goal is to make chargeable support an expectation," Verdberg says.
David Nicol, mobile computing brand manager for IBM, says A+ certification (PC basics/hardware and problem diagnosis) has become mandatory for IBM's internal screening desk staff in a bid to clear calls at the first point of contact. Toshiba is moving its call centre in-house for the same reason.
Still, many of these initiatives have an internal focus and fail to address relationships with partners. Toshiba and Compaq remain the only vendors with scheduled reseller training sessions, for which they charge around $200 a pop. HP supplies information only to business partners and IBM has no plans to educate its channel despite the dealers' proven ability to reduce service calls.
Top 10 models - 2001
1 IBM T Pad T22 900
2 IBM T Pad T20 700
3 Toshiba Satellite 1750XCDT
4 Toshiba Tecra 8000
5 Toshiba Satellite 2813XDVD
6 IBM T Pad T21 800
7 Toshiba Satellite 1730XCDT
8 Toshiba Tecra 8200 1.0
9 HP Omnibook XE3 700
10 Toshiba Satellite 1813XCDT
Who sold what
Notebook sales through the channel were just under 20,000 units, or $70 million, a month in 2001.
Corporate dealer: 45%.
Mass merchant: 23%.
Direct marketer: 15%.
Traditional dealer: 5%.
Independent retailer: 4%.
Vendors move to improve
- Toshiba is moving its call centre in-house to resolve enquiries at the first point of contact.
- HP will roll out onsite service nationwide.
- IBM aims to clear more service calls over the phone to save costs and customers' time. There will be more extensive use of IBM's global diagnosis knowledge base, for example in carrying out symptom searches.
- Compaq is likely to introduce charges for non-warranty support. No date has been set but it is expected to be a worldwide directive.