Opinion: Noughts and crosses

Opinion: Noughts and crosses

Ever since the July consummation of HP and Compaq's holy matrimony, the channel has waited with bated breath to see how it would affect them.

Based on what was revealed last week, either there has to be more information to come or all the vendor's spin doctoring about rejuvenating and rationalising the channel was nought but hot air.

There was some reduction in the number of direct-dealing resellers - which will fold an estimated $50 million back into distribution revenues - but little else. The real changes will be in the much tougher terms and conditions, which are yet to be announced. That is where HP will be cutting costs from its supply chain in a move that will benefit it more than resellers and distributors.

Many were expecting the number of distributors to be reduced, which in effect did not really happen. Alstom IT and Brightpoint were culled, but the former did not distribute any HP hardware at all while the latter was only doing handheld devices.

Nothing has been done to alleviate the price war raging amongst distributors and resellers and nothing has been done to return profitability to either tier of the HP hardware channel. Indeed, by adding Synnex to the line-up of distributors working with the vendor's imaging and printing operations, the competitive situation has probably just been made worse.

The appointment of Synnex definitely caught most by surprise, but in the end it probably should have been expected. HP in this country is now being power-brokered from Singapore and the relationship between Synnex and HP throughout Asia and the rest of the world is very strong.

Unfortunately for the competing distributors, when Synnex threw its hat into the ring, it was always going to get picked up by HP. That meant Dicker Data missed out.

Maybe HP is avoiding the tough decisions in the hope that the wholesale channel will carry out its own consolidation, either through mergers, acquisitions or collapses. It could also be hedging its risk because it knows there will be enormous credit pressure exerted by the new terms and conditions.

Perhaps it just lacked the intestinal fortitude to make the hard decisions required to truly rejuvenate its channel. The fact remains that the Australian market is not really big enough to have four large distributors servicing it.

As it stands, none of the distributors are attaining sufficient turnover to make it worth their while to apply the appropriate resources to the brand. The margins are too low and the costs of doing business too high.

While there is a deal of difference between the markets that each approaches, until the number of tier-one distributors is lowered, HP will only ever continue to stumble along from quarter to quarter in this country. It will never be able to substantially grow its market share without committed distribution partners who know they have the full backing of the vendor.

Gerard Norsa is ARN's Melbourne-based editor at large.

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