Compaq's plans strike fear into resellers

Compaq's plans strike fear into resellers

Compaq's strategy announcements following its recent acquisition of Digital have stirred up fear, disillusionment and sadness among Australian resellers.

With its corporate management team in place, Compaq will ditch the Digital and Tandem brand names over the course of coming months, and lay off thousands of employees from both companies, according to sources within the company.

In addition, Compaq will actively market and sell Alpha processor systems because of the recent slippage of Intel's 64-bit Merced chip.

The new company will also take a "customer flexibility" approach to PC sales, offering both direct and indirect relationships with customers and acting as the prime contractor for major accounts.

That may interest end users looking for other buying options, but Compaq's proposals are causing headaches for local resellers.

"Compaq's expanding too quickly and something's going to give," argues Ahmed Fawzi, managing director of Enterprise Technology. "I can see why it's done it, but I think it's going to be resellers that will suffer."

Fawzi said that Compaq's "customer flex- ibility" strategy, in particular, will "severely" impact his business.

"Anywhere in the world, let alone Australia, where a vendor gets involved with end users, resellers are going to be affected."

Frank O'Donoghue, sales director at Applied Business Technologies (ABT), agrees.

"I think the merger is [symptomatic] of Compaq looking to go direct and obviously as a reseller, that's contrary to our future."

The new strategies have prompted ABT, which has been a Compaq reseller for 15 years, to consider adopting products from other vendors.

"We are circling our wagons and looking elsewhere," O'Donoghue said.

Fawzi too said he may look at alternative suppliers in the desktop and PC server market because "with the buyout of Digital and Tandem, Compaq is moving away from that market to a certain extent".

Even David Hayman, managing director of Australia's largest Digital integrator, Integrand Solutions, and an advocate of the merger, expects to "lose a bit of goodwill from the Digital brand" when it changes to Compaq.

But Hayman's biggest concern is how successful the marriage of cultures will be.

"Compaq's been more volume- oriented and Digital's more value- oriented," he said.

However, Hayman claims the merger is a part of a global trend.

"It's a consolidation trend that's swept through the corporate world -through the banking, pharmaceutical, accounting and automotive industries and now the computer industry. Wherever you look, the bigger players are becoming bigger and the smaller players smaller.

"I predict it will eventually happen with IT resellers and distributors too because when it has happened in each of these industries it has then moved to the resellers and distributors under them."

For many resellers though, the merger will have little effect on their business.

According to one leading Sydney reseller, which asked to remain anonymous, those who lodged concerns at the Digital Business Partner Forum in Sydney last week were mainly involved in the desktop PC and PC server markets.

"People did voice concerns, but it was not system resellers," the source said. "It's the PC people that have got more problems because the merged company has to consolidate two product lines."

Compaq officials concede the merger is causing uncertainty in the channel.

"The channel has every right to be concerned because we are such a huge part of their business," said Steve Huey, Compaq's US-based vice president of marketing and communications.

'Business as usual'

Greg Healy, director of Compaq's commercial division in Australia, declined to comment on how Compaq's new channel strategies will be adopted locally, except to say that "it's business as usual for both companies until integration is completed".

"At the end of the day, it's always sad when a brand name disappears," Roger Bushell, Computer Hardware Australia (CHA)'s director of sales and marketing, said. "I wish they'd just hurry up with the merger."

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