IBM faces reseller backlash

IBM faces reseller backlash

Angry resellers are moving away from IBM in reaction to the vendor's continuing push into direct sales.

Overt direct-to-consumer advertising and tightening margins has the channel up in arms, with many vowing to push more channel-focused brands in favour of IBM.

"As a reseller I will not promote an IBM unit unless there is no other option," declared Sam Lahdo, director of Comcorp Computers International, a South Melbourne-based reseller who does a lot of business in the notebook market. "We only sell IBM to clients who specifically ask for it. IBM has made it ridiculous to do business."

The move has already hit IBM where it hurts - on the bottom line. According to figures from market analyst Inform, IBM slipped into second place in May behind arch rival Compaq for indirect sales.

"The whole market is down but IBM has had a couple of steep declines," said Inform senior research analyst Hakan Alac. "I think there is too much margin squeeze for resellers so they are showing a preference for other vendors. That's business."

Describing IBM's move as a "failing strategy", Harris Technology managing director Ron Harris predicts the approach will ultimately do the vendor more harm than good.

"They are competing directly with the channel," he said. "When resellers see IBM competing directly, they say, 'why should I be loyal?'."

IBM maintains however, that the majority of leads coming from its direct call centre are fielded through to its channel partners.

"The call to action on our advertising, urges customers to call a central number," a spokesperson for IBM said. Last month, 50 leads were referred to our business partners. That represents the majority of call centre leads."

But the channel remains unconvinced.

"The only time we sell name brands is when the customer wants it," Robert Abor, general manager of Explicit Computer Services told ARN. "They [the vendors] steal your customers and when they try and do it themselves, they botch it up."

The direct strategy has also left the channel confused in regards to pricing.

"Very often, a distributor's price is over and above that advertised on the IBM Web site, but the distributors say it is not unusual for IBM to do that and not tell them the price has changed," Lahdo said. "So to be honest, we are not really interested in pushing their brand name."

Lahdo said he would rather sell a Toshiba notebook than an IBM model, based on Toshiba's channel model and service.

"IBM does a lot of corporate deals, undercutting a lot of resellers but it is also making it difficult for distributors. The chain is missing a link somewhere."

IBM dismissed claims its Web prices undercut distributors as "rubbish".

"We give a discount to distributors but we can't tell them how to price product. There is no way our Web pricing is lower than our distribution pricing," the spokesperson said.

Despite his disappointment in IBM's approach, Harris will remain a partner with the vendor, remaining philosophical about the ebbs and flows of the industry.

"I am not happy at all [with the situation] but I have customers that require the IBM brand," he said. "Not long ago we were in dispute with Compaq about their Connect stores. Now Compaq is a close partner."

Harris feels IBM may have underestimated the collective power of many small resellers who choose alternate products to IBM machines.

Inform's Alac agrees.

"The one thing vendors don't want to mess around with is their reseller base. You would want to leverage the reach resellers have, rather than relying on brand which doesn't mean much these days. It is not like any particular reseller is committed to a specific brand."

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