IBM releases new online direct model

While rumours have been reverberating for months within the channel, IBM will begin advertising its Internet sales site - which is already up and running - over the coming weeks.

The company joins a host of vendors pursuing the direct dollar including Compaq, NEC, Sony and Hewlett-Packard. But IBM's personal systems group general manager, Phil Bullock, is at pains to tell the channel the company will still rely on its support for most of its sales, despite the move towards a direct model.

"The marketplace is changing," he told ARN. "The Internet is playing more of a role and the traditional manner of buying technology has changed. In a way, we mirror that marketplace."

While the move is hardly new - IBM has been selling direct in the US since 1998 - it is the first time such a model has been implemented in Australia.

"We don't expect the decision to be welcomed by the channel with open arms but we must understand that the market has changed irrevocably," Bullock said. "It is not going back, and we are taking advantage of the changes. The channel is now used to vendors announcing direct strategies. They may not like it, but resellers have become philosophical about the marketplace."

"I am never happy when vendors do that because when customers have problems they come back to the store for support - it's a bit hard to buy support when you didn't make any money on the sale in the first place," said Tony Prince of ComPlus Computers.

"Personally, I think it's about time," said Jon Johnston, managing director of system integrator and services company Centari Systems. "All the other vendors have been doing it for a long time and I think they have been at a disadvantage by not having a presence."

Johnston admitted the strategy would probably affect the retail channel, but would have little impact on Centari's business.

IBM had been in discussions with Harvey Norman in the weeks leading up to its site going live. The retailer will continue its relationship with the vendor.

"IBM's online venture is following a model out in the marketplace," Harvey Norman's general manager of computers and communications, John Slack-Smith, said, pointing out that Hewlett-Packard has had a similar scheme for 12 months. "Things are consistently changing and anytime a partner comes into competition with us we are not happy about it."

Slack-Smith added that while he felt Internet sales will be a channel within its own right in the future, it won't be by vendors.

"It will be by retailers like Harvey Norman because I don't think customers will go to a site with a single-brand strategy. There are people who are loyal to one brand but they are in the minority."

IBM's site will not launch amidst the fanfare generally associated with dot-coms and payment for goods will only be via credit card.

IBM has been slowly progressing towards hybrid sales, finding its partnerships are increasingly blurring channel boundaries. Bullock cites the company's recent but successful relationship with Virtual Communities, its affinity employee scheme and the move into logistics partnerships as examples.

"There are still great opportunities in the marketplace, and that will remain. It is critical we continue going forward. We have got to have that balance and if we don't continually amend how we do business, those customers will go to another organisation that can give the service they want.

Bullock has spent the past few months talking to IBM's partners around Australia about the changes. He predicts online sales will account for only a fraction of the market.

"Our primary source of sales will still be through our partners," he said. "I believe those [companies] that provide choice will be strong in the marketplace.

"Larger customers want a direct vendor relationship on certain products, but eight or nine out of 10 deals would involve a services agreement with a partner. Our business partners are the most cost-effective alternative today and in the immediate future."

He also refutes that the move will be the death knell for smaller dealers.

"Our small partners are extremely confident about their abilities. We find the consumer likes the IBM brand and warranty, but they cherish the ability to call the reseller up for information and support. Smaller businesses have great cost advantages over large vendors and will continue to do well in the market by providing service."

That sentiment is echoed by Synergy Plus's newly appointed chief executive officer in Melbourne, Peter Granger.

"We implement e-business solutions for our customers to grow their business so we can hardly complain if IBM wants to run its operations more effectively."

Granger added that resellers who offer solutions would not have a problem with the direct approach.

"I think complex business requirements and solutions cannot be offered over the Internet, such as e-business and content management. We are not really in the same market [as the IBM site] so we don't see it as any sort of threat. Any serious solution reseller would not have a problem."

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