Ing C Olivetti & Co SpA’s Olivetti Systems & Networks is intending to develop its indirect channels and is using the UK as a pilot for a pan-European programme. The programme is based on an extensive Coopers & Lybrand report commissioned in November last year, just a few months before Olivetti reported net profits for 1989 down by 43% to $168m on turnover up by 7.4% to $7,258m (CI No 1,416). The report established that some value-added resellers were ignoring the needs of clients and coasting along on hardware discounts that boosted their profits but did nothing for turnover. Coopers & Lybrand actually suggested that many value-added resellers were so adept at money-management and manipulation that they resembled banks. At the same time as European resellers came under the consultant’s scrutiny, Olivetti headhunted Cheryl Shearer, now director of strategic relations. She was with DEC for some 13 years, five of those in indirect channels, and the last two were spent implementing a new strategy. Ms Shearer is a disciple of Dr Louis Stern, IBM’s channel director, who believes that channels are the real unit of competition. Consequently, she has streamed Olivetti’s distributors into three categories – embryonic, emerging, and mature. An embryonic company is likely to be a one-product organisation with little or no geographical spread. Olivetti can provide leads, offer more generous credit terms, and make sure equipment is delivered in a timely manner to prevent stock holding. An emerging company is likely to have a large installed base and will actually need to carry stock. It would probably benefit from market research and requires information from Olivetti on future plans and products, and they may need to be taught project management skills. The mature companies are often multi-vendor, and early product disclosures are essential since these companies bid for projects up to 10 months in advance. They may want Olivetti to be a bid partner in multi-million pound projects. In addition to this sort of advice and co-operation, Olivetti is running training courses on marketing, on growth through mergers and acquisitions, and on recruitment skills. The company is actually considering recruiting and training salespeople for its system partners. This would involve the considerable investment of taking them on its own books, but it believes that it is a highly effective means of risk reduction. Olivetti won’t disclose how much the programme has cost, but Ms Shearer acknowledges that the investment has been considerable and it is an ongoing thing. The company is also prepared to share advertising and promotion costs, and equity investments are likely to grow from the present figure of 300 companies. Olivetti denies that the new programme is akin to teaching one’s grandmother how to suck eggs, and says that the system partners have to make a choice betwen remaining fast-buck merchants, or developing into fully-fledged systems houses. Third channel business constitutes 18% of UK revenue, and Olivetti expects that figure to grow to 40% in three years.
