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December 7, 1987

DEC UK TRIES TO EXPLAIN ITS LABARYNTHINE INDIRECT CHANNELS RESELLER SCHEMES

By CBR Staff Writer

Creative tension is about the mildest term for the habitual relationship between DEC and its resellers, not least because the ground rules seldom remain constant for long. Starting last July, the UK arrange ments have been going through another series of changes, most of which are now in place. Nick Simms outlines the current state of play. DEC UK’s third party sales channel policy makes IBM’s mid-range product strategy look simple-to-understand and cohesive by comparison. DEC’s latest move is to announce the introduction of the Digital Authorised Rental Channel from January 1 next year (CI No 824). Since July when it changed its selection criteria for OEM customers, the company has had no strategy for companies offer its equipment on rental. The Authorised Rental Channel is an attempt to put this right. It is primarily designed to encourage rental companies to penetrate non-DEC sites. Very strict rules governing what the authorised renters can do with kit and software coming back off hire have been set. FlakesBut renters have it easy compared with lessors. DEC offers its own lease contracts and is having nothing directly to do with the latter unless they add value. For instance, all future new DEC kit bought by Atlantic Computers Plc will have to be leased out with software from Atlantic’s CSD software arm. Atlantic and other lessors will however not be penalised for leasing kit acquired on what DEC UK channels marketing manager Cheryl Shearer describes as the grey market. Some of them will also be allowed to buy machines from users and lease them back in cases where DEC’s Customer Finance Services does not want to be involved. Ms Shearer says the changes will make no difference to Atlantic – a company with overweening ambition that DEC is going to have to come to terms with – although its recently-acquired subsidiary, Hamilton Rentals will, like other renters, not be able to hire out VAX 8250s or above. CSD and Hamilton are not allowed to swap kit. The July changes in selection criteria have reduced the number of UK OEM customers from 324 to under 200. Some of the former OEMs have joined a new category, that of Complementary Software House, around 100 others are now below the discount line and have to go to DEC’s two UK authorised distributors, Rapid Recall Plc and Lex Service Plc’s Hawke Systems Ltd for equipment, five were renters who now have to apply for Authorised Rental Channel status, and 11 are flakes who are no longer welcome in the DEC fold. New OEM customers fall into two categories: Applications and Equipment. Applications OEMs bundle just software with the DEC CPU while Equipment OEMs package up both software and add-on hardware. Hoskyns Group Plc is an example of the former, Plessey Co Plc, which sells a flight simulation system, and Ferranti Plc, which sells scientific systems, examples of the latter. OEM customers involved in mechanical or electrical Computer Aided Design or in manufacturing requirements planning software can call on DEC’s expertise in these areas through the Co-operative Marketing Programme. DEC is looking to extend this programme to another 15 areas including finance. The other programme available to OEM customers is the misnamed Authorised Computer Distributor program for those like Mancos, Cambridge On-Line, Zygal Dynamics Plc’s Coulson Heron Associates and MBS Plc’s Alveronic involved in supplying turnkey solutions. Shearer admits DEC is going to have to spend serious money changing the Authorised Distributor name as it is completely misleading. OEM customers can also sign the Complementary Software House addendum which entitles them to a 5% to 8% refund if they let DEC supply the hardware direct in situations where the OEM reseller has won a contract in competition with DEC. Complementary Software Houses are normally companies that supply software but rely on DEC to sell the hardware. Ms Shearer says Logica Plc and Apricot Computers Plc, DEC UK’s largest OEM customer, have been particularly adept at getting the Software House refund. The refund is just one of a number of s

chemes that DEC offers. DEC’s strategy seems geared to keeping the big deals with major end-users for itself. All customers, whether OEM resellers, renters or end-users, qualify for the Digital Business Agreement, a series of discounts ranging up to 21% available to those doing more than UKP150,000 a year with DEC. No discountAs the biggest OEM customers spend only UKP3m to UKP4m a year with DEC, major end-users such as ICI get bigger discounts buying the bigger products direct. Hoskyns, by virtue of its membership of the Martin Marietta Group, and Atlantic, are two of the few OEM resellers in the UK that qualify for a multi-country discount. In addition to the Business Agreement, OEMs are eligible for the reseller product adder, a range of four discounts – 15% on sales of UKP30,000, 10% on sales worth UKP100,000, down to 5% on the 8250 and 8350. These enable the OEM partners to sell small to medium to large users at better rates than they can get dealing with DEC directly. To emphasise this point, top-end VAXBI products carry no discount. It is therefore virtually uneconomic for third parties to sell 8500s and above. Instead they let DEC sell the hardware while they sell the software and qualify for the Complementary Software House addendum. For resellers, leasers and renters going into sites where DEC equipment is unknown, there is another incentive. DEC adds an extra 5% on top of what the end-user paid. Shearer says DEC does this to encourage its resellers to boldly go…. The 5% is intended as compensation for the higher overheads – longer lead times, the need for a higher level sales team – that are required to penetrate new installations. A further effort to attract new low-end business will be made in the New Year when new distributors will join Hawke and Rapid Recall in searching out and supplying the smaller software houses that initially want less than UKP150,000 of DEC kit a year.

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