DIRECT Vs. INDIRECT

Hewlett Packard (HP), the largest IT company on planet Earth, clocked US$ 100 billion in turnover this Year. It is the first time HP crosses this landmark. Mark Hurd, the Chairman & CEO of HP, commented during the celebrations, “this is as much the channels Victory as it is HP’s”. By this, he had very clearly acknowledged the role played by HP channel partners worldwide in the landmark achievement of the company. After taking charge of HP from Carly Fiorina, Mr. Hurd had steadfastly brought in the channel focus in HP. He had resisted many temptations and had gone against many advices in continuing to bet his stakes on the channel. It is said that he gave unreasonable targets to his sales team with the clear knowledge that without channel to assist, his team wouldn’t meet these targets. All his actions in HP had a channel base and today HP and its channel partners across the world are rejoicing on the HP achievement.

There is another top IT Products company; Dell Inc; whose success in the past was solely based on its unique selling strategy of going direct to the customer. Till this year, Dell never looked at the channel as a means of its go to market strategy. Dell’s direct strategy was the topic of discussion for the last one decade in Business schools, Consultants and other Management podiums. Everyone had praised the role played by its most efficient supply chain in going direct. Dell had been able to make available its products to the customers at the lowest price points, which its competition could never imagine. Going direct, in such a competitive market was deemed as mostly beneficial to customers and hence, customers too encouraged the model, notwithstanding the fact that they were not getting some of the comforts from Dell, when it came to implementation, customization and to some extend, the post sale support.

It would suffice to say that Dell became what it is today because f its unique direct selling strategy. Otherwise, this startup company would never have survived the competition from Compaq, IBM, HP and other senior global IT players. Going Direct was the best idea that happened to Dell. Things are different now. The company is now reeling under the overheads of its own direct selling strategy. Added to that is the depletion in sales margins. Dell is now serious about building up a channel of its own. The current plan is to make the new channel augment its direct sales revenue, but by a later date, it may have to adopt the HP strategy of total Channel dependence.

The question now is, which good, direct or indirect? The answer is, both are good. It all depends on the timeframe and the market dynamics prevailing to decide whether companies go direct or indirect. However, what needs to be understood by global giants is that, over a period, such big organizations will have the impact of its overheads and therefore, it is always better to nurture a channel whose cost of selling is much lesser than its principals.

All strategies are time centered. That is why the adage “an idea whose time has come” is still in vogue.