View from the Hill - #1
|I think it's now safe to say that luck had a good part to play in Sun's successful business development. It wasn't just technology and good timing...||More views from the hill...|
In the mid to late 1980's the computer market was going through two major changes, one of which was obvious to everyone at the time. The other change only became obvious later:- to people who specialized in marketing.
There were were 2 economic reasons for this happening at that time.
Somebody forgot to tell IBM and DEC that the second change was happening. Their reaction to falling system costs was apparently to try and hang onto as much of this business as they could take themselves. These companies already had big headcounts (by today's standards) and they decided that it was better to take the juiciest business directly, to avoid the massive layoffs and restructuring which would eventually come anyway. As the size of each piece of business gradually shrunk, the resellers of those companies were often shunted aside, ignored or regarded as competitors to the internal sales force.
In the meantime, the people at Sun Microsystems knew they wanted to replace IBM and DEC, but they had the practical problem of being a very much smaller company, with tiny headcount, and limited resources. Sun marketers decided to amplify their marketing efforts by working with 3rd party manufacturers to provide compatible add-in products (even when they later became competitors - as with Sun's freely licensed SBus). Sun also had to cultivate resellers who would of necessity develop the business, and make the sale, because Sun didn't have salespeople who could parachute in at the last moment and snatch the business. Sun therefore had to rely on resellers to develop Sun's own business. Resellers gradually learned that this was a partnership which worked in fact, and was not part of the latest mission statement which would be blown away when the next quarter's financial results came in.
By the mid 1990's it became obvious to every manufacturer in the computer market that resellers were very important, and even IBM and DEC tried to change their tune. But by then it was too late to recover lost markets, and change bad habits. By that time Sun was doing over 70% of its business in Europe via resellers, and over 90% in Japan. The US was a little behind that trend, but Sun's target was claimed to be 80% there as well.
Then a new factor came in to possibly change the rules for everyone once again. Its most visible and successful proponent was a small company which didn't have a large sales force, and it didn't have a strong reseller channel. It was Dell Computer - and of course the paradigm shift was the web.
Nearly every business magazine you read today will tell you that, by lowering the cost of sales, the web will remove the need for resellers, and that manufacturers will politely, then firmly shunt their channels aside in the race to supply direct. So, will the SPARC reseller fade away and be replaced by a giant web mall run at www.sun.com?
Well, the interesting thing about the web is that as well as reducing the marketing costs for mega large suppliers such as manufacturers, it also increases the economic reach of micro small niche suppliers. In my view manufacturers and resellers can coexist in a web dominated market in areas where this makes best sense for the customer. True, many resellers who fail to take up the web paradigm will be replaced by competitors with lower marketing costs, but also some manufacturers who fail to meet the web challenge will change role to being commodity suppliers to large resellers who have been better at branding the products they sell. There are many examples where a reseller is always a better supplier to the end-user than the manufacturer of those products. Here are some examples:-
My belief is that nearly every segment in the computer market will see major changes. The companies which will dominate those segments will sometimes be the manufacturers or resellers of today. The learning curve of using the web successfully will be mastered first by those companies which are experimenting with web advertising and brand building today. They have a head start compared with vendors who have web sites which noone can find. And the companies without web sites at all, are likely to be the first casualties in the market realignments to come.
Conclusion:- I think that market analysts who say that the web will kill off the need for computer resellers are wrong. Resellers who take up the challenge of the web can in fact become more successful than many of the principals who now supply them. Customers have simple needs, they just want suppliers that are easy to find, understand what they want, and can reliably supply products and services at a fair price. The web has not changed those fundamental needs. It has only accelerated the communications time frame.
|Sun Microsystems needs
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|Next month's View from the Hill will suggest:-||Sun Microsystems needs Intel and Microsoft to be successful to fuel the insatiable demand for SPARC servers.|
|Marketing Views||STORAGEsearch||SPARC Product Directory||ACSL - the publisher|
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