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Tech Industry

Compaq to recast dealer network

Compaq will slash its number of authorized computer dealers as part of a far-reaching strategy to improve customer service.

Compaq (CPQ) is working on plans that will radically alter its dealer base, as part of a far-reaching strategy to improve customer service.

One concept being bandied about calls for reducing the number of full-service computer resellers that provide both equipment and support to 500 from around 4000, said sources.

The 3,500 or so dealers who won't in the future qualify as support providers would still sell Compaq hardware. Service, however,would be handled by highly trained dealers that meet certain technological and personnel requirements.

The grand strategy, which will be publicly explained in January, seeks to fulfill promises made by chief executive officer Eckhard Pfeiffer at Comdex this past November, to the effect that Compaq will improve the buying experience for customers by providing integration and support services which are more consistent from dealer to dealer and easier to obtain.

Reorganization could also cut Compaq's costs. "It's a tighter supply chain if you've got 100 [dealers] rather than 1,000," commented Kurt King, computer analyst at Montgomery Securities.

Pfeiffer said in November that the industry needs to improve in customer service, especially if it hopes to continue expanding. He promised that Compaq would begin developing ways to "productize" service bundles--to make service more like a commodity--in order to make this aspect of purchasing computers less daunting.

"Compaq is trying to increase customer satisfaction by increasing the level of services that are being offered to users," explained Troy Wilhelm, vice president of support services at Inacom, an international computer distributor and integrator.

Under the dealer segment of the overall plan, Compaq will increase the prerequisites for computer resellers to function as an authorized full-service Compaq dealer. The requirements will likely call for authorized dealers to employ a minimum number of engineers, for instance.

Dealers who don't qualify under the new standards will still be able to continue to sell products--they just won't be "authorized" to sell them, said Wilhelm and others. In other words, they will lack a seal of approval.

To take care of the customers that buy from dealers which aren't authorized to perform services, Compaq has signed national maintenance agreements with Vanstar and Xerox, said Ahmad Manshouri, senior vice president at Vanstar.

Mike Berman, a spokesman for Compaq, admitted that Compaq is rewriting its channel strategy, but added that plans have not been finalized.

"It is a work in progress. We are asking people, 'What do we need to do to improve our service offerings?'," he said. One of the concepts that has been discussed, he added, is the aforementioned change in the dealer base. "We're looking at all of this," he commented.

Berman did not discuss a time when these changes would be implemented, but a number of sources close to the company have said that such a "channel" reorganization will take place in the first quarter. Channel is the industry term for a manufacturer's network of resellers.

If the plan succeeds, it could have a number of beneficial effects. Most important, customers would be able to obtain services more easily.

Nonetheless, potential conflicts exist and King, among others, said that not all of the details have been worked out.