In The Back Of The Pack: Why Some Vendors Lose

"The acid test is whether there would be an adverse effect on the VARs' business if the vendor went away," says Lina.

Unfortunately, some vendors at the bottom of the APEX scores fail that test. In talking with respondents, we identified recurring key points of failure: ho-hum products, product lemons, premium pricing without premium perception, slow response in replacing defective products, lack of preselling and lousy communication.

Ho-Hum And Then Some

In the monitor arena, Mag InnoVision Co. Inc. and CTX International Inc. were often chided by VARs for their "me-too" and "copycat" products. In a field of six, they ranked fifth and sixth, respectively, in technical innovation. "Mag and CTX are way below cutting-edge," says Bruce Gregory, sales manager for Rock Island Inc., a VAR based in Friday Harbor, Wash. The flip side for CTX, however, is "great pricing, availability and an easy RMA process," he says.

It is difficult to outpace competitors in peripherals technologies. In the disk drive market, for instance, the timing difference between competitors' introductions of new speeds and feeds can be measured in days and weeks, not months and years. Market leader Seagate Technology Inc., for instance, was criticized and docked points for not being innovative or timely in product introductions.

While printer vendors pile on paper-handling options to differentiate, technology leadership is hard to come by. "Instead of new print technologies, we get bells and whistles," says one VAR. In uninterruptible power supplies (UPS), vendors differentiate themselves largely on guarantees and service.

"With a few exceptions, peripheral technologies are mature and commoditized," says Dennis Waid, an analyst for Santa Barbara, Calif.-based market consultant Peripheral Research. "Vendors have the big problem of being under the pricing gun and having to produce leading-edge technology."

Sometimes "me-too" products are what price-conscious customers want. "In commodity products, customers want cheap," says David Bivins, field engineer for BMD Solutions, Simi Valley, Calif. "And they expect those products to work."

Lemons Should Only Grow On Trees

Many VARs take the "once burnt, twice shy" attitude and won't give a vendor who's sold them a lemon a second chance.

Mag InnoVision, last in monitor product quality, "started producing shabby products," says Gregory. Dull images, screens that could only be viewed from certain angles and failures were cited by several VARs.

IBM printers' durability, specifically a tendency to "crack under pressure," was cited by APEX respondents, who put those vendors in last place in product quality and functionality.

Worked hard and critical to basic operations, disk drives seem to be plagued by the most failures. Every vendor was cited for failures by respondents.

Several VARs say they've cut Maxtor Corp., Milpitas, Calif., from their shopping lists, because of durability, compatibility and performance problems. "Maxtor products have given us lots of headaches in the past," says BMD's Bivins. "We put one in a system, and it doesn't work well. We'll take the Maxtor drive out and pop in a Seagate or Western Digital drive, and the system runs fine."

Generally, vendors in this APEX survey expressed surprise at low product quality scores. Most echoed the sentiments of Maxtor's execs, who were stunned at that company's last-place finish in disk drive product quality and technical innovation. "We haven't had any quality problems," says Stu Featherston, Maxtor product line director. Like other vendors interviewed, Maxtor pretests products extensively.

Return To Sender

You want to start a brouhaha at a meeting? Just start talking about RMAs. It's amazing that the simple process of getting a replacement for a failed product isn't simple at all.

"We've had a hard time getting good returns or cross-ship programs for Mag InnoVision's warranty monitors," says Jeff Pullman, service manager for ComputerLand of Wilmar, Minn. Even after much cajoling, returns take about three days and cross-ships two weeks.

Low scores in VAR program administration, communication and ease of doing business often harken back to slow returns. Mag InnoVision in monitors; Maxtor and IBM Corp., Armonk, N.Y., in drives; and IBM in printers all fared poorly in those criteria. All were singled out for slow returns.

Even vendors who fared well in those criteria were cited for RMA policies. At least one RMA complaint showed up in more than three-fourths of APEX vendors' survey results. Even category winners were called on the carpet. VARs said APEX award-winning drive maker WD's "RMA system was on a decline during the past year" and chided the company for not offering "RMAs with advanced shipment online."

"These days, I'm just happy when I can send products back, and the vendor doesn't charge me," says Rock Island's Gregory. "We just assume it's going to take 10 to 14 days to get replacements."

Resell, Presell

The fact that slim margins reduce vendors' ability to provide VARs cushy co-op dollars and promotion makes preselling imperative in all peripherals markets today. "The vendor has to create pull for that commodity product," says Lina Group's Lina.

Preselling is paramount if the peripheral is premium-priced. In the monitor market, Sony Corp. is known for quality and high-end graphics capabilities. Even so, Sony monitors' "premium" pricing makes them a "tough sale," VARs say.

Customers "don't see enough of a difference in monitors to pay a premium," says Bivins. "Customers ask us for the best-priced monitor."

Sony's differentiation problem is exacerbated because its Trinitron technology is sold to OEMs. "People see that Sony's technology is available in other machines that cost less," says Joel Smith, sales manager for WJM Computer in Tucson, Ariz. "They don't see that Sony reserves some of its technology to set its own machines apart."

Failing to sell the "quality perception" is one of the fatal flaws that landed Sony in last place in revenue and profit potential.

Answer the Phone, And Other Requests

Those ubiquitous complaints about hold times plagued APEX vendors again this year, but not all VARs' complaints revolve around interminable hold times. VARs say their voicemail messages seem to get lost in space. "We left a message at the number advertised for Mag InnoVision reseller program, and nobody ever called us back," says Tim Burke, president of N-Synch Technologies, Irvine, Calif. "Unfortunately, not returning calls is common practice for vendors in this industry."

VARs had the same problem with Sony's monitor division and disk drive vendors Maxtor and IBM. All had low scores in communication and ease of doing business.

Sometimes communication problems are stupid beyond belief. One vendor printed the wrong number on a flier, one VAR says. Another VAR reported a vendor that disconnected a sales number shortly after publicizing it in national magazines.

Some vendors have cut costs by downsizing field and telephone support staffs and reducing marketing expenditures. Some hope to offset the loss in personnel with bigger and better Web sites. That helps, VARs say, but it's not a cure-all. Sometimes, they need a vendor rep for joint sales calls and product information.

Cutting marketing support harkens back to Lina's "presell" mantra. VARs complained, for instance, that Mag InnoVision's and Maxtor's lack of marketing support for VARs has "had a direct impact on market share" and "reduced requests" for those products.

People can't get too much of a good thing. When a vendor makes a great product and presells it well, demand often outstrips production capabilities. IBM disk drives, for instance, won first place in quality and last place in availability. Access to IBM drives is difficult, says Gregory. "They appear and disappear from price lists randomly." Sony has a high score in quality, but can't seem to "meet demand for its flat-tube products," says one VAR.

Other VARs complain that it is too difficult to get vendors to admit product deficiencies.

"All companies will obscure weaknesses in their products," says Harold Mann, a principal of Mann Consulting, a $2 million San Francisco-based VAR that resells UPS products by American Power Conversion Corp. and printers by Apple Computer Inc., Hewlett-Packard Co., Minolta Co. and Epson America Inc. His engineers often will work to solve a problem only to eventually find out that a vendor knew about a glitch but chose to hide it, costing him time and his customers money. Typically, Mann Consulting has to dig before a company will admit a product shortcoming, Mann says.

Get the Weed Wacker Out

"We have to be more selective about the vendors we work with," says Stuart Hill, president and CEO of Innovative Software Solutions Inc., a systems integrator in Jackson, Tenn. Vendors need to weed out unqualified partners and focus on those that are truly knowledgeable, VARs say. One company that has turned its channel program around and is working closely with its VARs is Computer Associates International Inc., says Hill. Instead of stealing leads, CA is passing them on to integrators. Likewise, VARs must trim vendor lists to forge stronger working relationships.

Though VARs might have to lower their expectations for VAR programs for peripherals, they do need vendors to cover the basics mentioned above.

"We're aware of the market pressures, so we don't expect many extras," says ComputerLand's Pullman. "But a vendor who makes us pull teeth to get basic services isn't going to be on our list for long."