Compaq increases effort to leverage federal channels
- By John Monroe
- Mar 22, 1998
Despite the lure of better margins that come with bypassing resellers and selling PCs directly to federal agencies, Compaq Computer Corp. actually is increasing its investments in the federal channels, according to the company.
During the last year, Compaq has about tripled the staff of its federal organization, said Gary Newgaard, the company's director of federal sales and marketing, although he declined to give specifics. The staff's mandate is not just to work with customers but to work on relationships with its vast array of partners, including resellers and systems integrators, Newgaard said.
Although direct sales may improve margins on PC purchases, "there is added value" in having dealers provide customers with pre- and post-sale services, Newgaard said. "They are part of the Compaq solution."
In fact, every product Compaq sells to the government, whether off its own General Services Administration schedule or one of its various agency contracts, passes through a dealer, the company said. Its roster of partners includes such major vendors as Federal Data Corp., Government Technology Services Inc. and Vanstar Government Systems Group, as well as small dealers specializing in specific customers or in specific regions.
Compaq's strategy flies in the face of the recent successes of Dell Computer Corp. and Gateway 2000 Inc., which last year overtook reseller GTSI to become the two top vendors on GSA Schedule B/C. Industry observers say Dell and Gateway are capitalizing on agency interests in getting the best prices on off-the-shelf products by cutting out the third party.
However, such an approach does not fit Compaq's corporate strategy, Newgaard said. One issue is Compaq's extensive product line, which runs the gamut from portable computers to high-end, fault-tolerant servers from Tandem Computers Inc., which Compaq bought last year.
With its extensive channels, "you really have a tremendous support mechanism, which is probably better than any in the industry," Newgaard said.
The channels strategy also provides an advantage in the federal arena, he said. Beyond its own GSA schedule and its NASA Scientific and Engineering Workstation Procurement II contract, Compaq products are available on a wide range of contracts, including indefinite-delivery, indefinite-quantity contracts and other GSA schedules. The company recently was added to the Department of Veterans Affairs' Procurement of Computer Hardware and Software program contract, which is held by Vanstar.
Bill Johnson, senior vice president of operations at GTSI, said the company can offer Compaq equipment off "25 to 30 different contract vehicles, any one of which I can use, depending on the preference of the government customer."
For example, while GTSI sells Compaq off its GSA schedule contract, the reseller also has the option of using Compaq's schedule, if the customer perceives an advantage in doing so. However, Johnson said, Compaq offers the same prices on either schedule rather than undercutting its channel.
"The channel can do a lot of things that a manufacturer doesn't want to do for the government customer," said Mark Amtower, president of Amtower and Co., a consulting firm based in Ashton, Md. It serves Compaq well because the company "is not set up to do a true build-to-order, end-to-end business model" that other vendors have developed, Amtower said.
Additionally, Compaq goes after a much broader market than Dell and Gateway do, Amtower said, which requires the extended reach that the channel provides.
Compaq unveils price cuts, promos
Compaq Computer Corp. last week cut prices by up to 11 percent on select models in its Deskpro PC product line and up to 15 percent on its monitor family.
The company also announced that, through May 31, customers would receive a Compaq V50 monitor at no additional charge with the purchase of select DeskPro models. The V50, a 15-inch color monitor, costs about $260 on the General Services Administration schedule. Customers can accept the free monitor or apply the cost to a higher-end display.