PC manufacturer Acer learned an important lesson when it
realised its channel was almost non-existent, but that has all
changed. Paul Kunert reports.
At the turn of the millennium, when IT spending began to falter,
margins had already eroded and the constant threat from Dell placed
a shadow over the channel, Acer realised it was time to ring some
dramatic changes.
While rivals flirted with the direct model and struggled to find
their raison d'etre, the Taiwanese PC manufacturer embarked on a
back to basics drive to cut costs and improve efficiencies. “Three
years ago we decided that to continue to supply technology products
through the channel on a global basis, we needed the most efficient
supply chain,” says Scott Dodds, Acer UK managing director.
The vendor invested in internal IT infrastructures to improve
the supply chain process, removing the need to hold inventory
locally — now products are shipped directly to distribution. “If
you go to market indirect, your efficiencies have to match the best
in the industry in terms of managing operating costs. If that is
heavy, you have got a problem,” Dodds adds.
He suggests Dell’s operating costs run at about 9.5 per cent of
its overall turnover. Acer, he claims, sits between 7.5 and eight
per cent: “But we are hoping to hit around seven per cent. Prices
are set by market forces and there is very little, if any,
technology that differentiates you from your competitors, so the
only competitive advantage is managing the cost of your business
and the channel you sell through.”
This is the battle ground for the future and Acer believes it is
already in shape to survive on low-margin, high-volume business.
Attention to cost filters right down to the 35 members of staff the
company has across the UK. “We can’t afford to offer the channel
margins if we employ too many people,” Dodds notes.
But such scrutiny on costs has not always been the domain of the
IT industry, or indeed for the Taiwanese manufacturer, when it was
launched as Multitech in 1979 by current president and CEO Stan
Shih. The company started life designing and manufacturing desktops
as they were before Intel processors hit the market — Shih’s vision
was to help make Taiwan a leading IT innovator and builder.
Dodds says many other IT companies were set up to manufacture
other people’s specifications. “We were set up as an original
design manufacturer, that was part of our culture,” he reveals. The
first 8-bit home computer, the Multitech Professor, was introduced
in 1983, and after four years of “steady” desktop sales the Acer
brand was created in 1987: “The early days were about designing and
manufacturing, but Acer was the creation of a brand.”
In 1989, Acer set up a joint venture with Texas Instruments on
DRAM and a year later acquired Altos, a server company with a
noticeable presence in the UNIX market. But the products which
helped shape the Acer of today came in the early 90s when notebooks
were first introduced. The product came out of the company’s
R&D, bolstered by innovations from several
small companies Acer had invested in, known as Holding Investment
Businesses (HIO).
Massive attack
Dodds says that together with Acer branded products, its Wistron
OEM business and, of course, the HIOs, the Acer Group has a
three-pronged attack on the market. Portables have been the
vendor’s core competency ever since the revamp three years ago, and
today they constitute around 60 per cent of Acer business, with
desktops accounting for 35 per cent. The rest falls to servers.
“This business is about focus and doing the simple things really
well. We have developed a strong position in the notebook market,
and having done that, you want to use the brand position to move
into other markets,” Dodds states. The desktop and server line-ups
have suffered from an obvious lack of focus, but Dodds suggests the
brand traction it created with notebook sales is bearing fruit in
other product sectors, with both desktops and servers posting
decent growth.
In terms of market focus, SMEs have been Acer’s primary target
from day one, which given the current state of the corporate
market, benefited the vendor. But education and local government
continue to be a focus and the Acer channel has hoovered up a lot
of education business, selling entry-level laptops.
The channel is the last area Acer addressed in 1999 and Dodds
admits, “we did not feature on resellers’ minds, so we moved to
form a relationship”. The process of improving its relationship
with the channel has taken three years, but Dodds believes Acer now
has the right distributors, the products and communication, glued
together with channel programmes.
Acer Point is aimed at shopfront dealers, Acer Active is
designed for the true SME reseller, and Acer Executive is being
lined up for corporate resellers as the vendor tries to move up the
food chain. Dodds argues that more importantly, Acer is a 100 per
cent channel-centric organisation and dealers are still struggling
to decipher the mixed messages coming out of its rivals in the face
of Dell’s direct-selling threat.
“We are totally committed to this business and there will be no
change to our strategy for the future. Our key focus and effort is
to make sure we deliver on our promises to the channel. PC
technology has developed massively in the last five years, but the
way we sell it hasn’t changed since the early 80s — you still need
to deliver on your commitments,” he concludes.
Acer
Founded: 1976
Turnover last year: $10.5bn (predicted)
Number of staff: 34,000 worldwide; 50 in the
UK
UK directors: Scott Dodds, managing director; Paul
Cook, director of sales; James Pank, distribution channel manager;
Steven Brown, client services business unit manager; David White,
portable business unit manager
Markets: Mobility, desktops and servers, monitors,
PDAs and education