IBM scales back direct sales

IBM is to cut back on direct sales when it stops taking telephone orders for PCs in four European countries later this month. Instead, the company will refer individuals and small to medium-sized businesses to its channel partners.

The decision, announced in an email to employees on Tuesday, is seen by some employees as indicative of the tough competition IBM faces from Dell in the direct sales market. It came on the same day that IBM announced its decision to outsource production of its NetVista range of desktop PCs. Instead, the NetVista PCs will be manufactured by Sanmina-SCI under a three-year, $5bn (£3.5bn) agreement.

The shift to outsourcing PC manufacture is likely to have an effect on IBM's ability to build PCs to order, said analysts. "When you outsource you lose some control over your ability to configure individual systems," said Brian Gammage, principal analyst at Gartner. "But IBM sells large volumes to enterprise customers, and this run-rate type business (where a lot of machines share the same configuration) works well when you're outsourcing."

An IBM spokesperson confirmed the decision to stop direct sales of PCs over the telephone, but denied rumours that the company is planning to pull out of direct PC sales altogether. "We will still be selling direct," said the spokesperson, "and we are still doing Web sales." But, she said, if an individual or a small to medium-sized business phones IBM now to buy a PC they will be referred to a reseller.

The roll-back applies to the UK, Germany, France and Sweden, where IBM has been selling PCs over the phone for two years now. "We found that small and medium businesses preferred to buy through resellers, and to rely on them for support," said the spokesperson. Affected telesales staff will be moved to large accounts that focus on enterprises.

Peter Foster, principal analyst at analyst firm Ovum Holway, said the shift in focus is in line with IBM's wider ambitions. "Given how tight the PC market is and given IBM's continued push into the services sector where it has said it wants most of its revenue to come from in the future, I'm not surprise to see them chipping away at less profitable operations like this," he said. "They will probably stick to the cheapest way of doing business, but the question is can they continue to compete in the PC market? I don't think they can."

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