So Hewlett-Packard SA has decided to terminate its distribution agreement with Rectron after a five-year relationship (IT-Online – 12 February).
Claiming that Rectron failed to meet what is so ridiculously described as "exhibits", HP SPO country manager Mark Perry apparently went to great lengths in an attempt to justify the "sacking" by describing it as a "purely business" decision.
Rectron sales director Zandre Rudolph was a little more diplomatic in his comments on the "divorce", describing the reason as a difference of opinion as to how the market should be addressed.
The bottom line is that a major multinational IT vendor appears to have behaved in stereotypical fashion.
It seems obvious that Rectron, hamstrung by prescribed limitations on what HP products it was authorised to sell in direct competition with two other distributors as well as HP’s own direct sales into the retail channel, failed to meet what were undoubtedly totally unrealistic targets.
I’m willing to bet that after five years and in a tough local market in which it’s becoming increasingly difficult to sell anything other than candles, torches and power generators, Rectron simply ran out of steam in trying to meet arbitrary quarter-on-quarter growth targets dictated by HP.
How multinational vendors come to decide on targets for local distributors has always been a source of great fascination for me. While some claim that targets are realistically set against a wide range of local industry statistics and economic fundamentals, I don’t believe there are many IT industry statistics available in this country that are even vaguely accurate or reliable.
I’m sure general consensus among local distributors would be that targets, sorry "exhibits", are set through a process that starts with the chairman of the board – that fellow who heads up the multinational, answers to the board and who is indecently rewarded with share options based on the share price and never-ending quarterly growth.
The chairman’s vice-president for sales is then told what his target will be and this target is then passed down the line to the local subsidiary in South Africa where it is then passed directly on to the channel -regardless of local market factors.
Acceptance of a target is a non-negotiable condition of being granted access to the brand, along with requirements to adhere to other "exhibits" such as vendor certification of technical and other staff etc.
Having set what is usually an unattainable target, the vendor then indulges in a "carrot and stick" game throughout the channel. "Carrots" in the form of travel incentives, prizes and other rewards and rebates are dangled. And even if targets are met, they are forced ever-upwards through what are referred to as "stretch" targets that attract even greater rewards.
If targets are not met, the "stick" is brought out. Demands are made to increase resources devoted to the brand. Incentives are withdrawn. Hints are made that additional distributors will be appointed. Noises are made about being stripped of distribution rights. And eventually the "ultimate weapon of mass destruction" is rolled out into the channel – the vendor threatening to "go direct".
It’s a game that has been a part of the IT industry since its inception.
It’s probable that HP will discover that Rectron is going to achieve outstanding success with another printer brand and that the new distributor to be appointed will struggle to deliver against HP’s set of "multiple exhibits" in the short term or even the foreseeable future.
It’s going to be an "exhibit" worth watching.
– David Bryant