Mixing Apples and PCs: VARs Find They Must Do WindowsBy Pedro Pereira | Print
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Between customers who demand service for PC-based technology and competition for corporate accounts from Apple's direct salesforce, it is now practically impossible to sustain a channel business focused solely on Apple products.
With Apple Computer Inc.'s market share expected to get a healthy boost this year, the casual observer might be tempted to think the increase carries a windfall for Apple's channel partners.
The casual observer would be wrong.
Even though sales of some Macintosh computers are up, much of Apple's growth comes from sales of the iPod MP3 player.
Deutsche Bank predicts Apple, Cupertino, Calif., will sell some 43 million units in 2006, many of which will be copies of the recently introduced Nano model.
Apple's overall market share this year is expected to jump from 3 percent to 5 percent, according to financial services firm Morgan Stanley.
The iPod of course is a consumer product that offers few business opportunities to channel companies. Add to that Apple's retail stores and the company's moves in recent years to take corporate accounts direct, and very little is left for channel partners.
Meanwhile, Apple-authorized resellers, designated by the vendor as "Apple Specialists," constantly get requests from their customers to service PCs as well. Most customers have mixed computing environments, and they want only one service provider to handle both platforms.
It is no wonder that RetroTechs Inc., an Atlanta-based Apple partner, started diversifying into PC products about 18 months ago.
The company has made the move almost begrudgingly because of its historic loyalty to the vendor. But RetroTechs had reached a point at which resisting the draw of Microsoft Windows-based business no longer made sense, said RetroTechs President Jon Nitto.
"In the past three years or so, we started getting more and more requests for Windows server and desktop support," Nitto said.
"Until 18 months ago, we normally said no because we didn't want to provide our clients with anything other than top-notch support. And we just weren't staffed properly to guarantee that for Windows-based support."
But that has changed. Having staffed up to handle Windows-based technology, RetroTechs, which does about $3 million annually in sales, has increased its PC-based share of the business to about 35 percent of overall revenue. Nitto expects that percentage to continue growing.
"We were almost proud to be a Mac-only business," Nitto said. "Mac users tend to be a very prideful group anyway."
RetroTechs opened in 1990 to serve pre-press and publishing clients that use Macs. Its customers are primarily SMBs (small and midsize businesses), but the company also has accounts in Fortune 500 companies that have departments running on Macs.
Large accounts, however, have become a target for Apple's direct sales force.
"Apple has a direct sales group that calls on large accounts, and in some cases, competes with channel partners," Nitto said. "This can be challenging, considering their current market share. It reduces the already small slice of pie.
"Apple is a good partner and they've been good to us, but it's obvious they need to do what they need to do."
Nitto's challenges in running an Apple-focused channel business are far from unique. It's hard to sustain an Apple-only business, if for nothing else, because customers demand PC-based products and services.
Cheryl Stearn, a partner at Apple Specialist Sunrise Computers, Chambersburg, Pa., said that it is possible to run an Apple-only business in large markets with enough customers in graphics pre-press, publishing and related businesses that tend to prefer the Macintosh platform.
"You would really have to rely a lot on services. You would need to charge for your expertise," she said.
But secondary and tertiary markets such as Chambersburg, she said, cannot sustain Apple-only resellers because most customers use Windows. This is why Sunrise handles both.
Some Apple partners would rather not deal with PCs, but market realities and Apple's channel policies have left them no choice.
Apple has exasperated VAR partners over the years with channel strategies that some partners say favor direct sales to the detriment of the channel.
In February, a group of Apple resellers filed a lawsuit against the vendor, charging it with illegal business practices.
The suit alleges Apple held back product from the channel to stock its retail store shelves, sold products to customers under cost to undercut resellers and stole information from channel partners to approach their customers directly.
Attempts to reach Apple for this story were unsuccessful.
For many partners, the launch of Apple's retail stores proved a turning point. Trying to extract a profit from selling Apple product became harder than ever.
"By opening up the stores, Apple also put itself in competition with the channel," said Jennifer Roback, vice president of sales at Praxis Computing Inc., a former Apple reseller in Marina Del Rey, Calif.
Praxis Computing Inc. lost its authorization to carry Apple products around the time the retail stores started opening up.
"Apple could see our volume wasn't substantial enough to keep us as a partner," she said.
Ironically, the reason Praxis had de-emphasized selling Apple product, focusing instead on services, was because customers could buy products cheaper from the vendor.
"Apple is a little crazy in the way they engage the channel," Roback said.
Even before losing its Apple authorization, Praxis already was diversifying because its customers demanded it.
"What our customers really needed at that point wasn't being served by what Apple had to offer," Roback said. "There is less software out there for the Mac than there is for the PC. It became difficult to do even simple things like exchanging files with other companies."
In recent years, Praxis has reinvented itself as a networking VAR focused on Cisco Systems Inc. and Microsoft Corp.
"Many Apple dealers are adopting multivendor solutions to stay competitive," said Justin Crotty, vice president of channel marketing for North America at distributor Ingram Micro Inc.
"And they are doing it while maintaining their Apple business. For many, it's no longer an either/or situation. They can have success with both."
Ingram Micro has about 120 Apple VARs in its VentureTech Network, an elite group of resellers that source product from the distributor, share know-how and often partner with each other for customer projects.
They are part of "Mactrack," a subset of the network that Ingram Micro created to attract Apple business.
RetroTechs joined VentureTech as part of Mactrack. Nitto said joining the network made it easier to build the company's PC practice because RetroTechs could consult with other network members on PC-related mattes.
The company also has taken advantage of VentureTech members' willingness to partner to serve customers that require skills and a geographic reach they don't have. "It's like having 600 or 700 RetroTechs offices around the country."
Nitto said RetroTechs now has 1,500 customers in 42 states. And though the company is intent on boosting its PC-based offerings, it remains just as committed to Apple, he said.
"We'll definitely maintain our Apple Specialist designation," he added.