Gateway’s New Chief Should Be Channel-Minded

A change at the top always leaves room for uncertainty, speculation and unsolicited advice.

In the spirit of all that, I figured I would tackle this week’s resignation of Gateway CEO Wayne Inouye and what the bovine-themed vendor should look for in a replacement.

The sudden resignation of the man credited with leading the Irvine, Calif.-based vendor back to profitability comes as Gateway’s direct sales soften and the company tries to boost its channel business.

Gateway board Chairman Rick Snyder has taken over as interim CEO while the company searches for a replacement.

The official reason for Inouye’s departure is to pursue other opportunities, but that could mean anything, including internal displeasure with the company’s direction.

Click here to read more about the resignation of CEO Wayne Inouye.

Inouye, who took over the company two years ago when Gateway bought eMachines, where he was the CEO, has a background in the consumer-focused retail market. In contrast, Gateway grew up as a direct-selling vendor and owned 190 retail shops dispersed through the country.

The companies’ business models were dramatically different. eMachines was a slim operation that relied on distribution while Gateway had a ton of overhead; its workforce in 2000 had topped 19,000. And before acquiring eMachines, the company had been venturing into other markets, such as flat-screen TVs.

In his restructuring efforts to return Gateway to profitability, Inouye closed down the retail shops and placed eMachines executives in many of Gateway’s top positions. He got shelf space at major retailers such as BestBuy and Circuit City, nixed the TV products venture and cut costs with such moves as sharing components between the consumer-focused eMachines line and the more high-end Gateway-branded systems.

The company had numerous rounds of layoffs, and its employee count is under 2,000 now.

While the moves had the desired effect of straightening the company’s finances, they undoubtedly eroded company resources, including those the vendor could have used to grab market share in the dynamic SMB space.

That dynamic space has been a lifesaver for countless IT companies that took hits from the dot-com bust and the post-Sept. 11 recession.

Vendors attuned to market realities have made great strides to seize the SMB opportunity, while Gateway seems to have focused disproportionately on retail.

The most effective way to reach the vast SMB market is through tight partnerships with the VARs and integrators that understand the needs of small and midsize customers. To make them effective, such partnerships require a solid technical and marketing support structure.

To be sure, Gateway has increased its channel presence in the last year or so, for which it has won accolades from some quarters in the channel. But it must sharpen its channel focus and invest even more in an effective SMB strategy.

For instance, said one Gateway partner, the vendor should have consultants in the field working with VARs to nurture long-term customer relationships.

The company already has taken steps in the right direction by moving some direct accounts to the channel and implementing a policy of compensating account representatives the same for direct and channel sales.

Gateway also opened a call center with 100 account executives to work with channel partners.

Gateway makes indirect commercial sales a priority. Click here to read more.

These are good steps on which to build, and as the Gateway board seeks a replacement for Inouye, it should insist on channel experience as a main qualification for the post.

The worst thing Gateway could do would be appoint a CEO bent on returning the company to the glory days of direct selling and Holstein-themed commercials.

Nothing against the cows, you see, but the direct model has limited potential. And if Gateway has any hope of truly penetrating the SMB market, it has no choice but to work with the channel.

Hiring a CEO that understands this go-to-market tenet would be a smart strategic move.