Panasonic Expands Its Toughbook Channel

Ruggedized notebook maker Panasonic Computer Solutions Company (PCSC), is working on making its channel as tough and as light as its mobile PCs.

PCSC, the Secaucus, N.J.-based developer and manufacturer of the Toughbook line, outlined its product and channel plans at its eighth annual Panasonic TP3 Summer Session, held this week in Phoenix.

It's comforting to attend the session and see Panasonic's yearly re-dedication to the channel, said Dennis Scott, president of Surface SystemsInstruments, a Mill Valley, Calif.-based developer of road construction test equipment and reseller of Toughbooks to customers in that vertical market

"The company could try to go to the consumer electronics market to build sales volume," Scott said. "But it's nice to come here every year and see their commitment to us."

Rance Poehler, president of PCSC, opened the conference with his e-mail address and the words "Welcome Friends" on his opening PowerPoint slide, along with a reminder that he welcomes solution providers to e-mail him directly when they have issues with his company.

"Please write down my e-mail address," Poehler said. "I feel close to this group. You keep me on my toes. This is one of my favorite things of the year, standing in front of you.

Poehler told the over 200 attendees of the conference, representing 56 solution provider companies and 21 technology alliance vendors, that PCSC expects revenue in 2007 to hit about $700 million, up from $600 million last year.

That puts the company in a tug-of-war with Hewlett-Packard for the position of second-largest or third-largest mobile PC vendor, behind leading vendor Lenovo, which nearly three years ago acquired the ThinkPad division of IBM, Poehler told the TP3s. TP3 is the company's acronym for Toughbook premier partner program and also is how it refers to its solution providers.

"We have 275 TP3s," Poehler said. "That's an average $2.5 million opportunity per TP3."

However, Poehler said, PCSC is only number five in terms of volume. The difference is that the average selling price for a Panasonic Toughbook is $2,726, little changed over the past four to five years, compared to HP's $1,134, a figure that has been steadily dropping.

Poehler used that comparison to push partners to sell more Toughbooks. "Would you rather sell a $1,000 unit whose price is always going down?" he said. "Or a higher-priced model with higher margins?"

In order to sell more of those higher-priced Toughbooks, PCSC is recruiting solution providers and offering new channel incentives, said Sheila O'Neil, PCSC's senior director of channel sales.

At the same time, the company is in the process of de-authorizing a large number of inactive partners, O'Neil said.

PCSC, which has consistently sold only through the channel in the 15 years or so since its founding, wants to recruit new partners who can bring the company incremental business, O'Neil said. "We're not looking for those who only respond to bids," she said. "We want partners who can go out and sell a solution."

PCSC, whose channel is segmented by vertical markets such as government, medical, and utilities, is especially interested in recruiting partners who can add value in vertical markets where the company currently does little business, such as construction and mining, O'Neil said. "Especially mining, where customers face unique issues such as (Underwriter's Laboratory) UL 1604, which deals with sparks in explosive situations," she said. "We just introduced two new models for this space."

Some solution providers new to PCSC who have a pressing opportunity can get immediately approved by a company field sales manager, O'Neil said. "But we'll check to make sure they're not just responding to a bid," she said.

Recently, however, PCSC has been tightening up on its channel. It has in the past few months de-authorized 75 partners, and during the month of September will ask all its partners to re-sign with the company, O'Neil said.

"Those who were de-authorized weren't performing at all," she said. "So we know they are not at all interested. When we have them sign up again, we'll find some are not interested in selling our mobile solutions."

NEXT: New Incentives Are Planned

Those who sign new partner contracts or who re-up with PCSC will find they need to work to prove their commitment to the company and its Toughbook line, but will also see new incentives, O'Neil said.

For instance, when companies enroll or re-enroll, they will have to file a business plan with PCSC, she said. "It makes it easier for us to pass on more leads if we know your focus," she said.

However, the company late last month revamped its rules of engagement program under which partners who either arrange a sales call or conference call with a Panasonic area manager, make an end-user presentation, or place a demo unit qualify for an additional 5 percent discount. Under the new rules, the discount now applies for orders of 10 or more units, compared to the 25-unit minimum previously required, O'Neil said.

However, under the new rules, any solution provider who brings in a competitive product after applying for and getting approved for that discount will be denied access to the program for a year, she said.

Surface SystemsInstruments' Scott said the changes to the rules of engagement will be good for solution providers who commit to the Toughbook market.

"Changing the minimum quantity for special pricing to 10 units, including the semi-ruggedized models which previously weren't allowed, is big for us," Scott said. "A lot of our customers are in that range. In the past, it was hard to qualify for smaller customers."

PCSC has also put together a new TP3 marketing tool kit featuring advertising and marketing material solution providers can use to take advantage of the vendor's marketing look and feel, she said.

The kit also includes a marketing grant of up to $10,000 per quarter for qualified marketing activities, with a maximum of only 25 percent able to be used for tradeshow activities, she said.

PCSC is also improving its lead generation program, but will require its solution providers to send lead follow-up reports to the company going forward, O'Neil said.

Poehler, who spent three days at the partner conference sitting in on every session, told solution providers that his company needs to settle a few issues.

One of those is the availability of accessories and components. Poehler said this is a tough issue for PCSC, which builds to order in the U.S.

"We've got to improve that," he said. "Because we're a custom solution company in a build-to-order model, our infrastructure has to creep along with this. Next year, I'd like to hear that we have a 30 percent improvement [over] where we are today. A lot of our IT infrastructure we're putting in place for this now is a 12-month to 18-month process."

PCSC's supply chain depends on 90-day to 120-day forecasts as well as historical data, and Poehler told partners that they can help cut issues with tight supplies. "If you get an order for delivery in 90 days, ask customers what exactly should be included so we can prepare the necessary components," he said. "If it's a big order, and then the customer changes the order, it destroys our supply line."

However, when asked by a solution provider whether certain new orders could disrupt an existing shipment, Poehler said there are certain cases when it could happen.

"I'm sorry, but if our Federal government says they need 1,000 hard drives to support our troops fighting in Iraq, I'll ship it," he said. "I'll then call the customer and explain what happened."

Stephan Herold, CEO of Paradigm Systems Solutions, a Burnsville, Minn.-based channel partner, said his main takeaway from the conference what how PCSC responds to partner issues.

"Our main issue is the availability of accessories," Herold said. "Rance (Poehler) addressed our number one problem. When what seems to be an insignificant part is short, it messes up our entire solution."

During a session on memory modules, one solution provider asked the presenter why memory modules installed in Toughbooks have a three-year warranty, while those purchased separately have a one-year warranty.

Poehler himself answered the question, saying that that doesn't sound right, and promised to call and find out why that is the case. He later told CRN that he made a couple phone calls, and learned that there are internal communication issues that need to be ironed out.