The recent news by Dell that is driving toward a potential private equity deal that will take the company private could be a good thing for the channel as well as for Dell.
A private Dell can focus on long-term value rather than the quarterly cadence that a public company is forced into as a result of the investment community.
Dell is in the middle of a historic transition that requires taking gambles in some cases and making long-term bets in others. It also is still in channel-building mode.
When Dell came forward about five years ago and stated that the former direct-only sales model was a strategy and not a religion, it opened its sales model to the value-added channel in a meaningful way. The truth is, it was already selling through partners but its program was minimalistic and not terribly profitable for partners.
Since then, the computing giant has not only invested in the channel and built a strong team around it, it also has had to race to a larger strategy that goes far beyond PC sales. Now with dozens of acquisitions under its belt and a formalized channel, it is battling the decline of the PC on a worldwide basis.
The solution provider channel is morphing faster than many of the suppliers in the market to a cloud sales model. Fortunately for Dell it has a channel it can leverage, but it needs to invest more heavily and build a cutting-edge partner base equipped at finding the new decision-makers inside of the midmarket and high end of the small-business market that are embracing cloud deployments.
The Wall Street quarterly performance treadmill is an inhibitor to Dell's transition path, in my opinion. A private equity play that takes Dell off the public market means a longer-term business horizon and an ability to invest in such a way that the immediate bottom line need not be a consideration.
UBM Tech Channel data shows that time to revenue from new partners can be shortened considerably but it takes up-front investment. We've built programs that suppliers use to drive demand for partners even as they are being recruited. These make sense because coming out of the gate quickly with sales results in a higher percentage of enabled and engaged partners.
Generally speaking, when a vendor brings on a newly acquired partner it tends to be at least 12, and more likely, 18 months before the partner is generating enough sales for the vendor to begin making a profit beyond the cost of recruiting, enabling and supporting the partner.
Historically, Michael Dell has been able to focus on the details of making his model work. He and his team mastered just-in-time delivery and realized that with component pricing, meaning historic pricing trends continually became less expensive, that fact could be leveraged. In the industry's early days, Dell won many competitive bids by pricing its product on a cost base that would be achieved in future months. Its sourcing and manufacturing discipline became an advantage in the market.
As long as Michael Dell stays engaged in the business after the privatization and we see an investment in its channel strategy, I think we should all view this as a positive for Dell and its channel. Moving away from a PC-centric world and toward a services-driven cloud model is difficult for any company, let alone one the size of Dell, with the pressures of returning quarterly earnings and meeting expectations.
Dell needs to be able to invest for a longer-term return and build out a stronger channel and, in my opinion, a private structure is better suited for that at this juncture.
BACKTALK: Robert Faletra, CEO of UBM Tech Channel, writes a monthly opinion column. You can contact him via email at firstname.lastname@example.org.