VARs To Dell: Good Start, Now Here's What We Want

The expected move by Dell to build a full-blown channel program is welcome news to many storage and server solution providers -- not only as a way to take advantage of the Dell brand, but also as a way to add credibility and accountability to a vendor with which many already partner.

However, those solution providers said, the company still has a long way to go to be considered a truly channel-friendly vendor.

A serious channel move could go far to reinvigorate Dell's customer base, said Jerry Pape, principle of Excalibur, a Big Sky, Mont.-based solution provider and Dell partner.

"If it put such a program in place, it would give us something we've wanted, needed and deserved for a long time," Pape said.

That Dell customer base is certainly a big draw to solution providers.

Dell, which is the fourth largest storage vendor after Hewlett-Packard, IBM and EMC, sold about $1.4 billion in storage hardware in 2006, according IDC. A large part of that revenue comes from reselling storage it sources from EMC under a long-term reseller relationship. Dell accounts for about one-third of EMC's midrange Clariion revenue, according to EMC.

Even in a year when Dell's revenue and earnings have been under pressure, the company's storage business has remained steady. In its last quarter, Dell said it saw $600 million in storage revenue, flat year-over-year, while other segments in its hardware lineup saw declines or tepid growth. Last year, Dell also signed a five-year extension to its alliance with EMC.

Dell is also the second largest server vendor worldwide, with revenue in 2006 of about $5.4 billion, according to IDC. However, sales rose a mere 2.2 percent over 2005, while Sun Microsystems server sales rose more than 15 percent during the year to enable Sun to take third place from Dell.

Dell's move to formalize its channel programs would find a lot of solution providers interested in working with the vendor.

Several of them already say the company is a good partner in a number of ways.

Roger Veach, CEO and founder of Advantage Data Systems (ADS), a Chillicothe, Ohio-based solution provider, said his company can get margins on Dell products averaging between 18 percent and 25 percent with a little work, including mixing its services with the hardware in a single packaged solution.

ADS avoids placing orders on a daily basis unless it is for an emergency, preferring to place one big order every couple of weeks, Veach said. ADS also keeps several Dell notebook and desktop PCs in stock to quickly fulfill a small order or replace a problem unit without forcing the customer to wait for a week or more, and focuses on providing custom configurations customers cannot get online, he said.

Eryck Bredy, president of Bredy Network Management, an Andover, Mass.-based solution provider, said he currently resells Dell hardware to customers to ensure control of his customers' accounts, and that a formal channel program would make it easier for him to increase his Dell business.

For now, Bredy said, his biggest advantage to working with Dell is access to applications, such as VMware's GSX server virtualization software or Citrix applications, that smaller solution providers typically may not have access to. However, Bredy did say that VMware this week authorized him to work with the vendor direct.

"I love the fact that Dell is there," he said. "It means you have access to software you don't already have and otherwise couldn't get."

Richard Taylor, national sales manager at ScImage, a Los Altos, Calif.-based medical ISV, said he can get the same margin with Dell that he can get with IBM and Hewlett-Packard thanks to his ability to source from all three vendors through his distributor, Arrow.

"There's a minimum margin we need," Taylor said. "For Dell, we'll go to Arrow and tell them we need this price to win the hardware deal."

Lynn Runnals, vice president of Multimax, a Herndon, Va.-based solution provider and Dell channel partner, said that a Dell sales representative visited his office just this month to discuss the potential of expanding his government sales of Dell storage products into commercial accounts, a sign he took as positively.

However, said solution providers, Dell still has a lot of work to do to prove it can offer a world-class channel program.

The main problem with Dell as a channel partner now is that the company is mainly an order-taker, Bredy said.

Dell will give a quote when called, but then doesn't follow up with the solution provider, he said. "If we do a Dell deal, it's to control the account," he said. "But it's not the best way to go about building a storage and server practice. I'd take a second look at Dell if they offered a strategic partnership. Not just take an order, but offer leads, deal registration, and sales support."

For Excalibur's Pape, a formal Dell channel program is good for the vendor in that it would force the company to change many of the ways it deals with customers, ways such as poor technical support that have led to a decline in customer satisfaction over the years.

"When you ship as much hardware as Dell does, errors get made," Pape said. "But when you can't escalate the service, you can end up screaming. If Dell has a channel rep, someone we can talk to, it will have accountability."

A true channel program would also hopefully result in improved channel rep relations, Veach said.

Currently, Dell channel reps change every six months or so, Veach said. "A formal channel program would make them more consistent," he said. "They wouldn't change just as you are getting to know the rep, and the rep is getting to understand your problems."

Such a program would also force Dell to make improvements to its products to make them easier for solution providers to sell and service, Pape said.

Dell's server and storage hardware is as good as any, but there are problems in the details, which can frustrate solution providers, Pape said.

"We have a problem when a hard drive fails," he said. "Not that the hard drive fails -- that's not a Dell problem. But when you use their hot-swap hard drive trays, they don't include the drive sled. It's easy to change the sled. But Dell uses incredibly cheap screws, which strip easily. Other vendors ship the entire sled."

NEXT: If Dell gets its program right, this VAR says he wants in.