Indirect From Dell

Well, it's not your father's Dell.

The company that was born into this world as PC's Unlimited with a promise to cut out the "middleman" has undergone an agonizing reappraisal.

The market has changed, the channel has gotten stronger and Michael Dell has made up his mind. He is now ready to work publicly and unabashedly with resellers, compete against other vendors for the channel's business, and allow his salespeople to stop fighting against the likes of Hewlett-Packard, IBM, Lenovo and Acer with one hand behind their backs. It's a new day in the PC industry—at least on paper—and that means the old playbook gets tossed on the scrap heap.

Click here for an exclusive Q&A with Michael Dell.

"In the last several years, we have been growing fairly significant business working with channel partners and solution providers," said Chairman and CEO Michael Dell in an exclusive interview earlier this month with CRN. "And I think, first of all, that's a real business. But more than that, it's just a really important growth opportunity for us to work with partners as we expand the ways that we're going to go to market."

Channel reaction has run the gamut from surprised to skeptical. "Just imagine, they have been a competitor since the beginning," said Babar Yasin, president of Arshco, a Berkeley, Calif., solution provider. "And today they are saying they now want to be an ally. This is a 180-degree turn."

But Michael Dell and other executives say the company has already quietly built its sales through solution providers in North America into a $4 billion annual revenue stream. And, since it is now among Dell's fastest-growing businesses, and around 10 percent to 15 percent of its business in North America, the company won't be so quiet about it anymore.

Dell already has operated a program, Solution Provider Direct, which enlisted a small number of solution providers that could buy direct from Dell at deep discounts and then sell to end users. It is now preparing to roll out the Dell Authorized Partner Program, with many of the traditional benefits—such as deal registration—that Solution Provider Direct did not have.

The company said it has learned from some of its baby steps with the channel. For example, executives say its program to provide unbranded "white-box" systems to solution providers failed not because it was a bad program, but because customers preferred Dell-branded systems to unbranded systems. Dell introduced the white-box program in 2002 but pulled the plug on it in 2005.

MORE ON DELL   & THE CHANNEL: Slide Show: Dell's Channel Zigzag Dell To Sell Systems Through Wal-Mart Blog: What Can The Channel Learn From Dell? VARs To Dell: Good Start, Now Here's What We Want Blog: Dell And The Channel: The Readers Speak Dell Execs Outline Channel Plan CRN Interview: Michael Dell Dell To Diverge From Direct Sales With Major Channel, Retail Push

So after a year in which the Round Rock, Texas-based PC maker saw its sales, earnings and market share begin to decline, Michael Dell is eager to reverse the trend. He told CRN that the channel has shown itself flexible enough and resilient enough to make it the kind of player with which he wants to do business when customers decide they do not want to buy from his company direct.

However, Yasin knows full well how Dell spent years fighting against solution providers in competitive engagements and how Dell's aggressive pricing played havoc with margins. "I have been in this industry for almost 19 years," Yasin said. "My challenge is to turn around and kiss the enemy, that's the challenge I have. Obviously, we are all in this to make money. If [Dell is] bringing in accounts for us where we can sell our services, this is something to definitely be considered."

Yasin said he also has only begun considering implications for other vendors. If Dell can offer Yasin better margins or incentives, HP, Lenovo, Acer and others will suddenly have to compete.

Next: Market Impact Of Dell's Channel Plan