Dell's Silences Cast Doubts On Channel Strategy

That's the warning from solution providers growing frustrated over Dell's failure to communicate any concrete details of its impending new channel program. Since Dell announced last summer its intent to pursue a formal channel strategy and actively recruit more VARs, solution providers say they have seen and heard nothing but rhetoric, mystifying reseller contracts and a string of acquisitions that cast the vendor's partnering strategy in doubt.

While Dell has promised to roll out a formal channel program by year's end, the six-month quiet period is unsettling and confusing, solution providers say. Muddying the waters is Dell's decision to acquire SilverBack and EqualLogic, both channel centric organizations, as it formulates its channel plans.

One EqualLogic partner, who did not want to be identified, said he is ready to move that business lock, stock and barrel if he doesn't get specific information right now on how Dell plans to embrace the channel and protect the heavy investment he has made in EqualLogic. "It's very difficult for me to believe Dell will embrace the channel after 25 years of bad mouthing the channel and selling a half percent over cost," he said. "I want the specific math and details on how Dell is going to protect me and my business."

During the quiet period too, Dell has stepped up its partner recruitment efforts and is in the process of signing new VARs to resell Dell systems. But the reseller contract offered to VARs has serious flaws, according to solution providers, most notably one that restricts where and to whom they can sell Dell products.

In the "Appointment" section of the contract, a copy of which was obtained by CMP, the document says, "You may resell Products to end-users approved by Dell, in Dell's sole discretion only after you have added value to the Products through the addition of hardware, software, or services."

But Dell restricts the markets and customers solution providers are allowed to go after. In bold upper case type, Dell cautions, "YOU MAY NOT RESELL THE PRODUCTS TO CONSUMERS OR TO DELL'S LARGE CORPORATE ACCOUNT, GLOBAL, GOVERNMENT, EDUCATION AND/OR HEALTHCARE SEGMENT CUSTOMERS."

"What's left? Those are the only markets I play in," said one baffled solution provider who asked not to be identified.

Another small business and minority contractor who is trying to partner as a set aside contractor with larger Dell government VARs says the vendor won't give them any discounts beyond the Dell direct government price, meaning they get zero margin for reselling the vendor's products.

"Dell has told us that the price we are giving you is the same price that we are giving our large [federal government] customer," said one solution provider who is trying to partner with the vendor and asked not to be identified. "It feels like the old Dell." Dell channel executives did not return calls late Wednesday seeking comment. But a source inside Dell acknowledges that the vendor will "stumble along the way" as it formulates its channel plan but says the vendor realizes its has exhausted the direct model and is now determined to "accelerate growth without cannibalizing" its existing business.

As Dell executives work through channel issues, solution providers familiar with the progress inside the company say the vendor's Federal Government unit is taking a leadership role in crafting the new channel program. The solution providers point out that the unit has a long history of partnering with the channel and is far ahead of Dell's commercial unit in dealing with channel issues such as deal registration and compensation. For example, Dell's Federal sales reps are compensated the same for a channel sale as they are for taking business direct. And the unit has stepped up to the plate when its sales reps sell business directly into a partner's account.

"Dell has given me credit when they've come into my accounts and taken some of my business direct," said a Dell solution provider who asked not to be identified. "Dell sent me a compensation check for the business. When HP [Hewlett-Packard] takes some of my business direct, they just tell me they are sorry and it won't happen again."

Still, solution providers worry that unless there is a major cultural shift within Dell, any channel program, no matter how well it's crafted, will amount to little more than rhetoric.

"You can come out with a new channel program, but unless it comes from the top down, Dell people won't honor it and it's not going to work," said one solution provider trying to work with Dell.