Fast Growth VARs Doubt Success of Dell's Channel Push

With Dell set to roll out its formal channel program Wednesday, some of the fastest growing U.S. solution providers say they have no interest in partnering with the vendor, putting in doubt the long-term success of its channel strategy.

Dell's plan calls for it to double the number of North American solution provider partners over the next three years. But the strategic solution providers Dell needs to jump start sales and reverse market share losses to rivals Hewlett-Packard and Acer say they see little chance the vendor's channel push will succeed.

"Where Dell misses the whole thing is that folks that have real channel programs like HP and Ingram understand that its not about a program or about pricing, it's about some kind of relationship," said Arlin Sorenson, CEO of Heartland Technology Solutions, a Harlan, Iowa solution provider that ranked 67th on CRN's 2007 Fast Growth 100 list with 2006 revenues of $11.5 million. "Dell doesn't get that. At the end of the day they are all about selling stuff. I don't see that changing. It's not in their DNA. It's not the way the company was built and run. I wouldn't invest any of my time [in listening to Dell's new channel program] because we are not going to go there. We're heavily invested with HP."

Sorensen's view shows what Dell is up against as it tries to bolster its channel ranks with solution providers already well entrenched with its biggest rival, HP. Greg Davis, Dell's vice president and general manager of Americas Channel Group, told CRN that the vendor already has 15,000 resellers in the U.S. and plans to double that number in the next three years. In order to do that, Dell needs to convince solution providers strategically aligned with HP and IBM to add Dell as a strategic partner.

Michael Dell told the press and analysts last week following the vendor's 2008 fiscal third quarter earnings announcement that the Dell brand represents a welcome alternative to HP solution providers.

"We're finding among this $9 billion Partner Direct business, a large number of partners who really aren't concerned that Dell also sells direct -- realizing our competitors also sell direct in one form or another," he said. "Many are quite excited to have the only full-line alternative to our major competitor out there." But solution providers point out that Michael Dell's comments simply show how far the world has passed Dell by. Dell still clings to the direct versus indirect worldview when in fact its problem is that it's a point-product company in an industry that has moved toward solutions.

"My concern is not so much direct versus competing with them, it's really the fact that their fundamental strategy is price," said Mont Phelps, president and CEO of NWN Corp., a Waltham, Mass. solution provider and third fastest growing company on CRN's 2007 Fast Growth list with 2006 revenues of more than $118 million. "That doesn't do anybody any good. There is no room for value there. It takes the 'V' out of VAR."

What's more, Phelps pointed out that Dell's product suite is limited and does not match up well with NWN's solutions approach to the market. As a result, he said Dell is busy acquiring companies such as SilverBack and EquaLogic to fill gaps. "They are an OEM for a bunch of other stuff and in that sense they compete against us," Phelps said. "Our value is to provide a multivendor solution to the client and Dell seems to see that as their role. Their fundamental strategy seems to become a VAR."

Joe Vaught, COO of PCPC Direct, the 65th fastest growing VAR on CRN's 2007 Fast Growth 100 with 2006 annual revenues of $64 million, said his IBM business remains strong, his HP business is up 400 percent this year, and his Sun business is up 50 percent. "I don't think Dell is going to fit in there," he said. "I think it would do me more damage to have a Dell logo on my [web] page. I think IBM would go nuclear. I don't see any advantage to Dell."