Dell And The Channel: One Year Later

Grass-Roots Approach
The concept of a $64-billion company taking a grass-roots approach to develop a new way of doing business seems absurd, but it could be necessary for Dell. In some regard, Dell seems to want to build VAR relationships in stealth mode. The vendor's PR team says it won't comment on Michael Dell's schedule, aside from public appearances. If Michael Dell calls on a VAR, you won't hear it from Dell.

One Texas solution provider recently issued a press release heralding its addition into Dell's PartnerDirect program. Noticeably missing from the release: a quote from a Dell executive.

"I think it's in their best interest to keep it quiet. I don't think they want other vendors to hear they are reaching out to potential partners and then having those vendors sweeten their deals with resellers," said Raymond James & Associates' Alexander.

But even keeping things quiet, Dell is gaining traction with enough solution providers for other top vendors to consider it a channel threat, said one distribution executive, who asked not to be named. "They have a story to tell and resellers are listening," said the distribution executive. The only hindrance the distribution executive sees is if direct marketers Insight or CDW take on a more aggressive stance.

"If they figure out how to partner with medium-sized VARs or small VARs, they will gain share," he said. "If you're a small VAR, who really is your enemy? Is it Dell, or is it CDW or Insight?"

The executive said Dell could really gain momentum by engaging distributors, although he doesn't see much interest from Dell regarding such a relationship.

The Prize
Dell has much to gain by building a strong channel program. It has a chance—a chance—to become the only vendor not named Hewlett-Packard to offer a near-complete portfolio of products to SMB customers. In other words, it could trump Big Blue in the channel.

In the past, companies had the ability to invest in a single OEM across multiple product lines to save money. For most corporations, either IBM or HP fit the bill. "Dell was on the outside," Venero said. "Now, IBM peels off its [PC] business, printers. What happened? HP grew revenue share."

A growing number of companies are working more with HP and only in limited areas with IBM, he said. Now Dell comes knocking—through a solution provider—with printers, desktops, notebooks, storage, servers, software, services.

"The [end user] has that two-horse choice again," he said.

Not surprisingly, HP and IBM are growing increasingly incensed by any progress Dell makes in the channel.

When distribution executives get asked about Dell on financial analysts' calls, it really irritates the senior leadership at HP, said one channel insider. "HP is telling these guys, 'Don't do business with the devil,'" said the executive. "What they say publicly has the potential to upset relationships."

One East Coast VAR said that HP and IBM also get angry when he talks about Dell. "Trust me, I get phone calls," said the solution provider.

So what's a VAR to do? To Dell or not to Dell—that is the question thousands of solution providers have to ask themselves as the vendor's reach extends further into the channel.

Mark Crall, CEO of Tech Care Team Inc., a Charlotte, N.C.-based solution provider, believes Dell has the most turnkey programs in town when it comes to small business offerings. But don't expect him to start baking cookies for Dell yet.

"On the configuration and support side, you can't beat it, but we are not diving into the partner program under the belief it is everything we'd like it to be."

No vendor is going to be a perfect partner. Heck, even Symantec, considered a longtime channel stalwart, has started to take some major accounts direct.

"You can have a lion as a pet, but it's still a lion," Crall said. "It gives us all the more reason to realize Dell has consistently proven that their first responsibility is to its shareholders. As a businessperson, I have to always be cognizant of that."

Business owners who have built nine- and 10-figure businesses by not making bad decisions have listened to Dell and liked what they heard. Regardless of past failures, it likely behooves solution providers to at least pay attention.

"I think it's very shortsighted to walk away from a business opportunity because of the past," Venero said. "If you do that, you're going to hurt your employees, customers and business. If it's right for your customer, that's your No.1 job."