VARs: Dell Disty Deal Raises Hopes, Fears

Dell Tuesday inked deals with Ingram Micro and Tech Data that will bring some of its PC products to market via two-tier distribution, a first for the Round Rock, Texas-based computer manufacturer.

"Dell's partnership with Ingram Micro and Tech Data is a positive thing," said Dan Evans, CEO of Nexus Information Systems, a Minnetonka, Minn.-based solution provider that works with Dell. "Dell talks about being a channel-friendly company, but the deal with Ingram Micro and Tech Data is one big step toward proving that commitment."

The vendor is dipping its toe into distribution waters by rolling out a select group of products through its new partners, starting with its Vostro line of SMB desktops and notebooks. Over time, the company plans to push other product lines through distribution, said Greg Davis, vice president and general manager of Dell's global commercial channels.

"This is a big agreement for all three companies," Davis said. "We chose to start with selected desktops and notebooks, but we expect to expand to servers and other product lines shortly." Davis said more than 15,000 solution providers currently buy products from Dell.

Ingram Micro and Tech Data initially will stock 11 desktop and three notebook configurations from the Dell Vostro lineup. Dell said that systems ordered through distribution will be delivered to customers within 24 to 48 hours.

Bruce Geier, CEO of Technology Integration Group (TIG), a San Diego-based solution provider, said the ability to source Dell products through distributors quickly will be a big help with commercial clients.

"Government [customers] are more willing to wait for product, they're not as anxious. But in commercial accounts, it's a problem when you're selling product and you have to tell them it'll be two weeks or more to get this stuff. That's a huge thing," said Geier, who does about $75 million a year in sales with Dell.

Not surprisingly, Geier has already received calls from Tech Data and Ingram Micro to try to win this business.

Whether TIG's mix of Dell business changes dramatically will depend on the terms and conditions with distributors, which neither Ingram Micro nor Tech Data would detail.

Even as solution providers applauded Dell's move into distribution, some still harbor concerns about what the new strategy will mean for product pricing and margins.

Evans hailed the move by Dell as a positive step for the channel, noting that his company prefers to do business through distributors, as long as there is no price hike that is associated with that.

"Consistent price between Dell and [Ingram Micro and Tech Data] would be a benefit," said Evans. "Prices still need to remain lower than what an individual can get off the Web. The fact is we need to have a low cost on commodity items, because if we don't our competition will."

Any potential friction between Dell, distributors and solution providers comes back to margins, according to Tyler Dikman, CEO of CoolTronics, a Tampa, Fla.-based solution provider. The availability of products and the speed with which they can be shipped is important, but so is taking care of the channel, he said.

"It's important for Dell to provide reasonable margins to solution providers while still ensuring Dell has competitive pricing in the marketplace," Dikman said. "If I end up paying the same price or more for what I can get from Dell direct, then providing a distribution channel isn't going to be an advantage for anyone."

Evans agreed, noting that there is a very fine line between Dell taking care of its partnership with Ingram Micro and Tech Data and continuing to watch out for solution providers.

"Even if a distributor adds one or two more points [to the price] it won't work out the way people want it to," said Evans.

Davis acknowledged the need for his company's products to be priced to compete in the marketplace. And while Davis said he doesn't set the price at which distributors will sell the Vostro desktops and notebooks, he aimed to reassure solution providers that Dell products will remain competitively priced.

"We always had to provide competitive pricing to the channel. We enter into this agreement intending to be competitive in the marketplace," Davis said. "Our prices to the channel are a discount off of our best prices online."

Some solution providers said Dell's distribution strategy makes its product line more appealing. Brian Sims, vice president of Advanced Technical Solutions LLC, a Scott Depot, W.V.-based solution provider, said his company has sold Dell's EqualLogic storage products since before its acquisition, but hasn't done more than look at Dell's desktops and notebooks, at least so far.

Currently, Advanced Technical Solutions sells HP desktops and Lenovo notebooks, but that could change now that Dell is available through distribution, he said.

"We've been looking at Dell more and more and trying to figure out how to work closer with their inside salespeople so it's not competing against us," Sims said. "[The distribution partnerships] will make it easier, but it still comes down to their interaction with their partners. It's great that they're doing it, but the commitment has to be there to follow through as a good channel partner."

Dell is also committing to quick turnaround times on the preconfigured systems that Ingram Micro and Tech Data will have in stock.

"Our partners tell us that working directly with Dell is a great thing. They enjoy doing that, but there are cases where they need a product and need it quickly. Ingram Micro and Tech Data meet that need," said Davis.

Nexus Information Systems' Evans is used to a 24-hour turnaround on products sourced through distribution. And for him, it's important that Dell and its distribution partners meet that expectation, he said.

"If an order through a distributor extends out past 24 to 48 hours, then we considered it a constraint product. If that starts to happen, in many cases it is easier to go to a different manufacturer," said Evans.

But not all solution providers are glad to see Dell entering the distribution channel. Jay Tipton, CEO of Technology Specialists, a Fort Wayne, Ind.-based solution provider, believes Dell's distribution deal will bring down margins for everyone.

"Look at what they've done. They sell Microsoft licensing at cost. We can't compete against them without giving the product away. When I go up against Dell, I have to sell Microsoft at cost," he said. "Dell has a good game. I respect them for being able to play as well as they do, but it'll be a long time before I sell Dell."

Scott Campbell contributed to this story.