Dell Not Set To Take On VARs In Small Biz Services Offensive

Dell is holding off on mounting a services offensive in the small-business market against what it is calling a “well-entrenched” VAR channel until it increases its services penetration in the enterprise and midsize-business markets.

“We figure the opportunity for us is to move into the higher end of the medium-[size] business and then drive it down over time as opposed to [competing] with a pretty well-entrenched VAR channel at this point in time,” said Joe Marengi, senior vice president of Americas at Dell, in a conference call last week. “It doesn’t make any sense to us. Even though there are revenue opportunities there, we are going to wait in our life cycle as a company to really try to penetrate that.”

Marengi said that Dell’s enterprise and midsize-business services offensive is only in its infancy. His comments come with Dell boasting that its services business is now the fastest-growing business at the Round Rock, Texas-based company, amounting to a $5 billion annual run rate, or 9 percent of total sales. Dell said its services business is up 36 percent this year and has grown more than 30 percent for the past six consecutive quarters.

Dell also reiterated its plans to continue to build a strong partner network to deliver its services and to aggressively grow its Dell-badged services employees base. The company, however, refused to break out how many of its 52,000 service professionals are Dell employees vs. Dell services partners.

“We have and will continue to have very strong partner elements of our service delivery capability,” said Gary Cotshott, vice president at Dell.

VARs say they see continued shortcomings—not only with Dell’s desktop repair business but also its help-desk business. Those services shortcomings are driving more customers to VARs and system builders, they added.

“Attorneys, doctors and businesses don’t have time to stay on the phone for 45 minutes to an hour to get an answer,” said Steve Plotz, president of Computer Systems, a system builder in Tampa, Fla., noting he has not seen any Dell services penetration into his accounts. “That is why they are willing to spend more with a system builder.”

“Dell is getting their heads handed to them in small- to medium-[size] business,” said Jay Tipton, vice president of Technology Specialists, a solution provider in Fort Wayne, Ind. “People are tired of Dell’s poor service. It’s easier to compete against Dell now because they are not providing the level of service that customers thought they once did. Dell’s services have gone downhill over the last couple of years.”

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