Solution Providers: Dell Faces Challenges With White-Box Assault

Dell Computer

Ron Kramer, president of All Computer Solutions, Portland, Maine, says Dell has an uphill struggle ahead in the white-box market.

It's "too little, too late," said Kramer. But he didn't stop there. Based on the manufacturer's history, Kramer and some other solution providers said they're wary of any overtures Dell makes on their small-business turf.

"[Dell CEO Michael Dell must be going into politics because he's speaking out of both sides of his mouth," Kramer said. "Several years ago he said it was his goal and objective to put every solution provider out of business and to destroy the channel. The bottom line is he's looking to add value to his systems and that's something the channel has provided to IBM, [Hewlett-Packard and Compaq for the last 20 years. He's bringing a knife to a gunfight."

Ted Hunter, president of Downtime, another Portland-based solution provider, questioned what kind of profit margin he will make on a Dell white box vs. other white boxes or a manufacturer's brand. "I signed up for a Dell reseller program seven years ago and I couldn't do any business with those margins," Hunter said.

If Dell wants to make inroads with solution providers, it should take some lessons from archrival Gateway, which has a "fantastic channel program," Hunter said. Two weeks ago, Hunter became a Gateway certified Network Service Provider and, through Gateway leads alone, has already closed three deals and has a dozen more in the pipeline.

"If Dell wants to work with solution providers, it has to offer us more than two points and a white box," Hunter said. "It's not like they're Microsoft."

But, like every story that gets solution providers' blood flowing, the Dell proposal has sparked an array of reactions. Steve Harper, president of Network Management Group, Hutchinson, Kan., said he and other solution providers serving tertiary markets might welcome a Dell white-box system. The two or three points on the boxes is irrelevant if the relationship opens up service opportunities.

"Let's face it, this is just another arrow in our quiver," said Harper, a staunch channel loyalist. "If I was a reseller in New York or San Francisco, the low points would not make it worth my time. But if I can tie $2,000 or $3,000 in services onto a Dell solution in Kansas then I'm all for it."

Besides, competition is healthy, Harper and others said. If Dell starts building relationships with solution providers, HP and IBM might just treat their channel partners with more respect, they said.

"If Dell being in the channel helps make HP's and IBM's channel programs stronger, then I'll welcome them," Harper said.

Several solution providers wondered if this initial move could signal the start of deeper, friendlier relationships between Dell and the channel. Despite Michael Dell's negative channel comments in the past, it's no secret that Dell uses solution providers to service and support its business accounts.

One solution provider here, who requested anonymity, said Dell's direct-sales force often complains that they have trouble selling into the enterprise because the manufacturer has no inventory and takes too long to fulfill orders. To combat that, Dell warehouses product with the solution provider and uses him for implementation and services. In other words, Dell needs solution providers more than the company lets on, he said.

"The Dell accounts we serve like us because they know the solution provider is a constant and their Dell reps change so often," he said. "I don't make anything off the product, but I make a substantial amount from the services. I'll take whatever they give me."

But when it comes to selling a Dell white-box system, other solution providers said they'll refuse to touch them. Despite the overtures, solution providers say Dell is still the enemy. They worry that Dell will try to steal any account they bring to the manufacturer.

"Dell always wants to know who the end user is so they can take that account direct," said John Samborski, CEO of Ace Computers, Arlington Heights, Ill. "I'd never sell a Dell box because our job is selling customized high-quality systems."

Besides, Samborski added, before Dell can successfully work with the channel, the company is going to have to "earn its stripes."