Entry-Level Servers: Dell Gets Serious About the Channel

Victory in the 2002 VARBusiness Annual Report Card (ARC) survey's entry-level server category could not have come at a better time for Dell. After years of pushing an all-direct distribution model, the vendor is finally making an official move to embrace the solution-provider channel. The company, which just last month announced its first-ever solution-provider program to sell unbranded PCs through systems builders and white-box VARs, scored an overall 71 in the entry-level server category, beating the category average by four points and outpacing channel veterans IBM (69), Sun Microsystems (65) and the new Hewlett-Packard (65).

Report Card Score

The victory comes only one year after Dell came in last place in this same category, and marks a dramatic shift in the entry-level server space, where traditional players saw their fortunes completely reversed. Last year's winners dropped a notch or two, and the relative channel newcomer made a big move to the top. For instance, Dell's impressive showing for its PowerEdge server included first-place finishes in three out of four subcategories,product innovation, support and partnership,and it took second in loyalty, just behind the new HP. It bested its competitors in 10 of the individual criteria, tied for first place in three, and came in second place in product quality/reliability and third place in solution-provider program.

Aside from its win in loyalty, HP's performance turned out to be a major disappointment in the entry-level server category, where its ProLiant and Netserver offerings tied with Sun for last place overall. The company, competing in its first ARC survey since acquiring Compaq Computer, came in fourth in the three other subcategories, and placed last in 14 of 15 individual criteria. The ARC performance marks a clear downturn for the newly merged company, which couldn't live up to the individual performances of Compaq or HP in recent years. (In 2000, for instance, Compaq won the entry-level server category, while HP came in second, only one point behind. And last year, the two separate companies tied for third place just behind IBM and Sun.) The dark spot for HP right now appears to be its solution-provider program, which many VARs say has been unclear at best since the Compaq acquisition. And the numbers showed it: The program came in last place, behind Dell, a company that doesn't even have a formal channel program in place.

Like HP, Sun Microsystems' performance marked a big fall for the vendor and its Sun Fire and Netra servers. Only a year after copping second place behind IBM, the company could do no better than third place in three of the four subcategories: product innovation, support and partnership. For Sun partners, one of its weakest spots was compatibility/ease of integration, an area where VARs ranked it last. What's more, the company was weighed down by a last-place finish in loyalty, in which it posted a 63, a full 10 points behind category leader HP and five points off the category average. Some company-watchers say the low loyalty score is indicative of widespread discontent among the Sun solution-provider community, as well as the many challenges facing Sun, like eroding sales of its gear in a post-dot-com world and the high number of Sun partners that have either filed for bankruptcy, been acquired or gone out of business in the past 12 months.

"The server business really got hammered," says Tom Gotshall, CEO of Technical Solutions, a Troy, Mich.-based solution provider that works closely with both Sun and HP. "Sun traditionally has been our largest revenue number, but today that business is definitely off."

IBM, last year's ARC champion in entry-level servers, this time around was held to runner-up status pretty much across the board, coming in second in all four subcategories. It did, however, manage two first-place criteria wins on its own in product quality/reliability and solution-provider program and tied with Dell for quality of tech support and service/sales partnering, demonstrating the solution-provider channel still holds the Big Blue's xServer offerings in high regard.

But surprisingly, IBM's entry-level server offerings didn't fare as well when it came to loyalty. In that competitive subcategory, solution providers gave Big Blue a low 67, one point below the category average, putting it behind every company but Sun. Only time will tell if IBM can follow iSeries' lead and regain its past momentum in entry-level servers,or if we are seeing the beginning of a Dell dynasty.

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