Michael Dell, chairman and CEO of Dell, on Monday told ChannelWeb he is committed to being a strong partner of the channel in the wake of Dell's acquisition of EqualLogic. But he chose his words carefully when asked about how the acquisition of EqualLogic might impact his company's relationship with EMC, the Hopkinton, Mass.-based storage vendor and long-time Dell storage partner, and with CDW, the Vernon Hills, Ill.-based Dell competitor and a top partner of EqualLogic.
What is your message to VARs today?
I think the message is that, for those EqualLogic channel partners, they are immediately grandfathered into the Dell Partner Direct program. And we've got a brand new product line in the form of the PS5000, the Dell/EqualLogic storage series. Essentially what we've done is taken the best of the EqualLogic partner program and put that into the Dell Partner Direct program. Now these partners get everything they had before: deal registration, attractive margins, field channel support that's even increased.
Plus now they can sell the number one best-selling x86 server product line in North America, including the most competitive blade offering in the industry. Our blade offering has the highest throughput backplane. No other competitor has that. It uses 19 percent less power than our competitors' [products].
I think it's all good news for channel partners in terms of expanding the range of things for the 40,000 Dell channel partners. Of course, now we've added the Dell EqualLogic product line which gives them the most competitive iSCSI product line in the industry, which is right at the bull's eye of where storage is growing, and where it has very attractive margins.
If a Dell direct rep sells an EqualLogic product, how does the compensation for that direct rep work?
Well the way it works is, let's say you're a Dell/EqualLogic partner, and you recognize an opportunity inside your customer, and you register that opportunity—so far, roughly 90 percent of the opportunities that have been requested to be registered have been accepted—so you register this opportunity. The Dell sales rep at that point is compensated the same no matter how it gets sold. The channel partner is going to get compensation. And so, if the Dell direct sales team wants to be involved, they're going to be working with the channel to do that. Although typically, once the partner registers the opportunity, it's the partner's account, and the partner is involved.
But let's say that a partner goes to register an opportunity that's already a direct account. What we're finding is, many, many times our sales force will say, "we're selling client products to this customer, we're not really selling storage to this customer, this is a great partner, let's work with the partner. The compensation's the same. So, basically, our sales reps are compensated the same whether it's sold through a channel partner or its sold direct. So they have no incentive not to work with the channel, and in fact every incentive to work with the channel.
I think we're finding all sorts of positive synergy between our inside sales force and our channel partners.
Is there a possibility that a VAR registers a deal for an Dell/EqualLogic, but then the Dell sales rep sees an opportunity to sell an EMC Clariion or a Dell PowerVault product, most likely a Clariion product, into that account, will the Dell sales rep be competing with the VAR in that account? Or will Dell honor the registered deal even if the sales rep could go in with another product?
If a channel partner has registered an opportunity, chances are we're not focused on that account on a direct basis, and that's the channel partner's account.
A more likely scenario, and we're seeing this quite a bit, is we're actually going to the channel partners with accounts that they don't actually have knowledge of or access to, and saying, "hey, here's 15 accounts in your area that know about Dell on the client side, and may be storage opportunities, and why don't you work these leads?"
So we're seeing lots of positive relationships being developed.
So what's going on with CDW? I understand you have had conversations with [Chairman and CEO] John Edwardson over there about the relationship going forward. What's the status there?
I've had conversations with John. I'm not really going to describe specific conversations with a specific customer or a specific partner. I don't really have anything to add there.
Word is that you have been personally calling a number of legacy EqualLogic partners about the acquisition. Is that true?
You know, I call a lot of people. I call you. I call all kinds of people. Sure, I've been speaking with partners, with channel partners. We're having round tables with channel partners. Greg Davis [vice president and general manager of the Dell Americas channel organization] is out and about meeting with channel partners. We've had a number of them out visiting us in Austin. We've been meeting them out in the field. We're on the phone. We're sending e-mails. We're here, and we're available.
Do you have a personal pledge to EqualLogic partners who fear that Dell will compete with them head-to-head for specific deals?
I think what we've said here is that, and I don't know how many of our competitors are in an analogous situation, but I think the fact that Dell has effectively no incentive for our direct sales force to not partner with the channel, that's a huge step. We're seeing very positive reaction from that. We're seeing a very positive effect from that. I think the proof is what happens over time. But so far we're seeing great lift in the relationships. We're seeing lots of new partners come into the fold and sign up. And when you look at the new whole complete product line, Dell's the only company in the world that has a product line that is as complete as this, an alternative to one of the other major companies out there.
But actually, when you look at it in terms of storage, it's the best product line in the industry.
Does the acquisition of EqualLogic impact Dell's sales of the EMC Clariion products?
Our storage portfolio is pretty broad. It includes Fibre Channel enterprise products. It includes iSCSI enterprise products like the EqualLogic iSCSI products, entry-level iSCSI products like the Dell PowerVault. By the way, all these products are available to partners as well. It includes the Dell PowerVault direct-attached storage, tape products, data center solutions for large data center customers. So we have a broad portfolio of products.
The EMC partnership continues through to 2011, and it's been very successful for both companies.
Will the fact that Dell now has EqualLogic products impact the sales of EMC products?
We have a broad portfolio of products. If you look at the last seven years, our storage business has grown from $370 million to about $2.4 billion, about a 30-percent compound annual growth rate. I believe it will continue to grow quite nicely. It will be a mix of technology and solutions across all the various areas that I mentioned before.
What is your goal in terms of direct vs. indirect channel mix for the EqualLogic products, given that EqualLogic had pretty much a channel-only model?
We like to see the channel continue to grow in absolute dollars significantly, and it looks like it's well-positioned to do that. We believe they're both going to grow. More broadly, when we look at channel opportunities, in rolling out the Partner Direct program here in the United States and Europe and across the world, we think there's a huge opportunity for partners with the Dell product line. Our ambitions are very significant in terms of the number of partners, the depths of relationships with those partners. And we believe we've got a very compelling solution and offering to work with those guys.
Since Dell launched the new Partner Direct program, how many new partners have signed up with Dell outside of those coming over with the EqualLogic deal?
I know just from anecdotal experience that there have been quite a few new ones. A significant number. But I'll let Greg [Davis] get back to you with some details.
Channel investment, in terms of dollars invested in 2008 vs. 2007, what are we seeing [from Dell]?
It's up significantly, obviously with the rollout of Partner Direct. Again, we'll let Greg get back to you with specifics.