Dell Channel Efforts Start To Reap Rewards

Dell is making progress.

That's the word from solution providers as they assess Dell's new partner program. While they acknowledge the vendor still has a long way to go in recasting itself as a channel player, most say Dell's channel effort shows promise, with some reporting recent wins against Hewlett-Packard Co. in the public-sector market.

Technology Integration Group (TIG), a solution provider in San Diego, recently won a bid with an initial value of about $15 million with Los Angeles County. "In the government arena, Dell is very aggressive in working with you to drive business," said Bruce Geier, TIG president and CEO.

Another large regional solution provider, who asked not to be identified, sold about $6 million worth of Dell laptops into a public-sector account that was previously buying HP. But because of the low margins on the deal, he's not ready to jump in with both feet as a Dell partner. "You have to look at Dell as two distinctly different entities," he said. "One is a free-for-all with thousands of direct reps at the low end. The other is at the higher end with storage and blades where they can adopt the EqualLogic model and treat those markets correctly from day one."

Still, solution providers say Dell is gaining additional traction in the channel by leveraging its existing solution provider relationships in the public sector while building on the EqualLogic channel.

In a May conference call with analysts, Dell Chairman and CEO Michael Dell said the company has added more than 3,500 solution providers since the fourth quarter and its channel business is on a $12 billion run rate.

"In April I laid out long-term goals to drive shareholder value, including delivering sustained EPS growth and executing on our five core initiatives and also growing our retail and channel for scale and profit," Dell said during the call. "While I'm encouraged with our progress, we still have much work to do to restore our competitive position but over time I am confident that our broad, long-term goals, which include our growth initiatives, will drive growth in revenue, earnings, cash and ultimately shareholder value."

The Round Rock, Texas-based vendor launched its PartnerDirect program in Europe and Asia-Pacific in the first quarter and continues to increase efforts to win over solution providers in North America.

"One of the key objectives for us this year is to reach out to partners and get solid feedback and continue to expand PartnerDirect," said Chris Bates, director of strategy for the Americas Channel Group. "Last year, as we were putting the program together, getting face-to-face together was a critical component for learning what it's like working with Dell."

Twenty-four Dell partners met in Austin, Texas, in late May for an advisory council meeting that included a one-hour Q&A with Michael Dell.

The purpose of the meeting, Bates said, was to gather feedback about PartnerDirect from different partners, including storage specialists who came to Dell through the EqualLogic acquisition, managed service providers who came through SilverBack Technologies, as well as network security VARs and some companies that focus on specific vertical markets.

Two solution providers who attended the advisory council meeting said they were impressed not so much with what Dell said, but what they asked.

"When I heard about [PartnerDirect], like the rest of the industry that's had any kind of connection with Dell, I was very skeptical. I've heard this before. It had always come with some constraints and restrictions that didn't make it a viable reseller channel program at all. I will have to say, I was pleasantly surprised after meeting in Austin," said Mike Collins, president of Mike Collins & Associates, a Chattanooga, Tenn., solution provider.

Collins said there were as many Dell employees as partners in the meetings. Dell had people from many departments, including the direct sales side, in the room to learn about the channel.

"It was more about them listening to us. They did a brief introduction, opened up with a presentation and then after the first slide, it turned into a discussion," said Tim Hebert, president and CEO of Atrion Networking, a Warwick, R.I.-based solution provider. "They let the whole thing play out to get the feedback they were looking for. You had three or four people running it, but another 20 people were writing notes, listening. After the break, they were coming up to get more clarity and detail. They came across like they don't have all the answers."

Added Hebert: "The thing I was really impressed about, they're not making channel decisions in a vacuum. I've been in this business over 20 years. I've always seen so many manufacturers make channel programs in a vacuum of what it's really like from a reseller standpoint. For the first time in 20 years, I'm involved with a manufacturer that's not just doing it for show. To get the growth they want to be able to sustain, they're going to have to grow this way. They have to go through resellers."

For their part, Dell executives acknowledge there's still work to be done. The company is fighting a New York lawsuit alleging it engaged in deceptive business practices, and many solution providers will always view Dell as a four-letter word. Channel relationships are likely to see more hiccups before being smoothed out, Bates said.

But the early successes, especially ones in the public sector, bode well for Dell's channel push, solution providers say. TIG's Geier noted that he often makes more working with Dell on public-sector contracts because there is less competition from other solution providers going after the same business. "In the government business, if you go in with Dell and they are aware that you are going in with them, then they don't let anyone else bid," he said.

By contrast, if he partners with other systems vendors, there are numerous other solution providers going for the same business partnering with the same vendors. "Not only do I have to beat [the other vendors] but I have to beat the other 25 solution providers," he said. "In the Dell world, all I have to do is beat the other vendors. I don't have to beat anyone else within my own ranks."

Geier said Dell has come a long way in just over a year in its channel-building efforts. "They put together a deal-registration program, they put people in the field calling on accounts [solution providers] and they put together special pricing to penetrate accounts," he said. "Are they as good as some of the other vendors out there? No. But how can we compare them? One is a baby and the others are adults. But they have made tremendous strides."