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The more moves CDW makes, the less everyone else seems to know what to think of the Vernon Hills, ILL.-based solution provider.
On one hand, CDW is putting the finishing touches on a geographic realignment of its sales force, the biggest initiative in company history, according to CEO John Edwardson, designed to better serve customers at a local level. On the other hand, CDW has said it wants to partner with VARs in local accounts.
These seemingly contradictory paths have left many in the channel wondering if the company isn’t still trying to figure out what it wants to be when it grows up.
For years, CDW enjoyed unprecedented growth. Wall Street got used to seeing the company outpace distributors quarter after quarter. Although CDW could top $7 billion in sales this year, revenue growth is slowing. Yet, earlier this year, Edwardson sent a letter to shareholders stating that he expects CDW to be a $10 billion company by 2008, a bold statement given the company’s recent performance.
One logical way to get there is by providing services, which fall outside the company’s traditional business. CDW also could grow by acquisition—it certainly has enough cash on hand to pick up a $1 billion company, according to one analyst. Either way, Edwardson’s next steps will have a dramatic impact on the company’s future—and SMB solution providers. CDW has identified 53,000 medium- and large-size customers and placed them within a new sales force structure of five geographic regions in the United States and 32 smaller districts within those regions. With more field sales and technical resources deployed around the country, CDW is counting on solidifying customer relationships at the local level, where solution providers have a strong foothold.
“This will allow us to focus on providing more service offerings around the box, including core services that are simple and scalable: configuration, break/fix and warranties,” Edwardson said last week during CDW’s quarterly earnings call. “It also allows us to provide adjacent services such as installation and migration. Our approach is to design and create solid partner networks and a straightforward go-to-market strategy.”
The trouble is, many of those VARs that CDW might want to partner with also compete with CDW for those same end-user customers. And several channel executives outside the company said developing those VAR partnerships will be a Sisyphean task because many solution providers still don’t trust CDW not to poach their accounts.
“They’ve called and wanted to partner on some clients we’re doing large amounts with,” said Jay Tipton, president of Technology Specialists, Fort Wayne, Ind. “I told them, ‘I'm trying to get you kicked out, why would I want to partner with you?’ ”
Some channel observers question the entire approach. “I don’t know that a partnership strategy will be a winning strategy because many potential partners view CDW as a competitor, particularly if they see them moving into a regionalized sales structure,” said Brian Alexander, senior vice president, equity research, technology distribution, at Raymond James & Associates.
Therein lies the rub. During its earnings call, CDW did not detail any updates to its partner strategy or how changes might be implemented, but Edwardson did emphasize that its services offerings would include a significant partner engagement model to fulfill services. “We’re trying to stay close to what we sell, [to] support hardware,” said Edwardson. “Our configuration and imaging capabilities have increased significantly. With our geographic realignment, we can more effectively work with service partners around the country.”
However, CDW’s partnering history doesn’t provide much evidence for working effectively with solution providers. It’s been a year and a half since CDW unveiled SolutionEdge, a partnership program with solution providers about which CDW has been so tight-lipped it’s difficult to tell whether or not it’s been at all successful. After its initial buzz around a pilot with 10 to 15 solution providers, the company has provided scant details in terms of how many partners it has, how many it wants, or how much business the relationships have generated.
One solution provider that participated in the pilot phase of SolutionEdge gave up on the program a long time ago. “We did not do much with it because the agent fees were not enough to get us excited. We do a lot through the [Hewlett-Packard] agent program and it was not enough to even consider flipping from HP,” said Steven Ellis, vice president of New Orleans-based Bellwether Technology.
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