Dell Through Distribution? Don't Hold Your Breath

CDW CEO John Edwardson may have famously taken the sledgehammer to a Dell notebook so many years ago, but there's a long line of people who have wanted to take similar whacks.

And ever since Dell started hinting at a channel program, getting a distribution executive to broach the D-word subject has been near impossible. You're more likely to get a wince and a pause than an answer. For one, Dell is also a huge customer for distributors, who supply the Round Rock, Texas, company with all the third-party products that it sells to customers. So they tread lightly.

But now that Dell is tearing down the channel equivalent of the Berlin Wall by forming its solution provider initiative, distributors are being forced to answer the big question: Will Dell turn to two-tier distributors to better reach the small-business solution providers?

On one hand, the relationship makes sense. Dell may have the logistics to reach small business partners, but it certainly doesn't have the relationships. Meanwhile, it's hard for distributors to tell their shareholders that they're not interested in billions of dollars in added revenue.

But on the other hand, it's still Dell and it's still the channel, an oil-and-water mix of epic scale.

At this week's Raymond James IT Supply Chain Conference in New York, we posed the question to Greg Spierkel, CEO of Ingram Micro, the world's largest IT distributor.

His answer? A Dell-Ingram distribution relationship is not likely to happen any time soon. "I think not much will change in North America. I'd be surprised if they did much with distribution here," Spierkel said. "I can see them using some smaller distributors in tertiary markets, like Turkey for example, or Africa or the Middle East."

Dell would have to be a lot more forthcoming on its plans before any relationship could be formed, he said. "They're not playing their cards on what they're going to do. A lot of us, and rightfully so, probably won't do much until they have a good program. There's risk involved [for distributors]. If we try things and they don't work, we've lost good will potentially with vendor partners and resellers," he said.

At Ingram Micro's last VentureTech Network conference, Spierkel said he gauged the temperature with several dozen solution providers regarding Dell in the channel. About one-third of the VARs said they had been approached by Dell, and about 1 in 10 have been selling the vendor for a while on a one-off basis, he said.

"[Working with Dell] is a double-edged sword. They're a $60 billion company but is their DNA going to change and is it serious and long term? I don't know," Spierkel said.

Last month, Greg Davis, vice president and general manager of Dell's Americas channel organization, told CMP Channel that he's had conversations with distributors, but that nothing substantive had resulted. "We wouldn't be doing our jobs talking about all the possibilities and ideas if we didn't talk to them," he said. "It's just a matter of prioritizing. I've got my hands full doing what we're doing now. But we're very open to talking about it in the future."

Meanwhile, Hewlett-Packard, which once tried to emulate Dell with a great direct push before reversing field by re-embracing the channel, knows firsthand the challenge that Dell faces.

"I don't know if everyone knows how difficult it is to basically establish a trusting relationship with either the retail or commercial channel," said Cathie Lesjak, executive vice president and CFO at HP, at the Raymond James conference. "We worked long and hard to establish relationships with our retailers, and we're at a time where we've lost a lot of money trying to figure out how to optimize relationships that are both good for the retailer and good for HP. We don't believe that anyone can come in and run it smoothly from the get-go. We don't believe that about any competitor."

-- Additional reporting by Jennifer Lawinski and Chad Berndtson