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Dell's Sniper Play

Dell's decision to kill its white-box solution provider initiative last week is just another example of the company's sniper channel strategy.

Dell's strategy has been to create confusion and turmoil in the field by picking off one or two partners at a time with half-hearted channel shots and then either letting those partners twist in the wind or cutting them loose if they don't like the company's terms and conditions. That kind of partner initiative is no partner initiative at all.

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STEVEN BURKE
Can be reached at (781) 839-1221 or via e-mail at sburke@cmp.com.

The dirty little secret is that Dell is more interested in feeding Wall Street lapdogs the direct-sales myth—and anyone with even the slightest knowledge of how computer solutions are being purchased by small, midsize and large businesses today knows it's a myth—than in moving forward with a strategy to significantly expand its market share by providing real solutions to businesses. All of the heavy lifting—from solutions design to product selection to configuration and support—is done by channel partners.

So why has Dell been successful in winning over a number of channel partners? One reason is VARs are attracted to Dell's robust logistics engine, basically the ability to deliver products quickly and reliably. The fact is Dell is a distributor of low-margin products. And it is a highly efficient distributor of low-margin products. Dell is a supply-chain innovator, not a product innovator. Those VARs that Dell is picking off, though, are not stupid. They know the difference between a real partner and a charade. The logistics card can only be played for so long.

Dell is the Wal-Mart of the computer industry. And as such, the company is more interested in feeding its highly optimized supply chain with an ever-expanding set of low-margin, commodity products. Plasma TVs are the latest and greatest example of Dell's never-ending drive to feed the logistics Little Shop of Horrors with new products in every imaginable segment of the IT and consumer electronics markets.

Don't get me wrong. Dell is a great company that has consistently delivered. But even the biggest and best companies will run into a wall eventually if they fail to change. That could very well happen to Dell as it continues with its sniper channel strategy. The fact is, the amount of Dell products and services influenced by the channel each and every quarter is substantial and by ignoring it, Dell risks doing harm to its business.

What do you think of Dell's sniper strategy? Let me know at (781) 839-1221 or via e-mail at sburke@cmp.com.

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