VARs To Dell: Good Start, Now Here's What We Want
However, those solution providers said, the company still has a long way to go to be considered a truly channel-friendly vendor.
A serious channel move could go far to reinvigorate Dell's customer base, said Jerry Pape, principle of Excalibur, a Big Sky, Mont.-based solution provider and Dell partner.
"If it put such a program in place, it would give us something we've wanted, needed and deserved for a long time," Pape said.
That Dell customer base is certainly a big draw to solution providers.
Dell, which is the fourth largest storage vendor after Hewlett-Packard, IBM and EMC, sold about $1.4 billion in storage hardware in 2006, according IDC. A large part of that revenue comes from reselling storage it sources from EMC under a long-term reseller relationship. Dell accounts for about one-third of EMC's midrange Clariion revenue, according to EMC.
Even in a year when Dell's revenue and earnings have been under pressure, the company's storage business has remained steady. In its last quarter, Dell said it saw $600 million in storage revenue, flat year-over-year, while other segments in its hardware lineup saw declines or tepid growth. Last year, Dell also signed a five-year extension to its alliance with EMC.
Dell is also the second largest server vendor worldwide, with revenue in 2006 of about $5.4 billion, according to IDC. However, sales rose a mere 2.2 percent over 2005, while Sun Microsystems server sales rose more than 15 percent during the year to enable Sun to take third place from Dell.
Dell's move to formalize its channel programs would find a lot of solution providers interested in working with the vendor.
Several of them already say the company is a good partner in a number of ways.
Roger Veach, CEO and founder of Advantage Data Systems (ADS), a Chillicothe, Ohio-based solution provider, said his company can get margins on Dell products averaging between 18 percent and 25 percent with a little work, including mixing its services with the hardware in a single packaged solution.
ADS avoids placing orders on a daily basis unless it is for an emergency, preferring to place one big order every couple of weeks, Veach said. ADS also keeps several Dell notebook and desktop PCs in stock to quickly fulfill a small order or replace a problem unit without forcing the customer to wait for a week or more, and focuses on providing custom configurations customers cannot get online, he said.
Eryck Bredy, president of Bredy Network Management, an Andover, Mass.-based solution provider, said he currently resells Dell hardware to customers to ensure control of his customers' accounts, and that a formal channel program would make it easier for him to increase his Dell business.
For now, Bredy said, his biggest advantage to working with Dell is access to applications, such as VMware's GSX server virtualization software or Citrix applications, that smaller solution providers typically may not have access to. However, Bredy did say that VMware this week authorized him to work with the vendor direct.
"I love the fact that Dell is there," he said. "It means you have access to software you don't already have and otherwise couldn't get."
Richard Taylor, national sales manager at ScImage, a Los Altos, Calif.-based medical ISV, said he can get the same margin with Dell that he can get with IBM and Hewlett-Packard thanks to his ability to source from all three vendors through his distributor, Arrow.
"There's a minimum margin we need," Taylor said. "For Dell, we'll go to Arrow and tell them we need this price to win the hardware deal."
Lynn Runnals, vice president of Multimax, a Herndon, Va.-based solution provider and Dell channel partner, said that a Dell sales representative visited his office just this month to discuss the potential of expanding his government sales of Dell storage products into commercial accounts, a sign he took as positively.
However, said solution providers, Dell still has a lot of work to do to prove it can offer a world-class channel program.
The main problem with Dell as a channel partner now is that the company is mainly an order-taker, Bredy said.
Dell will give a quote when called, but then doesn't follow up with the solution provider, he said. "If we do a Dell deal, it's to control the account," he said. "But it's not the best way to go about building a storage and server practice. I'd take a second look at Dell if they offered a strategic partnership. Not just take an order, but offer leads, deal registration, and sales support."
For Excalibur's Pape, a formal Dell channel program is good for the vendor in that it would force the company to change many of the ways it deals with customers, ways such as poor technical support that have led to a decline in customer satisfaction over the years.
"When you ship as much hardware as Dell does, errors get made," Pape said. "But when you can't escalate the service, you can end up screaming. If Dell has a channel rep, someone we can talk to, it will have accountability."
A true channel program would also hopefully result in improved channel rep relations, Veach said.
Currently, Dell channel reps change every six months or so, Veach said. "A formal channel program would make them more consistent," he said. "They wouldn't change just as you are getting to know the rep, and the rep is getting to understand your problems."
Such a program would also force Dell to make improvements to its products to make them easier for solution providers to sell and service, Pape said.
Dell's server and storage hardware is as good as any, but there are problems in the details, which can frustrate solution providers, Pape said.
"We have a problem when a hard drive fails," he said. "Not that the hard drive fails -- that's not a Dell problem. But when you use their hot-swap hard drive trays, they don't include the drive sled. It's easy to change the sled. But Dell uses incredibly cheap screws, which strip easily. Other vendors ship the entire sled."
NEXT: If Dell gets its program right, this VAR says he wants in. Dell could also pick up new channels partners with a proper channel program.
Greg Knieriemen, vice president of marketing at Chi, a Cleveland-based solution provider that currently does not work with Dell, said with the right program, he would purchase Dell servers to go with the storage virtualization software his company sells from Melville, N.Y.-based FalconStor.
Customers currently buy the FalconStor software from Chi, but they want to mate it to Dell servers, Knieriemen said. "We can lose control of an account in such a case," he said.
For those customers, buying the software and hardware from Chi would be a big help, Knieriemen said. "Dell thinks they can sell everything under the Sun," he said. "They sell FalconStor and other things we sell. But no one trusts Dell to do the installation. It's not their core competency. It would be better for Dell if they work with us."
For Dell to get Chi to sign on, the vendor would need to prove it adds value to Chi's customers, Knieriemen said. "Dell would have to add value to us, and have the value clearly communicated to the customer," he said. "But I couldn't imagine signing on with Dell before they have a deal registration program."
Some solution providers offered suggestions that would help Dell develop a world-class channel program.
Pape said that the program should take into account factors other than sales volume when awarding channel partners. "If it's based on sales volume, it's a problem because I'm in Montana," he said. "The criteria needs to be demographically based. I'm one of the biggest Dell VARs in Montana, and sell hundreds of systems. But that means nothing when compared to someone in New York."
Dell also needs to take into account the difference between ISVs and traditional hardware solution providers, said ScImage's Taylor.
Unlike traditional resellers, ISVs sell hardware as part of a package to match their software, Taylor said. While most would prefer not to sell hardware at all, they do it because customers want a single throat to choke. And even if the ISV didn't sell the hardware, it is still the first place customers call when they have a hardware problem, he said.
"An ISV sales rep is not thinking about selling hardware," Taylor said. "He's spending his time thinking about selling his application against his competition. When selling hardware via ISVs, it has to be simple. ISVs prefer the hardware vendor or distributor does the installation so if there's a problem we can tell the vendor, 'Hey, you installed this.'"
But even with a solid channel program, not every solution provider would rush to Dell's arms.
"Dell is a four-letter work for competition for us," said Dave Hiechel, president and CEO of Eagle Software, a Salina, Kan.-based solution provider.
Dell is great at working the price to get an order, but not at bringing value to a customer, Hiechel said. He cited Dell's sales of storage management software from CommVault Systems, Oceanport, N.J., which also partners with Eagle Software.
"Dell is a CommVault partner, but not a CommVault promoter," Hiechel said. "If a Dell rep gets word of a CommVault opportunity, they will put both CommVault and Symantec NetBackup in front of the customer and ask which one they want. Dell will say, 'We'll make the price work.' But they're selling competing offerings at the same time."
In the end, many solution providers said formalizing Dell's channel program can only help the vendor, its partners, and its customers.
"I'm anxious to see this channel thing," Veach said. "It will be good for the industry."
Ed Moltzen contributed to this story.