Should Dell Court Distribution?

In its push to expand its channel presence, would Dell be successful using two-tier distribution?

It might not be so easy. Some solution providers think that having a go-to distributor will make the transition easier for both Dell and VARs, but others think Dell has done too much damage to its relationships with the channel for distributors to remedy.

The Round Rock, Tex.-based vendor already has relationships with some distributors and sources products like peripherals and software licenses from broadline distributors Ingram Micro and Tech Data but neither distributor would say whether carrying Dell's products for resale to its customers was of interest or if they've had conversations with Dell on the issue.

On one hand, wooing VARs through distribution might help Dell break into new markets.

Larry Levy, president of LevyNET, Jacksonville, Fla., pursued a partnership with Dell several years ago but wasn't able to sell enough product to work directly with the vendor.

"I've re-sold some Dells in the past, but was just talking to whatever sales person happened to answer the phone. He'd give me a better discount than what you'd be able to get online but it's not something that we've pursued," said Levy.

Being able to get Dell products from distributors, he said, would open the door for him to sell the lower-end machines.

"We don't generally compete in the lower-end market for the $400 computers but it would open up that market for us. We get a lot of walk-in traffic and residential customers. It would be just one more opportunity. We sell a lot of Acers and IBM's right now but having the ability to purchase Dell through the channel would add just one more product that we could move," he said.

David Dadian, CEO of Powersolution.com, HoHoKus, N.J. said Dell would have to go through distribution to break into the channel in a meaningful way. "I don't know how Dell is going to do this," he said. "They've tried this at least two times before, and maybe the third time is a charm. They have to tread very, very softly on how they approach the channel."

Kurt Broski, CEO of solution provider Entr Computer Solutions, Rockford, Ill., it would depend on what kind of deal Dell struck with distributors before he would consider adding the vendor.

"They would have to put a lot of thought into it If they did it in such a way that they were still cheaper than HP, which they usually are, if they're still cheaper than them if they let us service the product I think they could have some merit," he said.

"Obviously have to overcome some animosity because they've been the bitter enemy for so long. When they're on your side they're not so bad I imagine," said Broski.

He thinks Dell could best reach the small business market leveraging VARs, but that pricing needs to be consistently lower for resellers than for direct customers buying online. Broski would also want assurance that his company would be responsible for and get the revenue generated from servicing Dell's products.

NEXT: Can Distributors Heal Old Wounds?

Dell could also benefit from distributors' networks like Ingram's VentureTech Network and Tech Data's TechSelect programs like IBM has in reaching the small business customers, he said. "They were gaining because they got involved with VentureTech where people could see their products and talk to them, and they wouldn't get that anywhere else."

Jack Gerbs, president of Quanexus, Dayton, Ohio, however, said that not even Ingram Micro and Tech Data have the power to heal old wounds and get VARs to take a chance on Dell.

"They've burnt too many bridges. I think they have too much of a hurdle to overcome to get the channel to trust them. I think Ingram's a great distributor, I just think Dell has tarnished their name enough to the reseller channel that the only way they'd be successful is to hide that name," he said.

"It's beyond a support issue. It's a trust issue and it's a history issue," he said. In the past Gerbs said that Dell would offer him prices that were higher than the prices given to customers who purchased directly from Dell online. Dell also wouldn't accept returns from resellers and locked them out of Gov-Ed pricing, he said.

"It's gonna take a long time to heal. Once upon a time? Maybe, but I think there's just too much," he said.

Carol Shulman, COO of Shulman Clark Associates, an Ann Arbor, Mich.-based solution provider. thinks Dell would be more successful working with Tech Data, which won a multi-hundred million dollar distribution deal with Dell three years ago. "I think to be successful with Dell you have to understand how its parts work and understand what parts work well and what parts don't," said Shulman. "For a lot of VARs it might be difficult to acquire that knowledge. If Tech Data gets really good at that so that they know how Dell works and they can get good support of out Dell so that they can cut through a lot of red tape for their customers."

For Neil Medwed, president of Richardson, Tex.-based solution provider Preferred Technology Solutions, it would be a boon to Dell to give the channel the distribution option but is skeptical.

"I think it would be a very good idea for Dell to give options in that regard. It allows us to fulfill immediately versus allowing us to wait for shipments from the manufacturer," he said. "If a client wants Dell I want to be able to provide them Dell. I like to work with Ingram as my number one distributor. Again, depending on pricing and everything else, do I mind a direct relationship [with Dell]? No. If everything is the same would I prefer to go through an Ingram, definitely."

So far, however, Medwed's overtures to Dell have not been met in kind.

"I've asked them in emails to explain their channel play to me, but I have yet to receive responses. That makes me feel that a lot of what they're talking about is words instead of actions," he said. " I want to deliver what the client wants whether it be HP, Dell, IBM or whomever. I'm hoping that Dell really becomes channel-friendly but do I believe that they will, I am extremely skeptical."