Is Michael Dell The Devil?

Is Dell CEO Michael Dell, who is wooing solution providers with a nascent channel program and at the same time launching a managed services offensive, devil or angel?

That was the question ConnectWise CEO Arnie Bellini took head on at the kickoff Friday of the third annual ConnectWise Partner summit. To dramatize just how he views the Dell threat, Bellini showed a slide of a CRN Cover story titled "Dell Hits The Wall" and drew devil horns and a devil goatee on the magazine photo of Dell CEO Michael Dell.

"I respect Michael Dell," said Bellini before a packed Tampa Marriott ballroom of 600 ConnectWise software and solution provider partners, many of whom hooted and roared with laughter at the Dell Devil likeness. "He is an aggressive, capitalististic entrepreneur. That is what we are dealing with though. It is not his fault. If we don't take control of our marketplace it is going to be our fault."

Bellini, a certified public accountant who has been warning partners for years about the Dell threat, noted that he has received direct mail pieces for sometime with a Dell Gold Support plan for "affordable" professional services desktop monitoring based on an Altiris software agent starting as low as $69 per system. What's more, he said, Dell has used IT consultants from OnForce's online marketplace for IT service professionals "very effectively." Dell has even advertised its services prowess on TV commercials, he said.

Bellini also pointed to an appearance at CMP Channel Group's XChange conference where the director of Dell's solution provider organization, Chris Bates, noted that Dell's upcoming channel program for deal registration would be deal-by-deal based with solution providers having to potentially defend against Dell direct across a customer organization. "I thought that was incredibly telling," said Bellini.

Bellini urged ConnectWise partners to move quickly to what he is calling a Technology As A Service (TAAS) offering or watch as industry giants like Dell, Google, CDW, and even software giant Microsoft move to take business away as they move into the burgeoning SMB market with managed service offerings. The aim with the next generation TAAS push is to cover everything from systems to printers to phones to firewalls and effectively any technology that needs to be managed for the client with a sharp focus on lower cost of total ownership for customers, said Bellini. "You need to be thinking about this and get some guts," said Bellini. "If we don't charge up that hill, others will take control of it."

Dell isn't the only threat, said Bellini. The reality is many of the industry giants are pushing from the enterprise and mid-tier into the SMB managed services market, said Bellini. He pointed to a Microsoft software and services initiative which includes $1 billion data center buildout and a public proclamation by Microsoft that it will provide some Software As A Service (SAAS) offerings direct to end user customers. "Microsoft is a great company," he said. "I admire them. But this is a market dynamic that you've got to pay attention to."

Bellini also pointed to a managed services threat from Google in the wake of the search giant's acquisitions of Skype and Postini along with a Google plan to build 50-acre data centers all over the world. "They are locating them right next to major power plants," he said. "What an aggressive company."

Finally, Bellini pointed to private equity giant Madison Dearborn Partner's decision to pay a whopping $7.3 billion for solution provider and direct market IT catalogue sales behemoth CDW. Bellini sees Madison Dearborn possibly adding more managed services muscle as part of broad buildout of CDW. "It's not like CDW has any problems to start with," he said. "What do you think they are going to do? I think they are going to add managed services and all kinds of things. I think they'll do the same thing as Google and Microsoft. Reject. Not good for us."

NEXT: MSPs See Booming Market

Despite Threats From Dell, Google, Microsoft And CDW Managed Service Providers (MSPs) at the ConnectWise Summit, for their part, said they are seeing sharp sales growth despite looming services threats from industry giants like Dell, Google and even Microsoft.

Dave Sperry, CEO of MicroMender, a San Francisco, Calif. services provider, said his managed services SMB business is up 300 percent this year. "I am still very positive about the market," he said. "There is still a window. I think those that have been doing it for a few years are in a good place to take advantage of it. The bottom end is becoming commoditized."

About 60 percent of MicroMender's professional services revenue is now recurring revenue, managed services-based business. Although MicroFinder is still offering consulting services to midmarket clients, it will not take on a new SMB client unless it is a managed services engagement. "The challenge in the midmarket is there is established IT staff," Sperry said. "You have to sell to a different person and you have to have a different value proposition. It's a bigger nut to crack. You have less obstacles going to the SMB because there is not an established guy that is afraid you are going to replace them. "

Sperry said he is not worried about a low end Dell commodity managed services offering in the wake of the Dell's acquisition of MSP platform provider SilverBack Technologies. "I don't worry about those guys for the same reason I never worried about IBM taking your clients," he said. "They just can't get close enough and personal enough with the client to displace the guy really adding value."

Sperry, for his part, like many other managed service providers, is moving higher up the services food chain. "The more intimate you are with the client's business, the more meaningful you are to the client," Sperry said. "So building a vertical is going to become increasingly important. The play is to move from keeping (IT) on the rails, which is what most guys are about today, to being able to introduce new technologies to them that take them some place they wouldn't necessarily get on their own."

"I don't think this market is cooling off at all," said Rory Sanchez, the CEO of SL Powers, a West Palm Beach, Fla. MSP which now estimates that 80 percent of its business comes from managed services clients. "Managed services is all we focus on now. We don't take new IT professional services clients today unless we feel there is a managed services opportunity." SL Powers has even put its Guaranteed Networks managed services moniker on its professional services organization, which is now called Guaranteed Networks' Compliance team.

Sanchez is currently in the process of making a major move into managed services backup with offsite data mirroring called Guaranteed Networks Restore. "That is something every company needs and is looking for an MSP to provide it to them," he said. "The novelty has worn off IT. Companies want to focus on their core competency. Ten years ago if we went into a law firm with three guys names on it one of them was a part time IT guy when he should have been billing clients. Today they want to bill at $300 an hour and they want their information technology to work."

The MSP phenomenon has created a chasm between the solution providers that have made the leap and are thriving and those that are being left behind in the dust, said Sanchez. "I think the guys in the Chevys hate the guys driving the Porsches," he said. "I talk to solution providers all the time that are either afraid to pull the trigger on it (managed services) or they haven't been able to figure out how to convert their existing client base."