Dell Channel Program Hits First Snag

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Just days after unveiling its first comprehensive channel program, Dell seems to have failed the first test of its ability to attract a solution provider following.

Dell and EqualLogic executives Friday in a joint channel conference pitched Dell's pending acquisition of EqualLogic is good for the channel, and fielded questions from solution providers.

Dell early last month said it plans to acquire EqualLogic in a deal worth $1.4 billion. For Dell, EqualLogic is an opportunity to grab one of the top vendors in the fast-growing iSCSI market while laying the groundwork for a storage channel based on EqualLogic's channel-only sales model.

During the question-and-answer period following presentations from Don Bulens, EqualLogic CEO, and Greg Davis, vice president and general manager of the Dell Americas channel organization, the first two solution providers asked the same question: Will Dell sell the EqualLogic products direct?

Bulens said that the EqualLogic brand will remain very prominent, and the same products will be sold direct and through Dell channel partners. "There was some discussion of separately branded products, and that would just introduce confusion into the market," he said. "So it will be the same products with the exact same functionality for everyone."

One of the two who asked that question, Jim Quasius, president of GCA, a Tampa, Fla.-based Sun Microsystems and EqualLogic solution provider, said he has seen little to make him feel good about the acquisition.

In fact, Quasius said, Dell's answer to his question has him more concerned than ever, especially given previous word from Dell on the matter.

In a letter from to EqualLogic partners after the pending acquisition was announced, Michael Dell wrote, "Dell has been clear in its intent -- EqualLogic branded products will only be available through the channel."

Quasius said the Michael Dell letter was specifically worded, and gave the impression that there will be a Dell-branded version of the EqualLogic product. "They've completely reneged on that statement," he said.

Another solution provider who attended the conference, Bernard Westwood, CFO of Atlanta-based Syscom Technologies, said he was surprised by the answer to the question.

"That's not what we've been told," Westwood said. "It contradicts what others have told us, including our contacts at Dell. I've had follow-ups with them since the conference, but the answers have been wishy-washy."

Another solution provider who was on the conference call and asked to remain anonymous, said that Dell's selling of the EqualLogic product changes everything. "They should have a channel-only product," the solution provider said. "If the direct sales guy tries to register the EqualLogic deal, and gets rejected, that's fine for him. He'll go to the next product, like EMC or Dell's storage."

Dave Bondo, principal and executive vice president at Preston Data Systems, Preston, Wash., said his initial reaction was the same as that of everyone else. "Oh no, they've sold out," Bondo said. "But as I thought about it, I thought that we can view it as a good side. What good is there to fight it?"

That good side, Bondo said, is the fact that Dell could have bought any other storage vendor, but it is planning to buy EqualLogic. "And with the amount of money they are paying, that's a strong endorsement of EqualLogic," he said.

Dell channel chief Davis told solution providers that Dell has put in a neutral sales compensation plan under which its direct sales reps will get the same compensation whether a deal goes direct or through a solution provider. "Regardless of whether a product is sold direct or through a channel, their compensation is neutralized," Davis said. "What I hope we have done there is taken away any motivation for our direct sales teams to not partner closely with our channel to win business for Dell."

The anonymous EqualLogic solution provider said he sees huge problems in what he heard from Dell and EqualLogic during the call. "I think of Dell more like a CDW than a vendor," the solution provider said.

The neutral compensation program is bogus, the solution provider said. "You can't do neutral compensation," he said. "It has to be positive compensation, maybe 125 percent on channel sales. For direct guys, the perception is the channel will just gunk up the sale. They have to sell a lot of other things, like services."

That solution provider also foresees channel conflict ahead.

"For example, say we talk to customer ABC. And Dell's direct sales talk to ABC," he said. "We may get the registration, and the Dell guy doesn't. But then the Dell guy just goes to his next Bullet, and sells Dell/EMC. Also, many EqualLogic solution providers sell CommVault. Dell can sell CommVault cheaper than we can buy it from the vendor."

When asked by a solution provider about the timing of the solution program, Bulens said the acquisition is expected to close in late January or early February. "We will have to see how quickly the channel programs will come together," Bulens said. "We have to be certain that we continue to support partners as we have all along directly from EqualLogic or through our distribution partners around the world until our channels can come together in an effective way and to ensure we are preserving characteristics of our program that are unique to EqualLogic."


NEXT: Will deal registration ease concerns?

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