Dell Channel Chief: Despite Q3 Declines, Company Exceeds Goals With VARs

A day after Dell reported disappointing revenue and earnings figures, resulting in its stock trading down nearly 10 percent Friday, two of the vendor's senior channel executives spoke with CRN Assistant News Editor Scott Campbell about the results and Dell's solution provider program, nearing its two-year anniversary.

Greg Davis, vice president and general manager, global commercial channels, and Paul Shaffer, director of U.S. marketing and operations for Dell's global commercial channels, said the company is exceeding goals with enterprise-focused solution providers and expects SMB revenue through the channel to pick up after lowering the deal registration threshold last month to $15,000. The following are excerpts from the conversation:

Dell's sales fell 15 percent and earnings 54 percent in the third fiscal quarter. Within those results, how did your channel business perform?

Davis: We can't quote specific numbers, but we're very proud of the fact that the effort we put in place almost 2 years ago has continued to pay off for us.

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In Q3, indirect global business was 26 percent of commercial revenue. When you look at the same business a year ago, it was 20 percent of total commercial business. We continue to meet our objectives, grow faster than the market, grow 2 times our direct business. A lot of that is having stayed focused on solution partners, especially those in the enterprise arena, focused on server, storage, and solutions like virtualization, consolidation and green IT.

We hit all of our goals. The team executed very well. As [CEO] Michael [Dell] said, the first three weeks of November have seen strength, improvement overall. We've seen the same strength and improvement in the channel business. We feel really good about the efforts we put in place.

How did North American channel business perform, compared to the global number?

Davis: In North America, we hit our top line number. What I can say is we performed top of our [goal] numbers in North America. We saw strength in midsize and larger partners in the quarter, the enterprise and EqualLogic partners overperformed our target. That's a good sign. We had 31 percent more partners selling EqualLogic in Q3 than in Q3 last year. I often get asked how EqualLogic is doing in the channel. That's a really good sign that the partner program is gaining strength and we're signing up new customers.

Are the new EqualLogic partners existing Dell partners who have moved upstream to sell the EqualLogic products or other storage VARs for whom Dell is a new vendor partner?

Shaffer: It's a mix of those. There are boutique channel storage partners to some larger players that were focused on Sun [Microsystems], NetApp or IBM in the past. We're making inroads in with those partners on a year-on-year comparison. That's largely tied to our Enterprise Architecture certification that leads for us.

If the enterprise side overperformed, does that mean the SMB lines didn't perform as well with solution providers? And if so, is that a case of the economy creating challenges or because you have more work to do with partners in those lines?

Davis: From a partner standpoint, our entire program has really focused on the enterprise. A lot of partners sell desktops, notebooks, but a significant focus of our investment and attention is around the enterprise. More than 50 percent of our registered deals are focused on enterprise products.

Shaffer: To add on to that, when we were lowering the deal registration threshold down to $15,000. We saw a 31-percent increase in deal registrations. We'll have more line of sight [to the SMB side] now going forward.

Next: SMB Products Come Into The Mix

Speaking of deal registration, how much visibility do you have now with the VAR as an influencer of SMB products. For example, if I'm a VAR that has a customer upgrading 10 notebooks, but I tell my customer to buy them direct from Dell so I don't have to carry that, does that influence get recognized or does that come across as a direct deal?

Davis: Today, it comes across as a direct deal. We have talked about leveraging the deal registration tool to allow partners to register opportunities like that so that could provide better visibility to track engagements. There's a great deal of partners we work with that are clearly focused on particular solutions, whether it's security, backup, consolidation, VMware type solutions. Customers are asking them about desktops, notebooks. Sometimes they send them straight to us.

It seems like that visibility might also eliminate some potential conflict. If you know a partner is working with a customer, you might not then go into that account directly because you don't know a partner is already there.

Davis: It is an evolution of the deal registration tool. I remember the first month that we had the tool, we were registering 10 to 12 deals a month. We average 700 a week now in the U.S. We have seen a significant increase in the number of partners utilizing the tool. Lowering the [deal registration] threshold also opens us up to a lot of new partners and a lot more opportunities in SMB.

Have you noticed that your registered deals are taking longer to close now? Is the economy impacting the length of time for the customer to buy in those situations?

Davis: For the first eight months of the year, we saw a lengthening out of deals. It was taking longer to close those opportunities. I think Michael [Dell] and [CFO] Brian [Gladden] talked about this on the [3Q analysts] call. In the first three weeks of November, we've seen good strength, encouraging strength. And when you look at deals in our deal registration tool and pipeline, when you've seen those cycles start to shorten. That's a good sign.

What impact will the acquisition of Perot Systems have on your relationship with SMB solution providers?

Davis: Up front, it's very exciting. We had an early call today and for the first time had the Dell and Perot teams on the executive call. It was great to have them talk and to welcome them. It's exciting. It's a great cultural fit for Dell from a people standpoint. I had an opportunity to look at this a little over a month ago and I saw very little overlap with our current channel and offers coming through Perot. I didn't see a lot of channel conflict in integrating Perot. It's only been eight days or so, but there's a whole team of people working through offers and how we can leverage them for the channel. I did not see any conflict issues. Now we have a company integrated into Dell and how we look at those offers come out of Perot and help define them for the channel. Our clear intention has not changed, as we commit to the channel, we want to provide any and all services to and through our channel partners. We will stay committed to that as we work through the integration of Perot.

Can you talk about green IT and what initiatives you might have for solution providers for 2010 in that area?

Davis: We have an entire team focused on green IT. We've made the bold statement that we want to be the greenest IT company in the world and we've led the industry in becoming carbon-neutral and driving green IT within our own company. We're focused helping [solution providers] through virtualization and integrating our products. Look at EqualLogic, it's ideally suited for virtualization and we're working close with Microsoft and VMware to train people on our products and how to help them sell a green IT solution to customers. It's very much an ROI story. For a while, green IT was stuck because of payback on the investment, but now there's a strong ROI reason to virtualize servers and become more energy efficient in doing so.

Health care solutions are a big area of investment for VARs in 2010. Do you have any initiatives in that area to help solution providers reach those customers?

Davis: A part of our entire strategy is around organizing globally around customers so we can provide very specific solutions to meet vertical needs. We have vertical segments in public sector tied to health care, K-to-12 education, higher education and federal government. We have very clearly defined solutions we want to bring to market. You'll start to see us roll out new solutions for several vertical markets within the public sector space. We see that as a key advantage around these [end user] organizations.

Health care in particular is another one of those areas where a small number of partners have been very focused. Clearly with all the public interest in health care, if there's money flowing there, we're sure to see more VARs focused there.