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Dell Working Capital Program Tops $5B, Partners Use Cash Flow To Drive Growth

Matt Brown
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Cash-strapped partners struggling to adapt to customers' new IT consumption models have driven a whopping 200 percent growth in the fourth quarter alone through a Dell program designed to free up working capital.

In the fourth quarter, Dell partners participating in the program did $1.8 billion in flooring volume, compared with $600 million in the same quarter a year ago, according to figures provided by Dell. What's more, since it was first launched 18 months ago, Dell's Working Capital Program has booked $5.4 billion in flooring volume.

"No business on the planet can grow without adequate financing. It's as simple as that," said Dan Serpico, CEO of San Francisco-based Dell partner FusionStorm. "What the Dell program does is allows us to finance, by leveraging Wells Fargo, large quantities of Dell business that quite frankly we would not be able to do."

[Related: Report: Banks Close To Finding Investors For Dell-EMC Acquisition Debt]

Serpico said it's hard to quantify how big an impact the working capital program has had on FusionStorm, but it has been significant.

"We were just under $100 million in Dell sales last year," Serpico said. "Would it be $50 million without [the program]? It's hard to say, but there is a clear correlation between our growth and the ability to utilize this program."

"Dell isn't going to give us a direct line of credit," Serpico said. "They don't have a strong distribution program where you can tap into a line of credit with your distributor, but you can tap into this program. It provides us with the ability to do deals we'd be tapped out of."

Perhaps the best part of the program, Serpico said, is its seamlessness. "Our guys never think about it, and that probably is the best validation," he said. "We have been in places with other brands that don't have the credit capacity where guys worry about being able to do a deal. Sales guys having confidence is the underlying emotion to them being able to sell. The fact they don't have to think about it absolutely helps."

In an interview with CRN editors, Dell Channel Chief Cheryl Cook explained that the working capital program solves a key problem for partners that other vendors have not addressed -- namely, that customers moving to a cloud business model are booking IT spending as an operational expense, rather than a capital expenditure.

It also allows partners to take on deals much larger than they're accustomed to, Cook said.

"It's all around cash-flow optimization for their business, expanded credit with us to allow them to continue this rapid pace of adoption with Dell," Cook said. "It's different from what some of our competition is doing, which is why I think some people are really embracing it."

Cook explained that in some cases, partners are closing deals that are twice the size of the transactions they're accustomed to closing. "Just through the flexibility of a program like this, it allows them to participate and take down large, meaningful $20 million to $30 million transactions with large customers that they might not have been able to do otherwise," Cook said.

Dell is predicting that the market will remain in a "hybrid cloud" phase for a number of years. Customers are comfortable moving certain workloads to the public cloud -- and moving some back and forth between public and private clouds -- but intend to keep others in on-premises, private clouds.

The working capital program is intended to help partners deal with the fluidity of that model, Cook said. "It's addressing with Dell Financial Services this growing trend of customers' coming to our partners with different consumption models," she said. "They want it as a service. They want to move capex to opex. So what are the things as an OEM that we can bring to them to help them be adaptive to those growing trends and requests? Our uptake initially in those programs has been quite favorable."

"It's consciously recognizing that for [partners] to maintain their pace of growth they've been realizing with Dell, for some of them, it's a strain on cash flow. This is a way to try and help with that dilemma, to give them expanded credit."

The program, which is based on partnerships between Dell Financial Services and Wells Fargo and GE Capital, has a few flavors, including end-user financing for leasing through DFS. That arm also offers cloud computing financing.

Partners can also work with Wells Fargo or GE Capital for additional financing arrangements intended to boost cash flow and/or credit capacity, said Cook.

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