Dell Picks Tech Data

The landmark two-year pact came after a hotly contested reverse-bid auction aimed at crowning a primary distribution source for Dell, channel sources said.

Although several solution providers worried that the arrangement could give Dell an additional pricing advantage, Tech Data TechSelect members said one unintended consequence could be better prices for them.

"It's a credit to [Tech Data's] organization they would get selected. I'm happy to be aligned with them. Now, if they would just give me Dell pricing," said Bob Parsons, president of Automated Office Solutions, a solution provider and TechSelect member in Evansville, Ind.

Solution providers noted that Dell almost certainly will continue to have a price advantage on the relevant products bought from Tech Data.

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Distribution executives argue that the deal will not alter the competitive landscape for true VARs. Some channel sources said the real losers are distribution giant and Tech Data rival Ingram Micro, low-price leader Synnex and solution provider CDW, which is battling Dell in many accounts.

Neither Dell nor Tech Data would comment on the deal, but sources said the deal is one of the largest distribution pacts ever inked by Tech Data and a first of its kind for Dell.

The deal, which does not include software, makes Tech Data the primary source for products sold on Dell's Web site, they said.

The news barely fazed many solution providers that stopped competing long ago with Dell on price for commodity products and have moved to a solutions business model.

Ross-Tek, a Cleveland-based solution provider which recently left Tech Data's TechSelect network, has significantly reduced its hardware business to focus on consulting and services, said Fred Johnson, president of the company.

Ross-Tek joined Dell's Solution Provider Direct program and found it easier to do business with Dell than other vendors. "We put more emphasis now on implementation, integration and service contracts. We leverage that far greater than selling hardware," he said.

Tech Data said the news will not affect its support for VARs. "Dell has been sourcing products through distributors including Tech Data for several years, and our business with them has never affected our approach to serving other customers, nor will it going forward," said Tamra Muir, vice president of marketing at Tech Data, Clearwater, Fla.

CDW Chairman and CEO John Edwardson called the deal one more example of Dell using the channel for its own benefit. "When they get enough volume of their own, they will circumvent the distribution network and build their own distribution center for these products," he said.

Ingram Micro, Santa Ana, Calif., made a bid for Dell's business, but the asking price was too steep, said Kevin Murai, co-president of the distributor. "Apart from [Dell's] systems business, they look and act much like a direct marketer, like CDW or Insight [Enterprises]," he said. "Not winning the RFP and the bulk of this business will have an effect on our sales with them. At the end of the day, our value proposition didn't match up with the aggressive pricing requirements for the RFP."

Ingram Micro retains a software business with Dell, as well as some other hardware lines and expects to serve as a backup supplier to Tech Data, Murai said.

"There's room for everybody in the market," he said. "VARs have always successfully competed against all competitors, whether it's Dell, CDW or anybody else. I don't expect that to change going forward." Synnex declined to comment on the deal.