Data center News
Exclusive: Michael Dell Says Company Is Growing Faster Than HP, Cisco, IBM, Oracle
Nearly one year after taking Dell private in a $24.9 billion leveraged buyout, Dell founder and CEO Michael Dell boasts that his company is growing faster in the channel than all of its primary competitors, including Hewlett-Packard, Cisco Systems, IBM and Oracle.
"Who is the fastest-growing big company in the channel? What's the fastest-growing large end-to-end IT company in the world right now? There is Dell and Oracle, IBM, HP and Cisco. We are growing faster than all of them," Michael Dell said in an exclusive interview at the company’s Round Rock, Texas, headquarters last month.
Sparked by the rollout of new channel incentives beginning in February, new lines of business within existing Dell accounts were up 175 percent in North America for Dell’s first quarter of fiscal 2015 ended April 30, according to the company. What’s more, first- to second-quarter growth this year was up 29 percent in North America, according to the company.
Central to those robust sales figures, Michael Dell said, is a partner community that has become the biggest growth engine for Dell in the commercial sector since the company went private. The channel, he said, is growing faster than the direct side of the Dell house.
"What I'm seeing is strong growth and adoption from channel partners,’ Michael Dell said. ’Our channel business is growing at double-digit growth rates.’
Dell channel executives said first-quarter rebates paid out to partners were up 40 percent. What’s more, Dell has seen a 13 percent increase in new-line-of-business registrations, where a partner that previously was just selling PCs or servers has added more lucrative Dell software, storage or networking offerings.
All in all, Dell since February has added 4,300 new customers and expanded 4,100 existing lines of business, which represent about 10,000 new orders in total, including 1,600 new software orders and 1,200 new orders in storage. Some 600 partners drove the bulk of those new customer wins and line-of-business sales.
Today in North America, Dell said 37 percent of its revenue is going through the channel compared with 33 percent in December 2013.
That momentum, according to Dell, has helped it trump the competition in recent quarters.
By comparison, Oracle in its most recent fiscal quarter disappointed investors with lower-than-expected sales for its hardware and Web-based services business. Last month, Cisco cut 6,000 jobs after a revenue-losing quarter following several previous soft quarters. HP's revenue, meanwhile, was up 1 percent compared with the previous year with PC and server sales up but storage hardware revenue down in double digits. IBM's last quarterly earnings report revealed falling sales as the company sheds its x86 server business to Lenovo.
Since going private Oct. 29 and being delisted from the Nasdaq exchange, Dell sales figures can no longer be verified by quarterly results reported to investors. But Dell partners say they are seeing the difference between the old Dell and the new private Dell.
NEXT: Partners Reaping The Rewards Of A Private Dell
Redapt, a Redmond, Wash.-based 80-employee Dell partner that said it is on track to do $200 million in business this year, said Dell's tweaks to its channel program has helped Redapt drive nearly $50 million in new sales.
"It used to be a one-way relationship with Dell for us. We would reach out to Dell for help within an account," said Redapt COO David Cantu. "Things have changed. Dell is reaching out to us, has become more accessible, and works with us to land new business."
For Redapt, which has been selling Dell servers "like hotcakes," according Cantu, the big change was when Dell's account executives became more engaged. "Our Dell business has always been strong. But with Dell and Redapt both having skin in the game when it has come to hammering out the fine print on deals, to put it simply, we are now winning more business."
Those deals, Cantu said, have varied in size from $20,000 to $60,000 and on up to $10 million.
"The access into Dell has been unbelievable. When we were struggling to close a $10 million deal, Michael Dell helped us drag it into the end zone by making a personal call to our customer lead."
The sweeping changes Dell made to its channel business including first removing the silos of its direct and indirect business, putting both under the oversight of Marius Haas, Dell's chief commercial officer and president of enterprise solutions. Dell then, in a major overhaul, began heavily incenting Dell direct sales to work hand in hand with channel partners in an effort to accelerate sales of data center solutions and drive new business.
"There is a palpable sense of excitement here at Dell," said Cheryl Cook, vice president of global channel alliances at Dell, in an interview with CRN. "The enthusiasm is cascading into the partner community."
Cook said that over the past year Dell has pumped $20 million into the partner community, investing in automating Web-based sales processes and introducing streamlined partner tools to make buying, quoting and doing business with Dell easier. But less tangible, she said, is the cultural transformation around the direct side of the business working with the channel.
"The feedback we get from partners is we are simpler and more flexible," Cook said. As a private company, she said, Dell is more focused on the channel, giving her the freedom to course-correct on a dime. "We are nimble and can act faster than we ever did before. That helps make Dell an easy choice for our partners."
The post-private Dell, Cook said, has seen impressive gains within the channel in the key metrics of winning new Dell customers, taking new orders, and expanding existing lines of business into areas such as high-margin software sales.
A key motivator to drive direct and indirect cooperation between the fiefdoms has been a 20 percent compensation accelerator for Dell direct sales on any sale of Dell's PowerEdge VRTX, storage, networking, software, thin client, workstations or SecureWorks solutions to a new customer sold in concert with a channel partner.
NEXT: Driving Channel Growth
Dell executives told CRN that the company is driving channel growth in its software, client PC, storage, and server business. The gains, they said, are coming from the broad channel ecosystems from behemoth national solution providers to large super regional enterprise solution providers and an army of smaller solution providers.
The key for Dell is not only alignment between its direct team and channel partners, but also taking the time to get to know the full potential of their partners, according to Dell channel executives.
Too often "big" or "small" partner labels were determined by how much the solution provider spent with Dell and not by the actual size of a business. What Dell has rejiggered itself to do is mandate regional sales directors to engage in more partner outreach in hopes of expanding Dell's book of business within existing partner accounts.
"A year ago field engagement with smaller partners was ad hoc," said Frank Vitagliano, vice president of North America global commercial channels. "Now it's formalized." That has helped Dell increase its product mix to include hardware, software or services, he said.
Partners say the channel philosophy change has resulted in an ability to diversify their lines of business, crack open direct accounts, and fully leverage pipelines into existing customers and sell a wider selection of products.
"Our focus is on training and how do we get more certified partners selling more deeply and across more product lines,’ said Michael Dell. ’How do we link more partners with our direct inside teams? How do we get them to utilize more of the resources we have in terms of tools such as Dell Financial Services. … We have partners that maybe don't know all the things that Dell has to offer their customers. How do we get in front of those partners?"
Going private, Dell said, has enabled him and his executive team to focus on driving channel sales growth.
"We aren't thinking in those [financial quarter] terms," Michael Dell said. "We aren't worried about, 'Oh boy, I've got to report the results in however many days.' That's all gone. So for me, that's 20 percent of my time just freed up and other people’s as well. We simplified a lot of the reporting and other stuff to make business less complicated. Now we have more time to focus on our partners."
John Swainson, president of Dell Software, said less time worrying about meeting numbers has allowed Dell to streamline nearly 30 acquisitions over the past several years. For example, Swainson said, the consolidation of multiple channel programs into a single offering is paying off for the company. "We literally turned seven channel programs together into one in September of last year,’ he said. ’We formally announced the plan in December, operationalized it in February, and then started training people. And now we are just starting to see the business benefits."
NEXT: The Partner Perspective
Ben Tiblets, co-president of Consuro, a Fort Worth, Texas-based Dell SMB partner with about 30 employees, said adding software solutions to his Dell hardware business has been a natural sales motion. "Dell's software is a natural fit to my product mix. These aren't ancillary software products, they complement what's already there and allow us to sell deeper and wider into existing accounts."
From a partner perspective, Tiblets said, trust between direct and the channel has been a key differentiator in Dell's recent channel strategy. "Channel conflict cuts both ways. But when direct reps are knocking on your door with new opportunities, that instills a lot of channel partner goodwill," he said.
For Dell, its direct business can be an asset to partners, giving them insight they might not otherwise have into potential customers. It's what Dell calls its ’omni-channel’ approach, giving customers a choice of how they want to buy Dell hardware, software and services.
"We have heard time and time again from channel partners that as we have invested with them, they’ve invested with us,’ said Michael Dell. ’The direct side of Dell can leverage an existing presence with specific accounts or an account it has had a longtime relationship with selling PCs. Dell knows these customers and is selling into new product areas with these customers.
"Now, as Dell has learned what a partner's skills are, we can increase the line of business by bringing in a channel partner,’ he said. ’Maybe there is a great channel partner out there that is really good at data center or security. So Dell aligns with them. That's happening on a minute-by-minute basis and bringing tens of millions of dollars of new business to us. So that's not an idea or a dream. This is going on right now."
PUBLISHED SEPT. 2, 2014