Dell EMC takes a risk with new consumption model pricing

LAS VEGAS – The text book definition of risk is entering a situation involving exposure to danger. Dell EMC with the introduction of its Flex consumption model programs are positioning themselves as taking all the risk for channel partners. And, on paper they are because if a customer doesn’t want that VxRail after one year they will take it back and the channel partner is off the hook. The VxRail has an entry-level price point of about $25,000. Under the program, channel partners could earn 50 per cent margin and that is paid upfront.

This is a wise move on the part of Dell EMC on many fronts. It first allows the smaller solution provider to get in the game. Imagine if a small player had to sell a $25,000 VxRail to a small customer and get let’s say $500 a month for it. They simply could not run their business on such little cash flow. But by getting their money upfront they don’t have to deal with the pains of transitioning to a recurring revenue model.

For the CIO or IT buyer who is getting the CEO or owner of the business breathing down their neck to cut costs and move everything to the cloud. The CIO can now go back and say ‘well, we can keep these workloads on-premise because it has important customer legacy data and for security reasons’. With the Flex consumption model, Dell EMC has significantly cut down AWS’ cost delta. AWS will still be cheaper, but one source told CDN that Dell EMC is now within range giving CIOs options to remain on-premise.

Also, if for whatever reason the Dell EMC solution is no longer in their plans they can give it back to the vendor without any penalty. But if they stick around in year three or four depending on the service level agreement that customer has the potential to save more than 20 per cent each year. So, the monthly costs lower over time.

This is key because what Dell EMC is going to do with customers is provide a meter for their usage. They will also include a buffer area if they go over their peak.

John Byrne, the Dell EMC channel chief, told CDN channel partners will be able to control the entire sales campaign as well as control the margin. They will also be able to insert their own value proposition and drive higher revenue services.

“Flex on Demand is a different selling motion. All core storage for Dell EMC is in play. This is a service and it’s not selling an asset. This is a cash injection. It’s a no brainer because it looks good on the balance sheet,” he said.

Dell EMC is taking the risk by owning the product and the financing on it. But Dell EMC is also hedging their bet that customers will not rip and replace the VxRail after one year. This will minimize the risk Dell EMC is taking.

One quick hit before I go. Stefan Bockhop, the long time channel chief of Lenovo Canada has been promoted to worldwide data centre channel chief for Lenovo. CDN congratulates him and wishes him the best. His replacement is expected in a months time.

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Jim Love, Chief Content Officer, IT World Canada

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Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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