They said it would never happen or that it would be a cold day in hell, but that day has come for the channel. They now have to at least listen to what Dell Computer Corp. wants to offer them.
Greg Davis, Dell’s first channel chief, has put together a channel program for its 15,000 partners that will be heavily focused on deal registration to help curb market conflicts, and include a portal site.
The new program will also have traditional offerings such as a Dell authorized logo program, online training, education, demo units, financing and product road maps, but will lack back-end rebates. There will also be a provision for deal sharing with Dell’s direct sales force. Davis has been working on this program since he took the channel chief job after a two-and-half year stint as GM of Dell Canada. Most of the framework of this plan, he said, has been based on partner feedback. At the heart of this program is operational efficiency, he said.
“We already have about 15,000 partners and they leverage Dell for operational efficiency in our direct business. We now want them to leverage it to make partner business more efficient and offer more value to customers,” Davis said.
As an example, channel partners today have the ability to order custom-configured computers and Dell will build them.
This is a cost efficient manner compared to Dell’s competitors and the distributors, Davis said. “We build to order for them and ship direct to customers on their behalf,” he added.
Dell is working on a program to place partner’s packing slips and other information inside the box on their behalf. Also there are plans for asset tagging and custom loading of software.
“We believe our model is uniquely positioned to offer the benefit of Dell’s direct to partner program and make them more profitable,” he said.
Dell will have a channel model made up mostly of registered business partners and a top tier called certified partners.
The central hub of Dell’s channel program will be a password-protected portal site. Davis said this portal will be the main information page for partners to learn about the program and its benefits. Over time, he envisions that partners will build significant capabilities through training that will be showcased on the portal. Part of the portal training will be product road map briefings.
“We at Dell train a couple thousand sales reps every day on our products and information. We have not enabled that training for partners and with a portal it now makes it viable to partners,” he said.
One of the major offerings in the portal will be dedicated technical support just for the channel, along with a tech chat forum.
Davis said that he realized that the channel program would be similar to offerings of other programs in the market and that was a major reason to come out with a unique site. He hopes the site can showcase partner capabilities to end user customers and also to Dell’s direct sales teams. He also hopes that the portal can be a conduit for networking between partner, customer and Dell’s direct sales force.
“If a customer asks for help and that partner has the expertise, they can find that (on the portal site) and get help to meet customer demands,” he said.
Overcoming issues such as channel conflicts is clearly the No. 1 challenge Davis’ channel plan will face, which is why the deal registration portion of the program is being pilot tested first.
“We have to manage that. One of the key elements is the deal registration tool via the portal. We will work hard to get them registered and they will have an opportunity to register deals and we will utilize this to minimize conflict,” he said.
The deal registration plan will work like this: A partner must first be registered on the portal site. From there the VAR registers the deal. Then the Dell portal site assesses if Dell is already engaged in that particular deal. Something as simple as extending pricing would mean Dell has already captured this customer. But if it is a wide open opportunity Dell will not proactively market to them to take that deal away. Also all the data will be walled off from the direct sales team at Dell.
“The partner can feel safe. There is no fear of them being used,” Davis said. Also, Dell’s direct sales team will be compensated regardless of what the route the customer takes.
Harry Zarek, the president of solution provider Compugen, said that channel business is not driven by deal registration programs, but by relationships.
Zarek, who has not been privy to the details of Dell’s program, said he would be willing to listen to what Dell has to stay, but stopped short of saying that he had any interest in doing business with Dell.
“The business relationship is not made up of details. It is important to get the details down, but what’s also important is the philosophical approach on why a channel partner would want to do a deal with Dell. Where are the business benefits? And their good name does not cut it. They have missionary work to do,” he said.
He added that Compugen would look at Dell the same way they would any other potential vendor partner who has products and services that are of interest to his customers.
No back-end rebates
Davis said the main reason for not offering back-end rebates is that from the feedback he has received, partners do not want them. Partners find those programs to be cumbersome and there is a tremendous amount of work to properly track them, he said.
“I do not see the same value in helping them reduce costs up-front versus trying to put cumbersome back-end programs that require additional costs,” he said. Dell aims to have the lowest cost. It is Dell’s model, Davis stressed.
The program will not have a revenue bar. Davis believes that back-end rebates unfairly align vendors to larger resellers. “The more you can sell, the more back-end rebates you will get. We see the opportunity for Dell to bring cost efficiencies to the VAR community across the board,” he said.
Michelle Warren, market analyst for Info-Tech Research of London, Ont., says she could see aggressive price points diminishing the need for back-end rebates, but dismissed the notion Dell doesn’t want to offer back-end rebates because of reseller feedback.
“The fact of the matter is that doing back-end rebates is costly to run,” Warren said.
There will also be a list of competencies partners can attain within the program. The program will have two at its inception with another three to five competencies coming in 2008.
The first will be an enterprise architecture competency, which will focus on building relationships with channel customers that already have strong value add in this area.
Storage expertise will be essential, Davis said. Dell wants to build on EqualLogic’s success in the channel. EqualLogic EqualLogic was recently acquired by Dell for US$1.4 billion. Storage power, cooling and virtualization will also be important attributes to have for this competency.
The second is specific for certified partners. Those solution providers will get first crack at managed services through the recently acquired Silverback Technologies. Again, this is another area Davis et al. are working on. He said Dell wants to pursue a deeper, stronger relationship with certified partners in hopes of developing a managed services partner base.
Financing will be another core element of the program, Davis said. Financial terms and flooring terms of approximately 30 to 45 days will be offered. Other financing plans such as revolving credit and a credit card will be available with this program.
“We will not turn away partners because of credit. We will find a way with several programs to get access to credit,” he said.
The authorized Dell logo program will be in limited use for partners. There will be a set of logos for registered and certified partners. Davis said this is one area he and his team are still working out the details for.
The Round Rock, Tex.-based company will also be working on enhancing Dell’s existing evaluation unit program for partners, specifically certified partners.
For Zarek, Dell would need to stand up and acknowledge some of the things they have done in the past. “They need to come clean and say that they have changed. They need to say they did not have a positive relationship with the channel and be prepared to go on a new path. If we do not hear stuff like that it would suggest to me they would be a short term solution. We are not interested in short term.”
Zarek believes Dell has reached an inflection point in its business. They have noticed that the role of the channel has changed.
Warren agrees, saying Dell’s first channel program gives credence to the strength of solution providers today.
She added that this program will lead to more solution providers “coming out of the closet” and partnering with Dell.
“The one thing Dell is good at doing is partnering with other organizations to provide a total solution. They can now leverage those skills to the Canadian solution provider community, she said.
Warren acknowledges the task ahead of Davis will be monumental given that HP, Lenovo, Acer and Toshiba already have a foothold in the solution provider community.
“That is going to be really interesting how it unfolds and how Dell is going to play that game. And how others respond. They have to increase market share and they are going to have to do it with solution providers. This time the solution provider will have the power during negotiations with Dell,” she said.
One Calgary-based Dell channel partner, IT Matters Inc., has already voiced it wants from the vendor. Stuart Crawford, principal and director of business development for IT Matters, would like to see direct vendors shoulder some marketing and promotional costs for their products as well as provide them with some guidance on what devices customers are interested in.
Validation of this program will be a hard sell for Davis. One way for Dell to win channel partners is by passing direct accounts to the solution providers. There will be no move afoot, at least initially, to do that, Davis said. He added that it could occur through the partner portal site where a direct customer could team up with a partner who is offering certain capabilities they need.
Zarek does not expect Dell to hand over major accounts on a platter. “This is not a transaction driven activity, but a relationship driven activity,” he said.
Zarek added that if Dell is willing to champion the value of the channel to its direct customers that would go a long way to validating its indirect message.
Davis called his channel plan ambitious. He admitted there is a lot of work ahead of him and his team to leverage Dell’s capabilities with operational efficiencies.
“We are committed to eliminating cost,” Davis said, not just with the partners, but with customers as well.
Davis said he is committed to making it work. He said that his main reasons for his optimism is that for the first time there will be a dedicated organization that is an advocate for the channel inside Dell.
“We want to provide a great value proposition to a set of channel partners that want to do business with Dell. I am not going to make everyone happy. We are in the formative stages and I hope they see value and partner with us. It will take several years to build out the benefits,” Davis said.