Dell`s Mixed Channel Signals

Arnie Bellini makes no bones about Dell: He simply doesn’t like it. Worse, he considers it a threat to his customers, the managed service providers that use ConnectWise management and reporting tools.

At his fourth annual partner conference in Orlando last week, the chief executive of ConnectWise made his beliefs crystal clear by plastering on two giant screens a caricature of Michael Dell tied down like Gulliver by Lilliputian managed service providers.

“You can choose to have in your cloud anyone you like, but I wouldn’t have Dell in my cloud,” Bellini told hundreds of managed service providers in his closing remarks, to which he got a rousing round of applause.

Dell’s decision to expand its direct managed services business has likely erased any trust and goodwill the company has built since re-entering the channel a little more than a year ago. Declaring a pilot program in the Dallas area a success, Dell is starting a similar direct program in metropolitan New York, selling direct managed services to businesses with fewer than 499 seats. That’s the bread and butter of the SMB channel and managed services market.

Dell wasn’t oblivious the questions of potential conflict with its managed services partners. The rules of engagement are that Dell won’t target existing customers of its partner managed services providers and only target net-new customers. It’s a small consolation to managed service providers, given that so few SMB end users currently engage a service. There’s only upside in this market, and Dell is clearly looking to take as much of that growth for itself over its partners.

When Dell re-entered the channel a little more than a year ago, solution providers expressed reservations about Dell’s true intentions and long-term commitment to supporting resellers. In previous forays into the channel, Dell has pulled back and gone direct after a tenuous relationship with partners. Many solution providers openly expressed concerned that Dell would seduce them into a program with promises of growth and margins only to have the rug pulled out from underneath them.

Dell has expended tremendous resources and money in trying to build the trust of the channel community. And it’s worked. Dell currently counts more than 12,000 partners in its program, and claims 200 to 300 new partners each week. It’s implemented all of the checkbox items that every good channel program is supposed to have – tiered discounting, rebates, deal registration, etc. Based on the growth of the Dell channel population and that the company is doing more than $4 billion in indirect sales, it appears that it was making progress in earning solution providers’ trust.

Regardless of Dell’s intent, perceptions of its actions are the reality. By taking its managed services direct without setting a hard deck between its inside sales force and its partners or giving solution providers the opportunity resell Dell services, its sending the signal that it will act in its own self interest and sacrifice relations with solution providers.

“We see them do this every few years and they never change,” said one solution provider based in Dell’s backyard in Austin.

Dell is big and has the resources to field a massive and scalable managed services platform through Silverback Technologies and Everdream assets. The anticipation is Dell will convert its EqualLogic acquisition into a direct managed services offering. It all adds up to a powerful, overwhelming offering. However, not everyone is concerned. Dell’s outbound call centers could attract managed services customers whose primary purchasing consideration is price, but Dell won’t have the ability to put feet on the street to keep close contact with customers.

N-Able Technologies CEO Gavin Garbutt believes that this lack of scalable human resources will give small, local managed service providers with a competitive advantage over Dell and other large managed service offerings. More optimistic solution providers believe Dell’s need for human touch on managed service customers will force the company to partner with local solution providers to deliver on-site services.

“There’s still a role for solution providers competing in the direct-delivery world,” said Garbutt. “They need to build out their individual value proposition by being the value-add solution provider and the local general contractor.” (Click here to read more about Garbutt’s thoughts on the managed services market.)

Solution and managed service providers that were skeptical of Dell’s channel intentions are now proven right. Dell’s inconsistency on channel commitment in product sales and services undermines it’s pleas for trust with partners. If Dell wants to remain in the channel—and some would argue that its sagging sales means it needs solution providers—it needs to reverse course, devise clear rules of engagement with partners, and delineate operating space between direct and indirect sales. The channel’s trust never comes easy, but it’s easily erased by short-sighted strategies.

Lawrence M. Walsh is vice president and publisher of Channel Insider. He can be reached at lawrence.walsh@ziffdavisenterprise.com.