Dell`s Secret Channel Weapon: Flexibility

The most impressive thing about Dell’s fledgling channel program is that the company—from CEO Michael Dell down—readily admits that it’s a work in progress and subject to change.

It’s an amazing admission, and sign of strength, from a company that was—for all intents and purposes—all direct until about a year ago.

Under the weight of declining market share and competitive pressures—particularly by Hewlett-Packard, Dell decided last year to formally engage the channel to expand its distribution and reach of everything from personal computers to high-end storage devices to managed services.

What changed? In an exclusive interview, Michael Dell told Channel Insider that direct was “a monolithic strategy that worked well until it stopped working.”

What stopped working was Dell’s ability to directly deliver products to consumers and enterprises alike while competitors such as HP, IBM and Sun—to name a few—moved products through multiple sales channels that gave them reach into numerous market segments with varying price points. 

“I’m a pragmatic guy, and when you look at all of the facts and data, the decision wasn’t that hard,” Michael Dell said.

Since formalizing the program, the company has converted nearly 12,000 resellers into registered partners that generate more than $15 billion in revenue annually. Another 200 to 300 more join their ranks every week, which puts Dell on track to crack 20,000 partners by the first quarter of 2009. It’s an impressive growth rate considering Dell shunned nearly all formal channel partnerships until last year.

Despite this seeming success, Dell still has several major hurdles to overcome, most notably the trust factor. Channel partnerships between IT vendors and solution providers are built on trust. Trust that the vendor will deliver quality products. Trust that the vendor will manage conflict between direct sales and its indirect channels. And trust that the vendor will support the channel. In exchange, solution providers build entire businesses around the value proposition and support of their vendors that deliver billions of dollars in revenue back upstream.

“Who’s got the customers that are most loyal?” Michael Dell rhetorically asked. “We want to have the customers and partners that are loyal.”

How Dell will manage the conflict of its massive direct sales engine with the fledging channel program remains a challenge. Nearly from its inception, Dell’s religion has been direct. Few organizations have converted from direct to indirect without a fair amount of pain and suffering. With the assistance of channel veteran Donna Troy, the sales team is getting its channel indoctrination. And inspiration is coming from within—Dell’s own federal channel program, which the company formed several years ago to capture government contracts only available to solution providers.  

“A lot of them have been watching what’s been happening in the federal space and seeing how the channel works in their favor,” says Donna Troy, vice president and general manager of Dell’s Corporate Accounts Division.

No one in the Dell channel organization is arrogant enough to believe that they have all the answers or the right formula. A reflection of their flexibility is channel chief Greg Davis’ assertion that Dell isn’t interested in building a partner program consisting of what amounts to mirror-image, check-list items found in other vendor’s channel programs.

To be sure, Dell has all of the things a solution provider would expect from a partner program—deal registration, volume discounting, marketing materials—the channel team feels unencumbered by the structures adopted by other vendors. This lack of experience and legacy gives the Dell channel team the flexibility to craft a program that works for it and its partners. While this may sound like a scary concept for some channel vendors, Dell is engaging its solution providers and partner advisory council to critique and endorse its efforts.

While problems with Dell’s partner pricing, deal registration program and support infrastructure persist, Davis says he’s personally committed to resolving partner complaints and continually improving the quality of partners’ experience. Flexibility to change and improve is a strength, but the true test is durability and commitment over time.

“If anything I tell you [or a partner] isn’t working, tell me and I’ll do what I can to get it fixed,” Davis told Channel Insider. (Compliments, complaints and problems can be sent directly to Davis at gregory_davis@dell.com; you can also copy Channel Insider at lawrence.walsh@ziffdavisenterprise.com.)

Lawrence M. Walsh is vice president and group publisher of Channel Insider. What do you think of Dell’s relationship in the channel over the past year? Share your thoughts with Larry at lawrence.walsh@ziffdavisenterprise.com.