Dell Is the Ultimate VAR

If you decry and defame Dell as a predatory vendor that’s still not channel-friendly, you’re missing the point. Dell is the ultimate VAR, reselling more hardware and software than most traditional VARs could ever dream of.

The announcement that Dell will resell Sun Microsystems’ Solaris operating system on its servers is a huge victory for Sun. It opens a whole new channel for the resurging hardware vendor for its underdog, yet highly reliable platform. Best yet, it doesn’t necessarily conflict with its own channel or direct sales since there’s little overlap between Sun and Dell server sales.

This deal is indicative of Dell. Many people look at Dell as a manufacturer, when in reality it is a reseller. Most of its branded products are manufactured by so-called competitors. Dell printers are made by Lexmark, Samsung and Xerox. Dell enterprise storage is actually EMC hardware. And some Dell laptops are actually made by Acer and Hewlett-Packard.

Click here to read more about Dell’s deal with Sun.

If you scroll through Dell’s Web site, you can find a massive catalogue of hardware, accessories and software produced by other vendors for installation as part of a PC bundle or as stand-alone products. Dell sells Symantec security software, Autodesk CAD applications, Nuance’s voice recognition packages, Business Object’s reporting software and every conceivable Microsoft application and bundle.

Dell isn’t unique. Most of the channel-friendly vendors have OEM channels, too. Microsoft sells through virtually every server and PC manufacturer. Every printer manufacturer has relationships with a PC vendor. And even software vendors will bundle their wares with complementary competitive packages. VARs often get access to products without having to join 100 different channel programs because of vendor-to-vendor relationships.

If you talk to the analysts about who Dell really competes with, they won’t say HP, IBM or Sun. Often the chief competitor cited is CDW and direct catalog DMRs (direct market reseller), since they have the same high-volume, low-price model as Dell. Ironically, both Dell and DMRs serve the channel as alternative sources to distribution. Many VARs refer business to Dell for commodity product sales and then sell installation and support services to make their numbers.

Now, you might say that Dell has tripped, given its financial performance over the past two years. Perhaps, but a closer examination of the numbers reveals that its enterprise sales are healthy and the growth recorded by its rivals—namely HP—is mostly attributed to consumer sales. In fact, many customers will still specify Dell products in their RFPs (request for proposal), which forces resellers to do business with Dell or lose the deal to Dell’s direct sales.

VARs can learn a lot from Dell: Business is all about marketing and the business model. Many VARs will get hung up on technology and their relationships with market-leading, powerful brand vendors. They’ll talk about the quality and technical prowess of the products they resell. However, they rarely talk about marketing, go-to-market strategies and growth ambitions.

The thing Dell did right, and VARs should emulate, is establish itself as the brand and build an infrastructure where all roads run through it. Where VARs brag about their vendor relationships, Dell and its OEM partners—by contract—will not speak of its vendor relationships. With Dell, there’s no question of who owns the customer relationship, where VARs are always caught in the tug-of-war with their vendor partners over their customer relationships.

VARs can learn a thing or two from Dell. Emulating parts of Dell’s business model, marketing strategy and strategic relationships would serve resellers well in the marketplace.

Lawrence M. Walsh is Editor of Baseline magazine and a regular columnist for The Channel Insider.