Is Dell Ready for the Channel?

By Pedro Pereira  |  Posted 2006-09-15 Email Print this article Print
 
 
 
 
 
 
 

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Opinion: Dell finally acknowledges it needs more than direct sales to sell product. Could a formal channel program be far behind?

Pigs haven't learned to fly, and my sources tell me hell hasn't frozen over. But lest you go thinking all is right with the world, consider this: Executives at Dell are finally acknowledging publicly that the company could benefit from alternative routes to market.

That's right, company brass, including Dell founder Michael Dell, said during an event in New York this week that the vendor is open to "experimenting" with routes to market other than the direct model that Dell has held sacrosanct for years.

Dell said the "vast majority" of company customers buy online and he expects the online business will continue to increase. "But that doesn't mean we won't experiment and reach out to other means to reach the market," he added.

If you've been paying attention, you might be tempted to say, "So what?" After all, Dell effectively has used the channel for years, and analysts estimate some 20 percent of the company's business is generated through the channel.

So, then, what's the big deal?

The "do-my-ears-deceive-me" revelation here is that Dell for the first time acknowledged publicly that the company could stand to benefit from getting product to market through means other than direct sales.

You know how that goes: The first step is acknowledging you need help, and we have that now. The second step is actually getting the help, and that's what we will see in the future.

Unless Dell has in store more cockamamie ideas of the same ilk as its strategy to open retail stores that carry no inventory, we should see some sort of a formal channel program from the vendor in coming months.

As Dell may have finally realized, a direct model only gets you so far. And while it is hard to argue with the company's success until recently, Dell has started to struggle. Its financial performance has faltered, a handful of executives have left for competitor Lenovo, the company's customer support has taken a lot of criticism, and just last month, Dell revealed it was recalling defective 4.1 million Sony-branded battery packs in Latitude notebooks.

And if that weren't enough, the U.S. Securities and Exchange Commission is investigating the PC maker's accounting practices, and analysts have been suggesting it's time for CEO Kevin Rollins to go.

The company is working to change its fortunes through moves such as product design improvements and initiatives to beef up services and support, but such moves may fall short. The price differential Dell used to enjoy against competitors no longer exists, and customers who are turning away from the brand now could prove hard to win back.

Dell needs people to champion its brand, and not just people who get a paycheck from the company. Those people could be solution providers who wouldn't mind having another choice of brands to offer customers.

Solution providers have significant influence over customer purchases. The brand they recommend is the brand customers buy as much as 80 percent of the time. Think of all the sales Dell could be making if it had an official program to market the brand through solution providers. That estimated 20 percent of business the vendor generates from the channel would surely increase.

Business is business. And as such, it requires making adjustments to stay competitive. Holding fast to the direct model for any reason other than sound business strategy would be silly. As it looks now, that model is no longer sufficient to keep Dell competitive.

Pedro Pereira is editor of eWEEK Strategic Partner, contributing editor to The Channel Insider and a veteran channel reporter. He can be reached at ppereira@ziffdavis.com.

 
 
 
 
 
 
 
 
 
























 
 
 
 
 
 

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