Can Dell Do it Without the Channel?

By Chris Talbot

Dell is expanding its software-as-a-service (SaaS) portfolio with the acquisition of security service provider SecureWorks. The deal extends an existing partnership between Dell and SecureWorks announced in July 2010. Terms of the acquisition were not disclosed.

The SecureWorks acquisition, which is expected to close early this year, will add managed security services, security and risk consulting services, and threat intelligence to Dell’s growing line-up of managed and professional services. As a company often accused of circumventing the channel in favor of direct sales, particularly in the managed services arena, the question remains: What will this latest acquisition mean for Dell’s channel partners?

Dell’s recent history shows that while Dell has courted resellers of its, its managed services programs have been less channel-friendly. For instance, Dell’s managed services approach is to not interfere with existing customers of Dell certified managed services providers. But if no such provider exists, Dell will sell the services direct to customers.

Dell launched with this direct sales focus for managed services in April 2009. Although certified Dell managed services partners were given the opportunity to sell the managed services to their customers, Dell also came under fire for potentially eroding the pricing of managed services overall.

Plus, after Dell acquired Silverback, the managed services platform provider, it offered managed services to MSPs only in a Dell-hosted mode. That and perhaps other factors caused some serious attrition among Silverback MSPs after Dell’s acquisition. Its largest customer, master MSP Do IT Smarter, told Channel Insider about its Silverback divorce last year.

Dell reports that it currently has 125 certified managed services partners, up from 115 in early 2010, but down from the 150 Silverback had at the time Dell acquired it in 2007.

But Peter Altabef, president of Dell Services, says the channel has nothing to fear from Dell in the services arena. Dell has every intention of quickly integrating the SecureWorks offerings into its channel after the acquisition has been finalized.

Chris Liebert, senior analyst of security services at IDC, told Channel Insider that it was unlikely Dell would cut out the channel in the SecureWorks acquisition.

"I don’t believe that they want to do that. Managed security services are traditionally difficult to reach to small and medium markets because a systems integrator, for example, like Accenture or IBM, they ... find it difficult to package the managed services to the SMB and mid-market," she said.

The market for security services is growing in the SMB market just as it’s growing in the enterprise market, as all sizes of companies have to protect themselves from malware and cybercrime, but as large vendors and systems integrators find it easy to hammer out the details of deals with other enterprises, it’s the channel that acts as feet on the street in the mid-market and below, Liebert said.

Vendors like Dell simply don’t have the sales manpower to properly serve the SMB market. That’s where local and regional channel partners really shine.

"With regards to the channel, the only way for managed security service providers or security services vendors to reach the SMB and mid-market is to enlist the support of their regional VARs and regional channel partners," Liebert said.

She added that it would be too risky of a proposition for Dell to take SecureWorks entirely direct to the SMB market. Although Dell has stated it will make a strong channel push with SecureWorks services, how much of that opportunity will go through its partners remains to be seen. Only time will tell how much of a channel play this really is.

Dell’s strategy in services, like with its other product lines, is to give customers the ultimate choice. If customers prefer to buy direct, Dell doesn’t turn them away, according to Dell. If customers prefer to buy from trusted advisors, the channel has the opportunity to fulfill that role.

This article was originally published on 2011-01-04