Dell at the Channel Crossroads

To hear Wall Street pundits tell it, the outlook is all doom and gloom for vendors associated with the PC space. But if you look past the PC side of the business, there is a fair amount of opportunity for the channel when it comes to enterprise IT. In fact, one of the primary reasons Dell CEO Michael Dell is so interested in taking his namesake company private is to invest more in that side of the business.

Now there’s word that Dell has recruited channel veteran Frank Vitagliano to be vice president of channel sales, where he will be responsible for channel partners that have regional accounts or specialize in a particular vertical industry. Jim Defoe, in his continuing role as another vice president of channel sales, will assume responsibility for direct markets and channel partners that have global footprints.

According to Greg Davis, Dell’s channel chief, the hiring of Vitagliano—who prior to joining Dell held senior channel management positions at Juniper Networks and IBM—is another signal of Dell’s continuing commitment to a channel that continues to grow.

“We’ve seen double-digit growth in Europe; double-digit growth in Asia and continued growth in the United States,” Davis said, “and we continue to gain market share.”

Roughly 37 percent of Dell’s revenue comes through the channel, according to Davis, and about 38 percent of its revenue comes from enterprise customers. In the most recent Security and Exchange Commission (SEC) filing, Michael Dell made it clear that adding additional channel reach is a priority. Specifically, he said that Dell’s goal is to increase sales coverage and expand the depth of partnerships with channel partners in its Partner Direct program, and that the company expects to significantly increase investment in training for both new and existing sales personnel, including channel partners.

That training, said Davis, will prove critical in terms of ensuring partner profitability. Investing in training lowers the cost of sales for channel partners and ultimately allows them to discover more opportunities. Couple that with a highly automated delivery system, and you wind up with a scenario in which channel partners can more profitably address a much broader range of opportunities, he added.

In addition, Davis said that training is exposing Dell partners to a raft of new products and services that Dell has acquired, starting with EqualLogic storage products and moving into software and security with the acquisitions of Quest Software and SonicWall, respectively. Taken together, Davis said the investments in training, along with an expanding product portfolio, create more opportunities for partners.

The degree to which Dell can continue to make those investments remains to be seen. Dell rivals say that one of the likely outcomes of taking the company private is that it won’t have the cash needed to make those investments because that money will be allocated to servicing company debt. Worse yet, with the majority of Dell’s revenue coming from a PC business where unit volume sales are declining, the concern is that Dell, by focusing more on enterprise IT, may not be able to recover that lost revenue stream in a timely enough manner.

Naturally, it’s that shift in priorities that has Dell looking more to the channel. After officially launching its channel program five years ago, Dell has been consistent in its commitment to the channel.

The good news for channel partners with a presence in the enterprise is that among Dell, Hewlett-Packard and IBM, they have never been more sought after. As a result, vendors are not only willing to invest more in enabling channel partners to sell more, they also are inclined to liberally share the profits generated by those sales more than ever.

Michael Vizard has been covering IT issues in the enterprise for 25 years as an editor and columnist for publications such as InfoWorld, eWEEK, Baseline, CRN, ComputerWorld and Digital Review.