Why Dell’s channel religion will be tested moving forward
- 04 May, 2018 05:15
Michael Dell (Dell Technologies)
It was 11 years ago this week that Michael Dell penned the infamous memo declaring that its crown jewel (direct) was a revolution – not a religion.
The very thing that anchored its messaging and competitive advantage over the first 15 years was not an absolute.
Back then it was a lesson in customer preference. About one-third of PC’s were bought direct, one-third retail and one-third through different types of reseller channels.
Thus, to target the other two-thirds of the market, channel religion was a necessity.
With all of the changes in Dell Technologies over the past couple of years with the merger of EMC (and others) and the privatisation of ownership, one interesting milestone was reached: Over half of all business (51 per cent) now flows through the indirect channel.
I asked Michael Dell specifically about this milestone and how this growth of indirect would change the go-to-market motions of the company.
His (non) answer was that direct and indirect are important channels and the company is looking to grow both simultaneously.
Competitors such as HP, Lenovo, IBM and others drive over 80 per cent of their global business through the channel.
Dell’s strategy as the only “edge-to-core-to-cloud” company left standing will test what the right route mix should be.
Here are some channel specific observations:
1 - The combined partner programs look comprehensive and rich:
Initial partner feedback has been strong with many buzzing about simplification, cross-brand integration, ease of vendor management, and a broad (and growing) product portfolio.
2 - Simplicity and ease of doing business has always been a plus for partners that work with Dell:
One of the not-so-secret benefits they had during the 1990’s and 2000’s were the thousands of dedicated VARs and MSPs recommending, influencing, and reselling Dell in the SMB and mid-market – even while direct was the company mantra and media messaging made people think it avoided channels completely.
3 - Several parts of the new Dell Technologies portfolio needs down-market channel support:
EMC, VMware, and even Virtustream collect the majority of their revenue from Fortune-sized clients and future growth will come as mid-market and SMB companies digitally transform.
This is especially true for highly regulated industries such as healthcare and finance where on-premises and hybrid storage, security, compliance and continuity will be paramount.
4 - The PC and PC server divisions will need to engage HP and Lenovo with a channel-first community play:
Dell has saturated the direct market and needs to focus on the many flavours of indirect channels to challenge HP and Lenovo for the number one spot worldwide. Channel religion may be tested the most in these markets.
5 - Dell is positioned well in the future of the channel:
I have written extensively about shadow channels such as XaaS ecosystem partners, industry-based services firms (accountants, digital agencies, etc.), ISVs, and born-in-the-clouds and how they will not participate in the traditional partner program.
Most of these shadow channels are not looking to resell or transact with hardware or software and can take advantage of Dell’s predictable and efficient direct supply chain.
One or the other?
To many in the channel, you can’t play both sides. You either have religion or you don’t. To others, it just doesn’t matter anymore. Shadow channels will likely warm up to Dell if they are able to drive the right level of visibility and influencer type programs.
Through all of the changes and customer digital transformations that are underway, the one constant is infrastructure.
Emerging technologies such as the internet of things (IoT), artificial intelligence, augmented and virtual reality, automation, and the many others, will take amazing amounts of compute, storage, and network throughput.
Data is the new oil and Dell is betting on an edge-to-core-to-cloud strategy that will be hard to avoid/ignore for anyone in the channel moving forward.
How Dell balances its go-to-market and routes-to-market motions will have a significant impact on their level of success around the globe.
Jay McBain is principal analyst of channels at Forrester. Jay leads Forrester's research and advisory for global channels, alliances, and partnerships. He focuses on B2B marketing in the age of the customer; understanding and navigating the complexity of multiple routes to market; ensuring contextual and relevant content to accelerate the indirect sales process; and describing the technology infrastructure to build and support channel relationships.