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Dell Brings in Distributors

Dell began selling Vostro desktops and notebooks in the United States on Tuesday through distributors Ingram Micro Inc. and Tech Data Corp. Plans are to expand the product lines sold through the distributors in the coming weeks and to begin the program in Canada later this year.

The distribution deal is a major change to the PartnerDirect channel program that Dell launched in December 2007, in what was widely seen as a serious effort by Dell to overcome its reputation as a channel dilettante (or worse).

One of the major talking points for PartnerDirect at launch was the idea that Dell would leverage its direct-to-order supply chain to the channel's advantage by shipping directly to channel specs, removing the middle man (distributors) and distribution's cut of any profits.

The meme was still alive as recently as Feb. 4, when a posting by Rev2 Technologies Co-Founder Steve Brown enjoyed prominent placement on the Dell Channel Blog. In the posting, the Santa Clara, Calif.-based Dell reseller sang the praises of Dell's direct capabilities for the channel and reeled off a list of the shortcomings of distribution.

The Tech Data-Ingram Micro deal partially undermines the anti-distribution argument, which is part of the justification for the "direct" part of the name of Dell's partner program, PartnerDirect (emphasis mine). I say "partially" because Dell will still offer direct sales to partners in addition to the distribution options, which for now cover SMB-oriented products.

The deal is obviously a huge win for the distributors. Now there's no longer a heavyweight in the channel trying to go it alone and challenging the entire distribution model.

I think it's a win for partners, as well. Dell's "direct to channel" meme doesn't seem to have been a major reason for all the partners who've been signing up for Dell's program in the last year. Mostly solution providers seem to have wanted the option to offer systems their customers demanded without concern that Dell would swoop in -- cutting them out of the deal and stealing their customers.

In announcing the program, Greg Davis, vice president and general manager for Dell's Global Commercial Channels, said the change was driven by partner requests. "Our partners value Dell's ability to custom-configure IT, but they're telling us there are times when customers' needs are more urgent, and this agreement shows our commitment to act on feedback from partners," Davis said in a statement.

By backing into distribution this way, Dell is immersing itself more deeply into the traditional channel structure that solution providers are comfortable with. And by committing to offer products at the same price through distribution as through its direct model, Dell is putting some "skin in the game" by giving up a few points of margin to the channel.

To me, those are two more signs that Dell's commitment to the channel model remains pretty strong. What's your take? Let me know at sbekker@rcpmag.com.

Posted by Scott Bekker on March 25, 2009 at 11:58 AM


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