Dell delves into new channel strategy

TORONTO – Michael Dell claims partial responsibility for driving the price of PC down dramatically over the last decade. He’d like to do the same for all of IT.

Dell was in Toronto Wednesday to meet with customers and partners but also took 30 minutes out of his schedule to take questions from local media.

His chief concern right now is managing the company’s highly scrutinized move from direct sales to a more channel-friendly strategy. But that’s only one change on the horizon, said Dell, who reclaimed his spot as CEO after Kevin Rollins stepped down earlier this year.

“You’ve got a number of vendors in our industry that are really promoting complexity, promoting proprietary systems that are overly complicated and required an army of consultants to make them run,” said Dell. “The result of all this is that they don’t have money left to do innovation around business models.”

Most IT departments are spending about 70 per cent of their budgets to keep old technology up and running, said Dell. He said he hopes to free up some of that money by taking complexity of out hardware and making it less expensive to purchase and maintain.

“We don’t know exactly how to do all that, but we think it’s a great challenge and one that is relevant to our customers,” he said, adding that server virtualization, made possible by its partnership with EMC, is putting the company on the right track.

“When you start to get on a more standardized environment and get off proprietary systems, companies can then start to apply more of their IT dollars to actual innovation. That’s a big focus for us,” said Dell.

Dell said the company will keep pace with server systems by providing a greater variety of solutions. “You’ll see a broadening of our platforms in the server space, where we have a broader set of solutions to address all of the unique needs from single socket to dual socket, from blades to towers . . . every kind of flavour you can imagine.”

Like most major hardware vendors, Linux systems have made up a significant part of Dell’s server architecture, but the company is hoping to extend that into the consumer base through Linux-based PCs and laptops. The company’s distribution of choice is Ubuntu (the “Feisty Fawn” version). Selling Linux to consumers is something of an experiment, admitted Dell, but “there’s clearly interest there. We’ll know a whole lot more about that in the coming weeks and months.”

Dell is also taking the plunge by moving into channel waters – a decision that has some channel players looking askance at the hardware provider. Dell has utilized the channel in a limited fashion in the past, but it was something the company was reluctant to acknowledge until now.

“The direct model was a real revolution in the computer industry but it’s not a religion,” said Dell, adding that his company already has a multi-billion business with solution providers, partners and retailers in the U.S.

Canada will factor into Dell’s channel plans in the immediate future, he said. “I think you’ll see a number of countries, including Canada, move along the same path as the U.S. in terms of embracing solution providers and channel partners.”

Dell said the market has become more competitive and that diminishing margins on PC equipment urged the company to provide value-add by selling more services – something he hopes to extend through channel partners.

At least one Canadian VAR was heartened by the news that this country will factor into Dell’s imminent channel plans, though he wishes the news had come earlier.

“Truth is that I got a little excited when I heard that Dell was entertaining an indirect sales model and disheartened to hear that it is being test marketed in the U.S.,” said Randy Kalpin in an e-mail interview. “Canada would have made a more sensible test market for Dell where their logistics in our vast country are more compromised.”

Kalpin is a former channel executive for On The Go Technologies Corp., a CDN Top 100 Solution Provider.

“All that being said, I would love to be part of an initiative to implement a VAR model for Dell in Canada,” added Kalpin. “Keep your friend’s close and your enemies closer.”

Dell said he isn’t cowed by the encroachment of other hardware vendors, nor does he see the company’s move into the channel as any kind of defeat.

“We’ve got a few disruptions of our own planned,” he said.


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