Dell Computer Corp. has ruffled the feathers of some industry heavyweights with its new networking strategy and gear, moves that have some vendors sliding partnership deals through the corporate shredder.
In July of this year, Hewlett-Packard Co. ended a long-standing partnership with Dell amid rumours that Dell had plans to tread on HP’s signature bread and butter: the printing and imaging market.
Less than a month later, Dell caused another partner to jump off its bandwagon with announcements of switching products and networking gear. Although it will not “comment on specific details regarding our business relationships,” Cisco Systems Ltd. announced that it would call it quits with Dell, whereby Dell would no longer be authorized to sell any Cisco gear. In a statement, Cisco said “to help ensure a smooth customer transition and the highest level of customer satisfaction, Dell will be able to sell Cisco product until the end of October.”
And, it looks like three’s company, as 3Com Corp. last month revoked Dell’s top-tier status as a gold-level partner to become the third supplier since July to terminate an agreement with the PC maker.
With three of the industry’s key innovators out of the house, so to speak, is Dell getting worried?
In short, the answer, as far as Dell is concerned, is no. According to Don Kerr, Dell is more than confident its own networking gear will make significant inroads in the industry. The company has already released a line of local area network (LAN) switching products, called PowerConnect, that come in both unmanaged and managed flavours.
However, Kerr noted that Dell’s decision to enter the networking space did not happen overnight. He said the company has looked at the market closely, examining key drivers to ensure the business will succeed: is there sufficient volume in the marketplace; is the market standardized; and most importantly, is it profitable?
“All that has happened here is that we launched the (PowerConnect) set and reception in the market has been phenomenal,” Kerr told Network World Canada. “The switch market is clearly profitable and that business is growing and has been very effective for us.”
While Dell appears positive that its strategy, combined with its product offerings, will guarantee it a spot amongst the top networking dogs, at least one ex-partner has no intentions of rolling over and playing dead.
“Dell has decided that they are going to try and enter into the networking space and we have decided that we are not going to make it easy for them to compete with us,” said Nick Tidd, managing director of 3Com Canada in Mississauga. “The fact is, we know for certain that a number of customers ask for our products specifically when they are phoning into the Dell organization.
“Additionally, we believe that our product line is much broader in range and that Dell is still focused on a specific category, primarily around the SMB and the 10/100 switching space. We are just not going to make it easy for them. The old adage is that you can’t have your cake and eat it too.”
Tidd added that 3Com customers have nothing to worry about, as 3Com will continue its dedication to its channel partners. Tidd said there is a good possibility that without Dell in the picture, some of its smaller resellers will be able to pick up the lost revenue.
“From an end-user perspective, does it cause them to now make two calls instead of one? Possibly,” he said. “We still believe that we do have the best value proposition out there when it comes to practicality and innovative technology. Users are ultimately going to realize that. We don’t think that this will impact warrantees, services programs or standing offers.”
Dell’s Kerr also assured that Dell customers will not be affected by the situation, and added that much of Dell’s decision to enter the networking space came as a direct result of customer demands.
“What we are saying is basically we think that we can not only replace but accelerate growth around those specific product groupings by having a Dell-branded option,” he explained. “We are not doing this in any way, shape or form out of spite for HP or Cisco or 3Com. This is a clear response from customers.”
And, for at least one customer, the news has little effect on its dealings with Dell. In July, the Buffalo Center of Excellence and Bioinformatics rolled out one of the world’s largest PC cluster environments using more than 2,000 Dell PowerEdge 2650 and 1650 servers with more than 4,000 Intel processors. According to Dr. Jeffrey Skolnick, director of the Center in Buffalo, N.Y., the cluster was built to aid in identifying the functions of as many proteins in a number of genomes, including the human genome.
“The calculation, even to do one of the first stages…for human proteins would take between 1,000 and 2,000 years on one PC, which means it is basically impossible,” Skolnick explained. “We needed a way of speeding it up to do this in people time.”
Dell won the bid to power the Center, although Skolnick said he was aware of the problems the company was having with partners. He said he feels secure in thinking that Dell will satisfy the needs of the Center.
“Obviously I had to do my due diligence to make sure that I don’t have a $13 million mistake,” he said. “I have warrantees with the vendors who feed the various components.…As a longer-term issue as to whose switches one goes to for the next round, we will have to revisit that issue when it comes.”