Dell Distribution Agreement Shock Waves

March 30, 2009 at 3:12 am Leave a comment

By Tim Lowe

Finally some news other than what’s going on in the economy!

DELL’s distribution agreement announcement is sending shock waves throughout the industry larger than rumors of IBM-SUN merger discussions. The availability of a subset of the DELL product line through broad line distributors Ingram Micro and Tech Data has ramifications for every value added reseller in the channel. The worst kept secret in the industry for years has been the percentage of DELL desktop and laptop business that has either been sold or influenced by the channel. I’ve never seen an accurate estimate of how many Dell desktops have been “sold” by the channel through the influence of a solution provider either for a configuration fee or simply as part of the overall solution package. And of course Dell has used broad line distributors for years to provide the logistics of their third party options. However the public announcement of a formal relationship between DELL and Ingram Micro/Tech Data legitimizes the entrance of Dell into the channel supply chain.
A chief complaint by VARS of the current Dell partner program is the competition with Dell direct. Not only in terms of pricing, but also availability and timing. While Dell professed to an even playing field, the channel has been full of stories that end users were contacted and pressured by Dell direct after contact by a VAR. The broadening of the Dell deal registration program has addressed this and has eliminated most of the complaints. The question is if the availability of select models through distribution will continue to entice more VARs to lead with Dell products.

There are several positives and negatives for Dell in this new relationship with distribution.  Dell now has access to the long term customer relationships that distributors enjoy with VARS. They can leverage the credit facilities provided by distributors which has been a shortcoming of the Dell partner program for larger partners with substantial run rate business. And they now are seen as a legitimate alternative to HP and Lenovo, when a VAR calls their disty for pricing and availability. Desktops and laptops continue to be increasingly  commoditized and HP especially has enjoyed the lack of competition in distribution for their commodity products.
However, this is a new business process for Dell and there are lessons in dealing with distribution that are hard learned. The days of stuffing the channel are long past, and controlling inventory and price protection with a third party is science and an art that Dell must quickly discover.
Overall, this is a positive step for the industry and for Dell. It may come at the expense of HP domination, but they have responded aggressively to Dell successes in the past.

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