Data speaks volumes
Techaisle’s channel survey data shows that Dell channel partners’ perception about Dell has improved by nearly 50 percent in the last 4 years. 61 percent of partners say that they trust Dell, up from 43 percent in 2014, an increase of 42 percent. Similarly, 45 percent of partners believe that Dell has cutting edge technology, an increase of 45 percent from 2014. Most interestingly, unlike in the last several years, 57 percent of partners mention that they like Dell as a partner, very similar to HPE partners liking HPE. For 93 percent of partners, Dell’s messaging on Simple, Predictable & Profitable has resonated although variations in perception remain. Dell’s messaging on digital transformation also seems to be having a positive effect on its channel partners. 65% of Dell partners are currently offering some form of digital transformation solutions and 76% have moved beyond 1st step of digital transformation, which is, digitization, the lowest ladder of the transformation journey. However, not all have reached the pinnacle of transformative solutions.
Dell Technologies channel revenue is US$43B, slightly above 50 percent of Dell revenue (had languished around 40 percent the last 3 years) which is bigger than revenues of Nike, Starbucks, Coca-Cola and would neatly fit as a Fortune 64 company. In Q1’19, Dell channel revenue grew by 14% Y/Y and distribution by 19% Y/Y.
All of the above statistics are very impressive and are a result of Dell’s wide solution portfolio range as well as a maniacal focus on streamlining channel partner’s total experience which includes simplified deal registration by accelerating deal registration response time to 4 hours for most deals and 48 hours for storage; accelerated speed to quote by providing best price faster and 80 percent within 4 hours and 95 percent within 24 hours; and finally, faster speed to pay by cutting cycle time by nearly 30 percent.
Dell listening, partners noticing
Channel partners are noticing. During many depth interviews conducted by Techaisle, one Dell channel partner said, “…they have tried to retain most of the good points of both older Dell and EMC partner programs. Motivation levels have gone up. Although they have tried their best to incorporate the good aspects of EMC partner programs; however, I still believe that the level of engagement we used to have with EMC was closer; at the same time, I would say that the new model is better than what Dell model used to be 15 months ago. We are given a fair deal now; and I am hoping the new model empowers us; especially I have seen some change in the company’s management strategy and they are trying to focus on the partner business rather than only direct. Their new management is also thinking aloud in terms of thought process towards smaller resellers and partners; only then they can increase their market share. Just by enterprise sales, I don’t think they would be successful; and probably that may be the reason that the company is engaging more with us than they used to do in the past”.
SMB segment had always been a strong focus area for Dell whereas EMC was primarily focused on enterprise service delivery model. Dell has tried to retain all the good attributes of both the original worlds of Dell and EMC. Some of the key changes are –
From a partner’s perspective there is a shift happening. At Techaisle we survey thousands of partners and speak with hundreds. No longer do we hear the refrain, “Don’t work with Dell as they don’t want to work with you.” Dell has been listening. Partners wanted the scope of Direct Dell and Channel partners to be different and the issue was raised by partners across different forums and in quarterly meets and discussions. In the new partner program, Dell has made it possible for partners to sell in high margin areas like storage solutions, larger databases, and business transformation offerings while keeping simple peripherals with its ‘Direct’ team. In the past, certification and training was focused around technology and product updates especially around the features, and attributes of different products but today it includes trainings and certifications for sales and business enablement.
Digital transformation – Dell partners well positioned
The past 15 years have been tough for traditional resellers. Smartphones devastated the PC refresh business, while generally lower prices for front-office equipment hollowed out the value of maintenance/management contracts. Around the time of the ‘great recession,’ channel valuations fell precipitously – by 20x or more – disrupting transition plans for an entire generation of channel leaders. Next came the explosion of cloud, which reduced market potential for on-premise back-end technologies and shifted contracts from high-value, one-time transactions to monthly recurring revenue agreements, increasing stress on revenue and operating margins.
Today, the IT industry is abuzz with discussion of digital transformation. Unlike smartphones and cloud, however, digital transformation actually provides upside for traditional channel members. And this where Dell partners could shine because Dell seized the digital transformation conversation and has made it most visible. In many cases, channel organizations that describe digital transformation to prospective customers are really talking about digitization, or some combination of digitization and digitalization. However, in its transformational end stages, digital transformation is defined not by supplier delivery but by customer processes and objectives. Traditionally, MSPs and SaaS suppliers have offered clients advanced and highly-efficient solutions to current problems. They do not tend to customize their offerings for individual clients – doing so would undercut the efficiencies at the core of their business models. VARs, on the other hand, have pursued ‘trusted adviser’ relationships that reflect deep understanding of client needs and objectives, reflected in technology strategy, planning, deployment, integration and management. And this is where bulk of Dell’s channel partners can operate. VARs/SIs include types of partners who focus on volume product sales and those who focus on working with customers to define IT strategies that align with business requirements, and then sell, configure, deploy, integrate and manage new systems and the customer’s overall IT environment. This latter group is best positioned to be the key point of IT management for customer digital transformation initiatives.
Techaisle also data shows that 56 percent of partners find training to be important and when asked to choose between trainings and certifications, partners prefer training but then it depends from whose perspective, and over what timeframe. Certification has been positioned as being of value to partners (point of competitive differentiation) and customers (ensures qualified suppliers). In some cases, there is some truth to the former, but costs are high, and in an increasingly complex market (e.g., IoT, hybrid IT), partners need access to many products – certainly more than they can afford to be certified on. Certifications may work for some products, but they constrain options for partners dealing with configurable solutions. The entire industry is migrating from “just in case” to “just in time” skills. Training that can evolve with market needs and opportunities responds to this trend. These certifications dictate a lot within the relationship. If a channel wants to partner with Dell then it is sort of mandatory to invest money into certifications. However, it depends on the partner level whether the investment would be useful or not. Revenue thresholds decided by Dell is much higher for certified partners as compared to non-certified partners. Dell cites certifications as important; and they have reasons to prove as to why it is important. However, many channel sales professionals consider it as a non-value add activity losing approximately 40 hours to a non-productive sales time. However, there is another group of partners which feels that Dell has never put any undue pressure on them to complete these certifications. In fact, they believe that the sales representatives need not to do these trainings at a stretch. Nevertheless, in Q1’19, approximately 5,500 credentials were earned across more than 600 partner individuals up from 2,100 in Q1’18.
No channel left behind – it takes a village
There is a strong perception within the Dell channel community that Dell is increasingly focused on its Titanium - Black, Titanium and Platinum partners and specifically those who are focused on enterprise commercial accounts. Partners who work with smaller-sized businesses want Dell to also focus on alleviating the 3rd partner segment (Gold) as well – which has not progressed much owing to small budget end-customers and lower revenue thresholds. Another big challenge that partners see is that Dell has a strong communication channel and process for obtaining feedback from larger partners; however, the smaller partners, selling to small customer segments often feel neglected.
Channel urging further improvements
There are still improvements to be made. Dell’s was a low margin, aggressive approach, living in cut-throat competitive world direct sales model; while EMC’s was solution driven, very good at turning $50k or $100k into a million-dollar response. The key difference of ideology was transaction selling vs. solution selling. Within the combined entity, the former Dell resources are still not completely familiar with EMC’s portfolio and the latter does not know enough about Dell’s portfolio. Partners who have worked with only one of two companies have had certain challenges when engaging with the new Dell.
Channel partners also want Dell to help in lead generation and sales enablement. And they are requesting ease of maintenance renewals for customers already using Dell products.
The channel industry examined by Techaisle’s 2018 channel research survey is very different from the community that existed a decade ago. Once a staid domain in which technologists provided IT infrastructure support to (mainly) local customers, the channel is being reshaped by five key issues:
Dell has been largely focused and aligned on selling its line of business products and solutions. But its partners are asking for assistance in selling that is aligned to their own five key challenges. The more they understand the context behind Dell’s technology strategy and business unit portfolio the better it would be for them to articulate the right benefits to their end-customers. Financial levers that Dell uses to drive sales are great but the long-term impact of delivering customer business outcomes is even greater.
SMB Data You Can Rely On | Analysis You Can Act Upon