Dell has been aggressively peppering both the digital and print media with its enterprise storage campaign “running circles around everyone else”. It has reason to do so. Dell has come a long way from a dorm in Austin, TX to the corporate offices and consumer households globally. And Dell is doing all it can to take its channel partners, which are Dell’s extended sales and deployment team, along a fraught put potentially rewarding journey.
Dell’s channel momentum has not yet peaked. Q3 YoY channel order revenue grew by 21% as compared to 14% YoY reported in Q1. Distribution remains one of Dell’s fastest growing routes to market, having 19% Y/Y growth in Q3 (same as Q1) and through three quarters, accounting for roughly 40% of Dell’s overall channel mix. In early 2018 Dell had set a target of reaching US$50 billion in channel revenue and by end of 2018 it was at US$49B in orders (pending Q4 financial results). It has now set its sight at US$70B, timeframe as yet unknown.
Regardless of the success achieved, Dell continues to modify its partner program. Actually, it can be argued that continuous tinkering with the program has helped Dell to drive channel partner growth. While the core tenets of Simple, Profitable, Predictable remain, in February 2019 Dell has added three imperatives: 1/ making it easier for partners to do more business with Dell, 2/ fast-tracking partners’ ability to deliver transformational solutions, 3/ embracing and monetizing emerging technologies. Is Dell being very smart in using financial incentives’ levers to drive quarterly growth and revenue share and missing out on long-term transformation of its channel partners to efficiently participate in multi-cloud, connected business future? Is Dell focusing on the end zone without regard for down and distance? Let us analyze.
Making it easier for partners to do more business with Dell
Dell certainly has mindshare of both partners and customers. Dell also realizes that channel partners have choice, which empowers the partners to deliver solutions based on customer preference – which in turn results in a very narrow window of opportunity for Dell to convert mindshare to wallet-share. Techaisle survey shows that channel partners have an average of 4.2 meaningful vendor partnerships. But Dell channel partners have 6.18 vendor partners, which is 47% more from average. Simplification of partner program and incentive structure in addition to breadth in product portfolio is important for Dell as it distinguishes itself within its channel.
In 2017 when Dell had introduced new metals – Gold, Platinum, Titanium (and Titanium Black) – for its program tiers, a collective cry of anguish was heard among the smaller, nimbler channel partners. But the anguish soon turned to tepid excitement; in particular, many Gold partners responded with greater Dell wallet-share. As the CEO of a US$9.2 million Dell partner said, “I personally believe that this partner program is more effective for us. We are small in size and catering primarily to smaller businesses. If I talk about my company’s business, we generate over 45% of total revenues from Dell. I know many of the other counterpart partners who have almost similar numbers. It may be coincidence but 2018 has been one of our best years in a long-time and I would like to give some credit to Dell for this.”
Dell has no intention of leaving any partner behind. In its loudest voice, on February 6th 2019, Dell made it abundantly clear that it was further simplifying program requirements, which to many smaller partners “felt like music.” In this announcement, Dell:
Sometimes simplicity unintentionally introduces complexities. While 34% of Dell channel partners are planning to invest time and resources in certifications in 2019, significantly down from 43% in 2018, the percentage of partners allocating resources on administration of partner program has remained relatively unchanged at 25% (compared to 26% in 2018). This is not a result of Dell’s partner program continuing to be complicated, but instead, results from the many new channel enablement initiatives have been introduced: Test Drive program, Self-service/process automation, Preferred Partner Program, Partner of Record (primarily for storage or server and implemented for further driving storage market share) and the Advantage framework. In addition, the individual partner programs of each of Dell’s business units remain operational. Partners who span multiple product lines will shop across the program to find the best economic deal and then attempt to apply these terms to as many products as possible – an important but laborious step towards optimizing relationship returns.
Dell continues to struggle with simplification of deal registration, both due to inherent complexity of the task and a technology transition (Oracle to SAP). Regardless, in Q3, Dell registered a 25% increase in YoY deal registration approvals and violations were significantly down. This is also a result of Dell training and rewarding its sales team to work with partners. Dell will soon be introducing badging for sales staff who train themselves on rules of engagement.
Fast-tracking partners’ ability to deliver transformational solutions
Dell’s transformative solutions are built on four pillars: 1/ Workplace transformation, 2/ Security transformation, 3/ IT transformation, and 4/ Digital transformation. The IT industry is still abuzz with discussions of digital transformation. Unlike smartphones and cloud, however, which reduced transaction values in core categories, transformation actually provides upside for traditional channel partners. The term is still murky: in many cases, channel partners that promote digital transformation to prospective customers are really talking about digitization (migrating from paper documents or manual tasks to digital alternatives), or some combination of digitization and digitalization (connecting digitalized tasks and assets into efficient digital processes). However, in its end stages, digital transformation is defined not by supplier delivery but by customer processes and objectives. It is not possible to redesign tasks or create new IT-enabled opportunities within the customer business without developing a deep understanding of the current state of the customer’s operations, and mapping a path that expands from task redesign to connected platforms that support entirely new work processes. Partners who enable this journey add significant long-term value to their customers, and as a result, to suppliers like Dell as well.
Dell’s partners have made giant strides in the last year. In 2018, as per Techaisle data, 65% of Dell channel partners were offering transformative solutions to their customers, this number has jumped to 86% in 2019. However, Techaisle data also suggests that a higher percent of smaller partners (18%) than larger partners (10%) are able to deliver end-to-end transformative solutions resulting in previously unattainable or unimaginable business outcomes for their customers. Techaisle research shows that 58% of both smaller and larger partners are offering digitalization solutions - deploying digital technologies to automate processes for better business outcomes.
Following up on its pillar of security transformation, neatly tucked within the partner program announcements of 6th February was a Dell EMC end-to-end campaign for all partners targeting midmarket (100-499 employees) customers, with a focus on trusted devices, trusted infrastructure and trusted data. With exposure attaching to the solutions that deliver greatest benefit to midmarket firms, it is not at all surprising to find that a clear majority of midmarket firms are already allocating resources to IT security, and that further investment is planned over the next 1-3 years, with 60% of midmarket organizations planning increased allocations to IT security, and overall security spending by midmarket businesses poised to increase by 8% annually. Sometimes ‘squeezed’ between the agile small businesses and deep-pocketed enterprises, midmarket firms are striving to both stay ahead of nimble smaller firms and to compete with global giants. Dell’s campaign opens up new opportunities for partners, as most midmarket businesses recognize that desk-centric workers, remote workers and on-the-go pros are important to their success, and agree that taking the steps needed to safeguard these users, their data and devices and the connections that they open into the corporate environment are important to the health of their businesses.
Embracing and monetizing emerging technologies
Techaisle data shows that analytics and cloud are the two categories that are most closely associated with transformation, and providing these solutions will be critical for channel partners looking to position themselves as digitalization solution leaders. Security and mobility/wireless are also ‘must have’ capabilities for organizations looking to address buyer needs. The next two waves of emerging technologies, VR and IoT followed by AI, containers, DevOps and robotics, requires that partners further extend their visioning/road-mapping capabilities. Dell recognizes that in most contexts, a provider’s ability to simply weave these technologies into a digitalization strategy (rather than providing a detailed plan for adoption) is probably sufficient for near-term midmarket digitalization messaging purposes. It is yet unclear how Dell intends to help partners embrace and monetize these emerging technologies, but Dell has begun by offering analytics competency.
A miss – P2P partner ecosystem collaboration platform
Techaisle data also shows that peer-to-peer collaboration is important to success in emerging technologies. P2P is important across all markets. As the pace of technology evolution accelerates, and requirements for niche understanding of both business and technology issues increase, it becomes impossible for all channel partners to be proficient across all technology offerings. It is therefore necessary for channels to collaborate with each other frequently to maximize opportunity and experience. Data confirms that the channel is aware of and is acting on this requirement. Across all channel types P2P collaboration is reported to occur “frequently” by 57% or more of channel partners. Two-thirds of Dell partners are already collaborating with other partners, slightly up from 65% in 2018. It would have been nice if Dell extended its partner experience center to facilitate P2P matching and collaboration.
There is no question that Dell has the most complete product portfolio in the IT industry. This position has evident and significant potential benefit, but can lose impact due to the need for partners to navigate an immensely complex set of offerings. Dell deserves plaudits for recognizing this challenge and responding with partner programs that mute the roar of the manifold solutions and enable partners to focus on working effectively – and profitably – with their customers.
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