Techaisle Blog

End-to-End Solutions Company
Convincing conference, unified messaging from all executives, substantial customer success stories including SMBs, considerable partner alliance conversations, convergence showcase, expanding geographic footprint, emerging technologies, mid-market design point, and end-to-end solutions story. What can I say?

At the recently held Dell Annual Analyst Conference, in Austin, the centerpiece of messaging was Dell’s relentless pursuit to be an end-to-end IT solutions provider and a trusted partner. Michael Dell in his conversation with the analysts proved that Dell has changed the conversation from product to services.

“Many new change vectors are going on - Data centers are becoming server centric/compute centric, networking is being combined with computing and storage and security are becoming one – Dell has the ability to understand where the puck is going”, said Michael Dell. To that extent Dell is busy building products and solutions from which customers can capture value.

Dell has made 20 acquisitions since 2008 to build a solutions delivery capability. Its R&D, which is increasingly being focused on storage, server, security and networking convergence went up by 40 percent in the last year alone.  A key aspect of the strategy is to develop converged solutions that include storage, security, servers and wrapping it all together with services and deliver end user solutions that help customers compute in environments with pervasive data access.



 

 

 

 

 

 

 

 

Since his return as CEO, Michael Dell has steadily moved Dell into new areas for higher growth and profitability. Although Dell’s revenue has remained within a narrow margin, growing by only 1.5% from 2008 to 2012, its net income after taxes has grown by 18.5% within the same time period. Dell today has greater diversity in its solution offerings and broader geographic footprint. Both storage and security are higher margin products and with the acquisition of EqualLogic, Compellent and recently SonicWall, Dell’s margin story continues to improve.

Dell’s end-to-end solutions story is also beginning to look complete with portfolio having evolved from PCs and servers to services. Dell’s software portfolio is not where it should be but Dell is building out its capabilities for on premise software, cloud applications and software embedded in hardware. Consistent with the overall theme it wants to offer software solutions that are easier to buy, easier to use and easier to extract value.



 

 

Even the channels organization is perfectly aligned and focused on continuing to grow its PartnerDirect program that was started five years ago and is now approximately US$14 billion business for Dell. The channel’s organization headed by Greg Davis is continuing to make its rules of engagement very partner friendly and empowering and training its channels to provide value to their customers. Greg is ensuring that there is consistent
channel engagement across both mature and emerging markets with deal registration, compensation neutrality and executive priority. With over 135,000 training modules delivered in the last year alone it aims to provide simplicity, enablement and a strategy to win datacenters together. To take advantage of new social media networking platforms, Dell has also launched a new social media training program for its channel partners. The training program, developed based on Dell’s own experiences, provides its channel partners access to a number of useful social media tools and tips, including links to all of PartnerDirect’s social media platforms, a Q&A forum, registrations for both a live virtual training session and on-demand refresher courses.

Executing on its vision
Dell’s vision is being driven by five key market dynamics:

1. Emerging markets growth


2. Consumerization of IT


3. Explosion of data


4. Alternative computing platforms


5. Corporate IT complexity

Dell has not only been able to integrate the businesses it has acquired but also has successfully scaled them. Dell Boomi, a middleware for cloud, originally acquired for its ability to bring cloud integration to SMBs, is equally at home in large enterprises. A  recent example is OneWorld Alliance which has implemented a new information technology (IT) hub based on Dell Boomi AtomSphere cloud integration, designed to substantially reduce complexity, cost and time involved in linking new member airlines into the alliance.

SMBs' "CIO in a box"
Whenever an IT vendor presents customer stories I look for sincerity in the customer’s dialog and contribution of the IT vendor to customer’s success. Current Motor, an Ann Arbor, Michigan based SMB stole the show and my heart. With only 12 employees it uses full end-to-end solutions from Dell in the most interesting yet fundamental ways. Remember that it is only a small business; nevertheless Dell put a team together to bring to fruition integration with salesforce.com and digital dashboard enablement of Electric Scooters six months sooner than expected. Solutions used – mobility, cloud, hardware, software, services. As Laura Flanagan, Executive Chairman, Current Motor put it, “Dell is her CIO in a box.” And it all started with Laura approaching Dell with a business pain point. The result -- sincerity in dialog and value-add by Dell.

As Dave Johnson, SVP, Corporate Strategy said in his presentation, the “heart of the customer is the CIO.” No worries, SMBs, if you do not have a CIO, Dell can play that role for you.

Next Steps for Dell

• The entire Dell team has to work harder to get its messaging and capabilities heard by its current and potential customers because I feel Dell’s end-to-end
  solutions story has not yet reached the crescendo it deserves


• By focusing on mid-market design point Dell should not forget that small businesses have different needs and the last thing they want is a scaled-down version of product meant for mid-market businesses. Other IT vendors have tried in the past with zero to limited success


• Dell should formulate and articulate its mobile strategy beyond its planned introduction of tablets and smartphones, especially for the SMB segment that are adopting mobility solutions faster than enterprises


• Technology pain points have now overtaken business pain points for SMBs. Dell can be that unique IT Vendor that helps SMBs sort out and identify relevant technology options (cloud, mobility, infrastructure, managed services, virtualization, social media, business intelligence, marketing automation) by becoming a trusted advisor and business consultant

Anurag Agrawal
Techaisle

On March 29^th, 2012, Dell announced a new Cloud Services and Solutions Certification program for its channel partners that want to transition to cloud-based business model. This program specifies additional sales and technical training required for the new certification and is initially directed at channel partners who already have a certain level of infrastructure-related skills and sell Dell’s enterprise products.

Dell’s Cloud Services & Solutions Certification is comprised of three primary pillars in providing cloud services and solutions:

• Cloud Builder – for channel partners that can provide services to design and develop a cloud infrastructure for their customers. This is typically suitable for VARs.


• Cloud Provider – for channels that have the capabilities or want to acquire skill-sets to operate a cloud networking operating center (NOC) enabled with Dell technology to provide cloud services. These include:  Infrastructure as a Service (IaaS), Platform as a Service (PaaS) or Software as a Service (SaaS).  This is typically suitable for SaaS ISVs, Service providers.


• Cloud Service Enabler – for those channel partners that want to act as aggregators or brokers identifying, securing and integrating the appropriate set of cloud technologies and services from multiple sources and operating the resulting cloud for their customers through a set of managed services. This is typically suitable for MSPs & Systems Integrators.

Techaisle believes that Dell’s new channel program is a step in the right direction. Techaisle’s research has shown that businesses are looking for advice and guidance from their channel partners on the use of cloud services & solutions. In addition, Techaisle’s channel research has also shown that many channel partners who want to offer cloud-based offerings to their business clients, themselves need help and support from their vendors. The new training requirements will ensure that channel partners have the required cloud-related skills to be the best in business. Dell is also making it easy
for partners to demonstrate their infrastructure-related skills by accepting their membership in channel programs of recognized vendors in technology areas of security, networking and virtualization. In addition to getting preferred pricing, Dell’s Cloud Partners will also have access to financing from Dell as well as support engagement from Dell Direct Sales and Services.

A key feature of Dell’s program is the recognition that channel partners vary greatly in their size, skills and resources. The program allows partners to transition to the cloud computing model in a manner they feel is best suited for them – be it as a cloud builder, cloud provider or as an cloud service enabler (aggregator). The program also allows partners to supplement Dell’s technology with their own technology services, giving them significant flexibility to offer Dell-based cloud offerings without having to write-off up their investment in their existing services.

Dell has steadily evolved its channel strategy over the last five years and this new certification represents an important step in that evolution. Given this steady evolution, Dell’s channel partners can expect Dell to further fine-tune channel’s role in the cloud, develop additional support programs and also expand its cloud-based offerings for the channel.

Anurag Agrawal
Techaisle

SMB SaaS is of high interest to the Vendors and the Channels as well as the SMBs themselves. This high interest has been fed by the promise of lower cost of ownership, avoiding software upgrade cycles and licensing fee and its ability to scale with the business. Our research shows that Global SMB SaaS market is expected to be US$5.3 Billion in 2011 and growing to US$8.9 Billion in 2015. This represents about 50 Percent of Global SMB Cloud spend, but is also showing the lowest growth rate behind IaaS/PaaS. While CRM and ERP seem to be the obvious choice for SMBs to begin their SaaS journey, supported by numerous small and global SaaS vendors, SMBs are looking for industry verticals or line of business applications more than generic SaaS applications. In our recent Channel studies, we have found that 40.3 percent of Channel Partners are currently offering SaaS based CRM solutions which is a little over 10,200 SMB Channel Partners in the US alone.

In the US, there are 2.3 million SMBs that are using some sort of SaaS solution. However, only about 1 million are using CRM. This represents approximately 98 CRM customers for each CRM SMB Channel Partner. With an average number of seats per SMB being not too high, one can easily guess as to how the Channel Partners can effectively make money in providing just CRM based SaaS solutions. This is with the assumption that all SMBs using CRM SaaS are going through Channel Partners. The only logical progression for both the Channel Partners and SaaS Vendors is to verticalize their applications, and that is where the actual demand is as both SBs and MBs are exhibiting high adoption levels for industry specific applications.

Top tier SaaS vendors such as salesforce.com initiated the No Hardware/No Software model and SMBs were quick to jump onto that messaging. However, salesforce.com should be in a state of dilemma in terms of addressing the needs of the SMBs as the market becomes increasingly saturated with generic CRM applications. SaaS vendors such as salesforce.com and Sugar CRM, besides enabling their applications for Mobile Solutions and Social Interaction, have to increasingly move towards offering applications which pertain to an SMBs line of business.

Vendors such as Intuit or Intacct have not been written about much but they have successfully gravitated towards offering solutions that are integral to an SMB operation. It is not surprising that Channel Partners are constantly asking each other as to how and where money can be made. Even with the roll out of Microsoft Office 365, where 5 out of every 6 Channels is a Microsoft Partner, not everyone wants to resell Office 365. It seems that the time is right for the Vendor and the Channel Community to once again come together to not only revamp the SaaS Business Model but also for the vendors to enable their Channel Partners for vertical solutions.

SAP is on a growth path with the SMBs as they have successfully transitioned their SaaS offerings to specific industry verticals as well as solution requirements of SMBs. This also strengthens the commitment and confidence of the Channel Partners to resell SAP. Agreed that SAP solutions are still used more by the mid-market businesses than the small businesses but the path defined by SAP is clearer than the rest.

Tavishi Agrawal
Techaisle

Complex PC Reseller Landscape

There are 30,288 channel partners in India, out of which 24,850 are PC resellers. As per Techaisle research, volume resellers account for 12 percent of all resellers but they constitute 47 percent of PC shipments. 50.2 percent of the PCs sold by these volume resellers go to the SMB segment. On the other hand, micro-resellers account for 16 percent of reseller PC shipments but constitute 50 percent of reseller universe. Their main customers are the consumers, nevertheless 28 percent of their shipments also go to the SMBs. India is a country where dealers are evolving from a mono-brand approach to a competing multi-vendor offerings, where low margin in hardware sales is driving dealers towards value-added services and a creation of a more skilled dealer channel. India is also a country where mall-like culture is sprouting to embrace the consumer segment and small businesses and selling is focused on price conscious provisioning of PC devices. Techaisle Channel Research also shows that there are many stages in the value chain before a PC reaches the end customer affecting the price structure. With additional presence of 6,340 system builders, India channel landscape is not only complex but constantly evolving.

Winning Streak

In the last 2 years, Dell has established itself as a leader in the Consumer PC market and is now trying to extend the same winning streak to the SMB market. But was it a stroke of luck, its own strategy that worked or the fault of others? Stroke of luck does not play into a market which is still considered nascent and growing. Dell has been winning due to equal measure of its own efforts and missteps of others. This winning position is for Dell to lose and others, namely HP to regain.

Let us break it down. Dell started its winning streak with the consumer segment. Initially rejected by Redington and Ingram, Dell motivated and signed up with Supertron to make them their National Distributor. Supertron with no presence beyond the Eastern Region quickly became a useful crutch for Dell to expand and establish itself in the India market. With the success of Supertron, Dell also picked up Global as a Distributor. With an explosive growth in consumer notebooks, Dell began establishing regional distributors for reach and market penetration. Their goal - to sell 5 notebooks for every 0.75 desktops.

During the growth phase of Dell in India, HP began to falter for a variety of reasons. Redington, a trusted partner for HP, which had initially rejected Dell’s offer now chose to drop HP and partner with Dell; albeit for some products only.

Targeting SMBs

To address the SMB market in India, Dell developed a “Direct-to-Dealers” strategy. It is a two pronged strategy where Dell deals directly with end-tier of channel partners for Tier 2 and 3 cities bypassing the distributors. However, for the Tier 1 cities, Dell follows the traditional route of selling through distributors. Dell itself does not stock and sell with channel partners but sells on a back-to-back basis. Targeting low-end products for SMBs, Dell is also using the retail channel to sell Vostros, a PC specially created for SMBs. This is key since traditionally vendors have shied away from selling commercial SKUs through predominantly consumer channels. Needless to say, Dell has recognized that the small businesses, especially less than 20 employee size companies use retail channel for their PC purchases. For its lower mid-market customers, Dell is encouraging its channel partners to sell on a solution based approach.

New strategies always tend to bring teething problems. With limited experience in dealing directly with the VAR/Dealer channels, signs of frustration are becoming visible, not yet within Dell but among the channels. Account managers are pushing channels to “pick-up vendor mandatory stocks” even if the inventory is not sold out. At the same time, channels mention that Dell does not provide any price protection nor does it yet understand the buying cycles in India which is different than many of the mature markets.  In lieu of price protection, Dell has designed a rebate program for its channel partners and empowers them with white papers and training programs to help them achieve better profitability.

Even if channels show some negative sentiments, there may be positives to Dell’s PartnerDirect program, such as provisioning of single point of contact for SMBs to reach channel partners.

Targeting the SMB Market of Tomorrow

Dell is trying to not only target today’s SMB but also keep in sight the Future SMB. Besides a distribution channel strategy, Dell is trying to focus on Cloud and Mobility for the SMB market. This itself is a great strategy but is yet lacking on execution. Vendors such as HP may have a much better chance of executing on the Cloud and Mobility front. Both these solution areas require extensive and experienced channel partners. Dell is in the early stages of partner development and majority of them are focused on basic building block products such as PCs and Servers. HP on the other hand has the capability to analyze its partner network and segregate them by expertise levels, creating partnerships among them to design a coherent and executable Cloud and Mobility strategy. On the flipside, since Dell’s channel ecosystem is relatively new, it has a rare opportunity to build a long-term program based on learnings from its own missteps and partner feedback.

Although Cloud Computing in India is on the rise, there is more hype than substance, and there are more free services being used than paid. With a limited bandwidth and internet speeds, it may not be long before cloud services get delivered over wireless. Because of a heavy adoption of Smart phones and other mobile devices, the march towards mobility in India cannot be stopped. However, SMBs mostly want integrated solutions to limit complexity and therefore seek channel partners that are capable of delivering cloud and mobility solutions integrated. Unfortunately, very few channel partners currently do so – especially for Dell. Those that do are financially out of reach of a typical SMB customer. And this is making SMBs unsure of overall benefits of Cloud and Mobility and desire to spend. Dell has to identify channel partners that could be ramped up and focused on delivering Cloud based solutions that have higher relevancy to SMBs.

Dell may be winning at this stage but its competitors are hot on its heels.

Tavishi Agrawal, US
Gitika Bajaj, India
Techaisle