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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

Dell Technologies Partner Program – Evolution not Revolution – Consistency to Drive Continuous Improvement

Rola Dagher is the new global channel chief at Dell Technologies. Proverbially speaking, changing of the guard brings in its wake anticipation of partner program changes. Because of the success achieved, Dell Technologies does not feel compelled to make significant modifications to its partner program. On the contrary, continuous fine-tuning of the program has helped Dell drive channel partner growth. While the core tenets of Simple, Profitable, Predictable remain, Dell plans to target consistency and constant validation with some refinements. For example, Dell is simplifying the partner preferred program (now to be named Power Up), launching a new platform to track earnings, MDFs, MyRewards with lower latency and cloud-like functionality of partner portal increasing investment earn-outs with potential to cross-sell and upsell. Dell had launched MyRewards in 2017 to capture the mindshare of the channel sales reps. The system awarded $1 value in points for cash to redeem for products and travel. 2017 also saw Dell launch its digital marketing platform (which has grown enormously), introduce Activation Packs for smaller partners with pre-approved MDF dollars, and develop compensation to channel partners on contract value for the cloud (consumption models).

Dell and its partners have been pleased with the channel strategy, and, as a result, Dell does not plan to change course. While every other IT supplier is planning for channel transformation, Dell's channel leadership believes in "evolution, not revolution." The enterprise partner preferred and commercial preferred programs (for targeted account lists) have been successful, yet they were complex to follow and execute. Learning from the experience, Dell has simplified the program to make it even more impactful for Partner of Record (PoR) partners. An identified list of accounts where partners are already working with Dell competitors; Dell sellers commit themselves to joint account planning to shift the customer to Dell. Partner competitiveness, better sales engagement with clarity of seller-partner offering, and robust programs on competitive takeout and customer acquisition have helped Dell and its partners. All part of the evolution strategy.

Until last year, Dell had struggled to simplify deal registration, both due to the task and technology transition's inherent complexity. Dell is therefore launching a better partner experience portal. Regardless of the complexity, due to relentless execution and commitment, Dell's partners made giant strides. There is no question that Dell has a complete product portfolio in the IT industry. This position has significant potential benefits but can lose impact due to the need for partners to navigate an immensely complex set of offerings. Dell deserves plaudits to recognize this challenge and respond with partner programs that mute the various solutions' roar and enable partners to focus on working effectively – and profitably – with their customers.

Channel partners are the custodians of customer needs. Armed with knowledge, training, and experience, partners are and can be in a great position to guide, design, architect, deploy and manage technology solutions for end-customers to work through the crisis and the future. Despite the headwinds, channel partners are quickly adopting both tactical and strategic approaches to solving customer problems to deliver customer success. Partners are the beacons that customers are looking for – partners who listen, share pain points, advise, and are responsive. It may be the best of times to develop a transformative strategy that is customer-in rather than product-out.

To help frame understanding of go-to-market investments, Techaisle asked its panel of channel partners to identify which of a handful of statements they believed to be accurate for their business. Data shows that the channel is in a longer-term transition. There is a need for sales staff to react to increasing customer's technical knowledge by being more innovative is essential and vital for their businesses. There is also broad and growing agreement that line-of-business selling is rising as a proportion of all sales and that "the as-a-Service model has significantly changed what a partner looks for in sales and business development professionals." These findings indicate that channel sales staff can't rely primarily on fulfillment-centric deals. Instead, they need to demonstrate a real understanding of customer business issues and how technology can deliver meaningful business benefits.

Dell is working on its partner training and sellers to transition from product to solution selling, from pricing-led to outcome-driven strategy. It seems to be yielding results. For example, in Q3, over 60% of Dell's new customer activation was through the channel. An increase in incentives to 20% for flex-on-demand offerings (for both referral and resell) lead to US$1.3B in offers in as-a-service. Dell is working to enable partner participation with Project APEX and access to Dell's as-a-service portfolio. The first offering in its portfolio will be Dell Technologies Storage as a Service (STaaS), delivering a pay-per-use model and elastic capacity and deployed on-prem. It will launch in the US for Dell's direct business in the first half of the fiscal year. Dell will share an update later this fiscal on partner availability with Project APEX, including STaaS. The key enabler of Project APEX is the Dell Technologies Cloud Console. This single web interface enables both customers and partners to manage cloud workloads and services. The Cloud Console's initial rollout will allow customers to browse a marketplace of IaaS products, services, and solutions. For partners, Dell is working on a roadmap and timeline for the console to be API eligible, allowing partners to integrate with their marketplaces.

Techaisle data shows that transformation partners are targeting revenue growth over quarterly, short-term incentives. But incentives seem to work wonders for Dell. Channel partner interest in fees and activity-based incentives are driven primarily by firms with traditional channel business models. SIs and VARs, who form most Dell partners, consider this type of stimulus most important to their businesses. But firms developing IP prefer solution development funds (which has been introduced by VMware). Channel partners focused on commodity products may not capitalize on deal registration, and only large partners would have access to staff/embedded headcounts. Rebates may be popular, but they do not increase margin much and often depress street price instead. Fees and activity-based incentives support solutions that require very long sales cycles, which would not be as beneficial in a rapid-turnaround niche. Solution development funds can be instrumental in building an ecosystem around a platform product but may take a long time to generate tangible results. SPIFs are generally helpful to shaping sales behavior but can be expensive, require effective targeting and management, and only work where there is buy-in from the partner business's owner. Within the overall channel partner ecosystem, 50% prefer fees and activity-based incentives, and 43% want solution development fund. Staffing and embedded headcount are preferred by 37% of partners.

It is evolution and not revolution. Those expecting Dell to make market-shattering transformative changes will likely be disappointed. Dell is working towards simplifying operations, educating partners, and enabling better digital marketing. Yes, there is a lot more Dell needs to do. Recent work by Techaisle shows that the need for updated understandings of channel management imperatives has expanded beyond the tactical questions of sales or management metrics or marketing activities. The pandemic has been an accelerator. Digital transformation provides enormous opportunities for the channel. It offers a means of establishing a customer relationship that secures ongoing/escalating account revenue and influence, improving the business outlook of channel firms who can capitalize on customer need for digital transformation support. For now, Dell's channel partner program has both its feet firmly planted on solid ground. Dell does not want and does need to take flight. Instead, it plans to and should continue its fight to remain valuable and loyal to the channel partner community.

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Digital Transformation Challenging the Channel - Five key issues

20% of channel partners are offering “digital transformation”, but most common is “digitalization” at 46% and balance 34% are still at the basic “digitization”. MSPs/SPs are the laggards and VARs/SIs the leaders. Among vendors, Dell & Cisco partners are leading the charge. The channel industry examined by Techaisle’s 2018 SMB/Midmarket focused 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 in the face of digital transformation:

  1. Cloud, and its wrenching effect on all aspects of the channel business structure – only 69% of are partners selling cloud, out of which less than 2/3rd are successful
  2. Managed services efficiencies, especially vs. the pending opportunity associated with digital transformation – 77% are selling managed services but 50% are increasing on-site break-fix support
  3. Increasingly-complex data center technologies - there is a skills shortage in the SMB channel
  4. Orchestration & integration demands that are expanding in multiple directions – cloud orchestration expected to be a high-revenue growth area for only 23% of partners
  5. The need to sell on and deliver to business outcomes rather than technical outcomes

The data in the report illustrates the extent to which these factors are affecting channel management decisions today and influencing the future directions. The report covers:

  • What is the state of channel?
  • What does the channel offer?
  • Where does the channel land on digital transformation, orchestration & integration?
  • What does the channel want from vendors & distributors?
  • How does the channel sell?
  • What is channel doing in the cloud?
  • What is channel doing in managed services?
  • What data center solutions is the channel selling?

With digital transformation as the backdrop, let us look at a summary of the five issues highlighted above:


techaisle channel five key issues resized

Cloud

Partners continue to be challenged by the wrenching, organization-wide change that cloud demands at all levels of the organization. Cloud is forcing new metrics and disciplines on management, which has historically worked to maintain sustainable per-deal margins on individual current transactions. It is requiring sales staff to sell differently – stressing recurring-revenue, OPEX-heavy ‘pay as you go’ contracts over larger one-time product transactions – and it is requiring sales management to compensate staff differently. Finance is dealing with a far more complex set of cash management requirements and is also needing to understand the valuation impact of different revenue recognition approaches. In the cloud, marketing’s role is becoming larger, and its tools much more sophisticated; it is almost literally a different (and much higher value) activity in cloud than in conventional channel businesses. Even technical skills requirements are changing, as channel delivery staff is evolving from ‘just in case’ knowledge (often, recognized through certifications) to ‘just in time’ skills acquisition that responds to the rapidly-changing environment.

Clearly, cloud is imposing a daunting challenge on the channel. Techaisle data sees that some partners are working through this transition, but many, especially in markets where cloud has not caused large year-over-year decreases in product sales, are navigating a path that doesn’t include top-to-bottom change. These firms will be under intense pressure as the market increasingly demands that partners support migration to and efficient use of hybrid infrastructure.

Managed Services

Managed services, with its efficient delivery and promise of higher margins and better enterprise values (due to MRR rather than transactional revenue) has become a major factor in channel business strategy. MSPs can increase shareholder returns without needing to meaningfully expand their customer rosters; they can invest in internal efficiencies to boost margins while simultaneously keeping pace with customer expectations, even in areas like managed security, where threat sources advance continuously, driving need for increased response capabilities.

But there are clouds on the managed services horizon. One is digital transformation, “the next big wave” which aligns poorly with managed services. Digital transformation requires a mix of on-site and remotely-managed capabilities, packaged discretely for individual customers – and this isn’t what managed service providers aspire to. At the same time, the push towards everything-as-a-Service is morphing into SMB customer expectation of increasing service levels over time (or decreasing costs), rather than the fixed value for static service level approach used by today’s MSPs (and IaaS suppliers as well). Can traditional MSPs move past the core business notion of one service, one price, delivered with high efficiency from a remote location, to address digital transformation and progressive service delivery expectations? In fact, most are going back to on-site installation & support.

Data center technologies

Data center technologies are another source of challenge for partners. Data center products – especially converged and hyperconverged systems that combine server, storage, networking and virtualization technologies – are much more complex than the client and server technologies that many channel members have focused on in the past.

Typical “one stop shop” VARs are lacking the technical depth needed to work with contemporary data center products. Specializations in current solutions take time, cost money and require skilled staff who is usually not affordable for – or even available to – channel members. But data also shows that VARs have the maximum depth in digital transformation and are involved in orchestration.

Orchestration & Integration

The nature of integration is changing. In an environment where core resources are located in many different physical environments, “systems” integration is becoming less a matter of physical connections and more an issue of automation and orchestration, which call for a distinctly different skill set. Meanwhile, customer interest in a multi-platform world is centering on data rather than systems integration: how can dispersed systems exchange data, securely and with the low latency needed to support workloads that span different environments?

The issue of integration is becoming more complex as businesses embrace IoT to provide a far more detailed view of their markets, and AI to make sense of the vastly-increased base or evidence that is used to support ever-more-rapid decisions. And demands on technology suppliers have already deepened with the need to secure these multiple platforms and sources. Integration offers an enormous opportunity for the channel – but this opportunity is accompanied by a demanding set of requirements.

Business Outcomes

Beyond all of the technology-driven change that the channel is adapting to, there is a shift in how customers are acquiring IT solutions. SaaS has shown buyers that they can acquire IT capabilities that map directly to business needs – they no longer need to take on the risk and uncertain time-to-benefit inherent in the purchase, integration and deployment of building-block technologies. At the same time, IT budget authority continues to migrate from IT gatekeeps to business managers who view technology as a means to achievement of process objectives, rather than as an end in itself. Both trends affect for channel sales and marketing professionals: within client organizations, the key customers are often non-IT professionals who are looking for suppliers to respond to business pain points with approaches that directly address the business requirements, rather than with traditional product-centric ‘some assembly required’ solutions targeted at IT buyers.

The ability to talk credibly to business outcomes vs. technology issues has become the key to selling solutions in today’s market. Most vendors lack business-savvy sales staff – the issue is even more acute in channel firms. Cloud startups often speak to business rather than IT issues (and clients). Can the traditional channel keep pace – at least, enough to prevent services leakage to born-in-the-cloud alternatives?

In the report, Techaisle research demonstrates how channel partners are positioning their firms to navigate this turbulent environment. There may never have been a more stressful time to manage a channel business than 2018 – but channel managers have proven through time that they are adept at finding profitable paths through even the choppiest waters.

The report covers:

  • What is the state of channel? Channel Partner Business Issues, Firmographics
  • What is the global channel landscape? (Only in WW SMB/Midmarket Channel Report)
  • What does the channel offer? Channel & planned offerings including digital workplace
  • Where does the channel land on digital transformation, orchestration & integration?
  • What does the channel want? Channel Expectations from Vendors & Distributors
  • How does the channel sell? Channel sales Strategy
  • What is channel doing in the cloud? Channel Partner Cloud Trends
  • What is channel doing in managed services? Channel Partner Managed Services Trends
  • What data center solutions is the channel selling?

techaisle us channel partner trends report cover resized

techaisle ww channel partner trends report cover resized

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Dell’s Channel Chief Cheryl Cook continuing to motivate partners

Dell has been busy, its channel partners are increasing their likeability of the company, and Cheryl Cook, Vice President of Dell’s Global Channels & Alliances is staying steady on her path to grow and maintain channel partners who add value to their customers. In Techaisle’s latest US SMB Channel Partner Trends survey, 57% of both Dell & non-Dell partners said they “Like” Dell, up from 53% a year ago and substantially higher than two years ago. In Q4, total North America partner revenue was up and while majority of North America channel partners showed growth, Dell’s distribution partners experienced double digit growth.

In a recent discussion with Techaisle on the state of the Dell channel, Cheryl Cook focused on:

  • Partner direction
  • Partner experience
  • Partner competencies
  • Partner cloud playbook
  • Partner investments
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Mobility becoming a niche within SMB Channel Partners

Where is the SMB mobility channel today, as we enter 2016? Results from three Techaisle SMB channel surveys and compiled in report The Channel and Mobility: SMB Supply Options show that there has been substantial retreat from mobility as a core offering in the SMB and midmarket channel. In two years, the proportion of partners stating that they are unsuccessful at selling mobility has increased from 5% to 17%. There are likely two main reasons for this, a “push” and a “pull,” both related to the increased need for specialization in 1-2 of four main market areas (mobility, cloud, managed services, converged infrastructure/virtualization).

On the “push” side, Techaisle believes that many channel partners are struggling to find a profitable entry point to mobility. Supply of the devices themselves is not sufficient: buyers are deploying a wide range of client technology (PCs, smartphones, tablets) which has the effect of diffusing investments in PCs, diverting investment from the channel (since some technologies, especially smartphones, are generally acquired from telcos or other non-traditional-channel sources), and slowing PC refresh cycles (since client technology investment is now spread across 2-3 different devices). Additionally, the rise of BYOD is a double-edged sword: on the one hand, it increases the need for mobility management solutions (since these devices have greater need for security and related capabilities, such as audit/compliance monitoring), but on the other, authority for these devices doesn’t reside entirely within IT. And SMB channel partners are continuing to struggle on how best to offer mobility management solutions, mobility security solutions and bet on which vendor suppliers.

smb channel mobility success trend techaisle

On the “pull” side, channel members who are being forced to abandon the ‘one stop solution shop’ positioning in favor of specialization in 1-2 of the core four areas need to decide if the uncertain journey into mobility has a greater overall benefit than focus on cloud, managed services and/or converged infrastructure/virtualization.

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