It was 11 years ago this week that Michael Dell penned the infamous memo declaring that Dell’s crown jewel (direct channel business) was a revolution, not a religion. The very thing that anchored its messaging and competitive advantage over the first 15 years was not an absolute.
Back then, it was a lesson in customer preference. About one-third of PCs were bought direct, one-third retail, and one-third through different types of reseller channels. Thus, to target the other two-thirds of the market, channel religion was a necessity.
After all of the changes at Dell Technologies over the past couple of years, with the merger of EMC (and others) and the privatization of ownership, one interesting milestone was reached: Over half of all business (51%) now flows through the indirect channel.
I asked Michael Dell specifically about this milestone and how this growth of indirect business would change the go-to-market motions of the company. His (non)answer was that direct and indirect are important channels and that the company is looking to grow both simultaneously.
Competitors such as HP, Lenovo, IBM, and others drive over 80% of their global business through the channel. Dell’s strategy as the only “edge-to-core-to-cloud” company left standing will test what the right route mix should be.
Here are some channel-specific observations:
- The combined partner programs look comprehensive and rich. Initial partner feedback has been strong in Vegas, with many buzzing about simplification, cross-brand integration, ease of vendor management, and a broad (and growing) product portfolio.
- Simplicity and ease of doing business has always been a plus for partners that work with Dell. One of the not-so-secret benefits they had during the ’90s and ’00s was the thousands of dedicated VARs and MSPs recommending, influencing, and reselling Dell in the SMB and midmarket — even while direct was the company mantra, with media messaging making people think that it avoided channels completely.
- Several parts of the new Dell Technologies portfolio needs down-market channel support. EMC, VMware, and even Virtustream collect the majority of their revenue from Fortune-sized clients, and future growth will come as midmarket and SMB companies digitally transform. This is especially true for highly regulated industries, such as healthcare and finance, where on-premises and hybrid storage, security, compliance, and continuity will be paramount.
- The PC and PC server divisions will need to engage HP and Lenovo with a channel-first community play. Dell has saturated the direct market and needs to focus on the many flavors of indirect channels to challenge HP and Lenovo for the No. 1 spot worldwide. Channel religion may be tested the most in these markets.
- Dell is positioned well in the future of the channel. I have written extensively about shadow channels such as XaaS ecosystem partners, industry-based services firms (accountants, digital agencies, etc.), ISVs, and born-in-the-clouds and how they will not participate in the traditional partner program. Most of these shadow channels are not looking to resell or transact with hardware or software and can take advantage of Dell’s predictable and efficient direct supply chain.
To many in the channel, you can’t play both sides. You either have religion or you don’t. To others, it just doesn’t matter anymore. Shadow channels will likely warm up to Dell if it is able to drive the right level of visibility and influencer-type programs.
Through all of the changes and customer digital transformations that are underway, the one constant is infrastructure. Emerging technologies such as IoT, AI, AR/VR, automation, and the many others will take amazing amounts of compute, storage, and network throughput. Data is the new oil, and Dell is betting on an edge-to-core-to-cloud strategy that will be hard to avoid/ignore for anyone in the channel moving forward.
How Dell balances its go-to-market and routes-to-market motions will have a significant impact on its level of success around the globe.