Analysts weigh in on Dell's move to go partner-led for storage
Analysts from CONTEXT, IDC and Gartner give their verdict on Dell’s big partner pivot
Meeting demand for cloud-based storage solutions, reducing cost base, and whether or not similar changes will be made across its entire portfolio, these are the thoughts of tech analysts on Dell's move to lean more on the channel for storage.
Last week Dell announced its direct sales team will earn more money if they move its storage products through the channel than if they take that same business direct.
The announcement, which was followed by news of job cuts, was welcomed by Dell channel partners for the vendor realising the value of the channel.
With questions remaining around if Dell is likely to broaden its partner-led model across its wider portfolio, CRN spoke with analysts from Gartner, IDC and CONTEXT to get their perspective.
Laz Gonzalez, senior director analyst, Gartner
What are your thoughts on the announcement?
"This is not the first time Dell has made a bold move in the channel.
"But it's more so a commitment or realisation of how the storage products are being sold.
"It's not just about selling hardware storage. In a recent survey of over 1,000 buyers, when asked how are you making your technology purchases five per cent of them would say they're just buying hardware, 18 per cent said they're buying software, and 25 per cent said they're buying integrated solutions.
"So now you're seeing that the demand for these devices and storage is not only moving to the cloud, but also being purchased by buyers in a different way, requiring Dell to rethink its routes to market and really leverage partners.
"There's no doubt that when the storage solutions are being sold in the cloud, that many times there's more than one partner involved.
"I sense more of a need not just to be competitive, but to collaborate between partners to deliver these solutions."
Other vendors have been proudly 100 per cent channel for several years. Why do you think Dell is making this move now?
"There is a move to the cloud, especially for these customers that are buying end to end solutions.
"We see this as a big area of profitability for partners. When we survey partners and we look at where's the greatest opportunity to be made, it's in end to end solutions as our data shows.
"So why now? Look at the company, look at its portfolio, how it's coming together, they're realising the shift to the cloud has to happen. They have to accelerate that and having partners who are selling AWS, selling Microsoft, having them in their stable of partners that can deliver on this. I think it's hugely important for them."
Is a partner-first strategy likely to extend across the wider Dell portfolio?
"When we look at solutions being sold in the cloud, we're sensing buyers are buying multiple solutions.
"Those solutions include storage, software, services, infrastructure, so of course, software is just one component of what's being sold.
"The likelihood is that all of that is being sold as a transaction or a solution to the customer. So you can't have one and not the others this way. The partners have got to have access to the rest of them."
"What's driving this may not be so much the internal structure, but more the way that the customer is buying, requiring Dell to lean into its partners to fill the gaps.
"In doing all of this, the challenges for Dell are going to lie in upskilling both internal and their people to move from promoters to orchestrators and externally, making sure those partners can deliver customer outcomes.
"I wouldn't say it's a bumpy road, but it's a twisty road, and they've got to navigate through it now."
Keep reading to hear from IDC and CONTEXT...
Analysts weigh in on Dell's move to go partner-led for storage
Analysts from CONTEXT, IDC and Gartner give their verdict on Dell’s big partner pivot
Howard Davies, CEO & co-founder, CONTEXT
What are your thoughts on the announcement?
"Dell's decision to focus on selling through the channel rather than solely focusing on selling direct can be driven by several strategic advantages and market dynamics.
"Here are some reasons why it makes sense for Dell to adopt a channel-focused approach:
"Expanded market reach: Partnering with a network of channel partners, such as VARs, distributors, and system integrators, allows Dell to tap into a broader customer base that might not have been reachable through direct sales alone.
"Specialised expertise: Channel partners often possess specialised knowledge about vertical industries, specific technologies, or niche markets.
"Cost efficiency: Direct sales models require substantial investments in marketing, sales teams, and infrastructure to manage customer interactions and fulfilment. By utilising channel partners, Dell can distribute these costs among its partners, potentially leading to cost savings and improved profitability.
"Rapid scaling: Leveraging a channel network can expedite Dell's ability to scale its business. Channel partners often have existing infrastructures and customer relationships that can be tapped into, enabling Dell to quickly expand its market presence without building everything from scratch.
"Reduced channel conflict: In some cases, a mixed approach of direct and indirect sales can help mitigate channel conflict. By offering a channel-focused strategy, Dell can avoid competing directly.
"Geographic diversity: Channel partners allow Dell to penetrate markets that might have cultural or language barriers, where local expertise is essential for success.
"Risk sharing: Sharing the sales burden with channel partners can help Dell mitigate risks associated with market fluctuations, economic downturns, or product-specific challenges. The diversification of partners and markets reduces dependence on any single revenue stream.
"Customer choice: Some customers prefer purchasing through channel partners due to established relationships, value-added services, or bundling options. By embracing the channel, Dell can cater to these customer preferences and potentially capture a larger market share.
"A well-executed channel strategy can complement Dell's strengths and enhance its market presence, resulting in improved growth and customer engagement. This looks like a brilliant decision by Dell."
Analysts weigh in on Dell's move to go partner-led for storage
Analysts from CONTEXT, IDC and Gartner give their verdict on Dell’s big partner pivot
Alexandre Mesguich, chief sales officer, CONTEXT
What are your thoughts on the announcement?
"Dell's decision to focus on the channel for storage is also a response to the changing nature of the IT industry. More and more businesses are adopting a cloud-first strategy, which means they are looking for storage solutions that are easy to manage and scale.
"Channel partners can help Dell meet this demand by providing cloud-based storage solutions and services.
"Dell's new strategy for storage is a major change, but it is one the company believes is necessary to remain competitive in the market. By focusing on channel partners, Dell can leverage their expertise and reach to grow its storage business and meet the needs of its customers.
"Historically, EMC Storage sold its products primarily through the channel. After the merger between EMC and Dell, the majority of Dell's storage business is still going through the channel. There are a lot of specialty sales teams within the storage area, and many sales reps are paid on commission based on storage sales.
"This means that Dell could potentially save money on operating expenses (opex) by reducing the number of its own sales reps and relying more on the channel to sell its storage products."
Other vendors have been proudly 100 per cent channel for several years. Why do you think Dell is making this move now? What do you think was the key driver behind the decision?
"It is probably the best time to do it considering the current market conditions.
"Storage sales through distribution channels have contracted over the past quarters going from over a growth of 17 per cent year-on-year in Q1 down to -9.5 per cent in Q2, whilst CONTEXT forecasts Q3 and Q4 to remain in negative territory.
"Cost efficiency as explained above: This is particularly relevant now, as companies are under pressure to reduce costs in soft market conditions.
"Bring back the EMC channel-first roots to tackle the change of the industry towards cloud and as a service models."
Is a partner-first strategy likely to extend across the wider Dell portfolio?
"I wouldn't think so for the following reasons.
"The storage market is more complex than the PC market for example. There are a wider variety of storage products and solutions available, and customers have more specific needs. This makes it more difficult for Dell to sell storage products directly to customers, and it is more beneficial to rely on partners who have deep expertise in the storage market.
"The PC market is more competitive than the storage market. There are many more PC vendors competing for customers, and Dell needs to have a strong direct sales force in order to compete. In the storage market, Dell is a market leader and does not need to rely on its direct sales force as much.
"Dell wants to differentiate its storage business from its PC business. Dell wants to position its storage business as a premium offering, and it believes that a partner-first strategy will help it to achieve this goal. By relying on partners, Dell can focus on developing and marketing its storage products, while its partners can focus on selling and supporting those products to customers.
"It is possible that Dell will eventually apply its partner first strategy to all of its lines of business, but it is not clear when this will happen. For now, Dell is focusing on applying this strategy to its storage business, where it believes it will be most beneficial."
Analysts weigh in on Dell's move to go partner-led for storage
Analysts from CONTEXT, IDC and Gartner give their verdict on Dell’s big partner pivot
Stuart Wilson, senior research director, EMEA partnering ecosystems, IDC
What are your thoughts on the announcement?
"When a vendor injects clarity into a go-to-market approach it can increase energy, eliminate potential points of friction and accelerate collaboration. You reduce the potential for conflict within the model. By embracing an indirect model, vendors can reduce their own cost base in terms of direct sales resources, but there is an additional cost incurred to reflect the role of partners in more deals."
Dell's competitors previously differentiated themselves by being more partner-centric. What does this announcement now mean for Dell's competitors?
"The very essence of 'direct' and 'indirect' terminology is challenged by new ecosystem models and the move to as-a-service consumption.
"If a vendor introduces a 100 per cent partner attach policy, does that classify as an indirect model because a partner is involved in every deal - even if that is only from an influence or services provision angle?
"Or does a true indirect model require the transaction revenue for the technology product or service to flow from the customer through the partner to the vendor? These are the complexities of new ecosystem models that vendors must now consider."