Will Dell use resellers to tackle growing pains?

Will Dell use resellers to tackle growing pains?

Rumours of Dell embracing third party distribution have been getting louder since company founder, Michael Dell, returned to the CEO role following the departure of Kevin Rollins in January.

Once the darling of Wall Street, Dell has seen growth rates plateau in recent times. According to IDC figures, its global PC unit shipments for the fi nal quarter of 2006 were down 8 per cent year-on-year. This was particularly worrying when compared to a rise of 24 per cent for its main market rival, HP, during the same period. Since reappearing at the helm, Dell has spoken of creating 'Dell 2.0' in an attempt to turn company fortunes around. Research director for client platforms at Gartner, Martin Gilliland, noted that [Michael] Dell had spoken recently about improving and expanding partnerships.

While this was almost certainly referring to alliances with other vendors, he had not been willing to rule out a channel play. Gilliland also pointed out that Dell already goes to market through resellers in some countries on an ad hoc basis.

"We have been looking very closely at Dell to see what changes the company will make in order to continue growth and improve profi tability," Gilliland said. "The channel would give it access to the same market and clients as HP and Lenovo but does it want to be another hybrid PC vendor? The majority of growth is in SMB and consumer and you can't reach those markets effectively without a channel. It's something that needs serious consideration." PC and components analyst at IDC, Liam Gunson, said there would be some obvious benefits for Dell if it built a reseller channel.

"The direct model worked well when the PC industry was experiencing strong growth," he said. "But now they [PCs] are a commodity, IT is becoming more important and there is a lot more involved in a typical sale. If an organization is looking for a complete solution, the vendors working through integrators have an advantage over Dell."

Despite the attraction, Gunson said it would be a difficult move to make because of its market perception. He questioned whether resellers would be willing to work with a vendor they have traditionally viewed as public enemy number one. Murray Computer and Offi ce Shop (MCOS) managing director, Mel Bice, said an indirect Dell was a proposition he had given some thought to.

"Maintaining a reseller channel is relatively inexpensive. Given Dell's falling profitability, and the recent success of HP, the idea makes reasonable sense," he said. "If direct sales are no longer working as they once did, you have to wonder how long Dell can continue to rely on them."

MCOS operates in regional South Australia and would be interested in carrying Dell hardware if it was offered control of warranty and support services for its territory. Bice said he had similar agreements with Acer and HP.

Total Computer Technology managing director, Robert Brown, was also open to the possibility of signing up as a Dell reseller as long as there was a decent margin structure in place.

"We do some servicing of Dell hardware and there are some clients that are very loyal to the brand," he said. "We would definitely be interested in procurement if it was competitive for us to do so."

But others would find trusting an old adversary more diffi cult. DPI Systems director, Michael Blumentals, was concerned that a Dell channel play would only be an experiment and could be reversed at any time.

"How could you be sure it wouldn't be a trial that is abandoned after six months?" he asked. "Dell could go back to its direct model and take a pile of new account details with it."

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