Dell Poses Serious Threat to Competitors with Shift to Partner-First

Dell Technologies this week made a huge organization play by adopting a partner-first strategy across its storage business. With the move, Dell is addressing one of its biggest challenges to date — the potential for conflict between partners and its own direct sales organization.

“The ever looming spectre of direct conflict was there, and partners constantly complained about it. It was driven by a compensation neutral model didn’t necessarily benefit salespeople within Dell if they sold through a partner. In reality, you’ve still got a latent direct sales culture lingering within Dell, because of its legacy. In many cases, partners were finding that that they were still competing directly,” said Alastair Edwards, chief analyst at Canalys.

Edwards described the shift to partner-first as “a very, very significant change.”

Canalys’ Alastair Edwards

“It’s something that will shift the needle substantially for [Dell] because it removes the No. 1 challenge they’ve had from a competitive go-to-market perspective, which is tension. The fact that Dell is opening up the available accounts for the channel is really meaningful as well. They’re not just concentrating their strategy on a small number of greenfield or hard to reach accounts. This is the strategy for what looks like almost all of their new customer opportunities.

“This is something that for some Dell’s competitors, could be a serious challenge,” he added. “Their differentiation from Dell has always been, ‘We are more partner-centric than Dell. We have a more partner-friendly strategy.’ Dell is countering that with this model.”

Will Partner-First Extended Across the Dell Portfolio?

The move by Dell looks to have been warmly welcomed by the partner community. The big question now is: Will Dell extend the partner-first strategy to other parts of its infrastructure business?

“It’s very unlikely that we’ll see it being extended to clients but certainly for servers, for the broader data center and Apex as-a-service model, this could usher in a partner-led strategy for the whole infrastructure and as-a-service piece. That would be an absolute game-changer for Dell,” said Edwards.

“The interesting thing will be if they’re not taking the partner-first approach in other technologies. If the partner is selling both infrastructure, servers and storage, is that going to create tension? Or will that drive them to extend the model to other parts of the infrastructure as well? That seems a natural next step to take.

Direct Sales Job Losses in the Cards

The analyst said the change of strategy is the necessary push for Dell’s direct sales force to work with partners, not against them. It is also meaningful that Dell has shifted its incentive model to drive the changes as “ultimately, salespeople follow the money.”

However, this is less good news for some of Dell’s direct sales reps, with the vendor announcing job losses alongside the changes. Dell told Channel Futures: “We’re always assessing our business to remain competitive and ensure we’re set up to deliver the best innovation, value and service to our customers and partners.”

“What it really means is that Dell’s sales force has to change significantly from being a direct sales force to engaging collaboratively with partners, working with them on co-sell and collaboration in sales opportunities,” said Edwards.

“Their role changes; their function changes. It doesn’t necessarily mean that direct sales people will be removed; what they need to do is retrain and reorient their function. Become more of an enabler of partner-led business. That’s the key. Not all direct salespeople can go through that cultural change or can shift their thinking. Those of the ones that are going to struggle. But those that become effectively partner-led in their sales approach will be more successful.”

Dell ‘Investing In Partners For The Long Term’

Dell isn’t the first vendor to adopt a partner-first approach. IBM wants to double partner-generated revenues to 80% in the coming years. Edwards added that ServiceNow, Google and Cisco are doing the same. Even VMware is likely to pursue a similar strategy rather than taking a more direct approach. He cited current tough market conditions as fueling the changes.

“The interesting thing about what Dell’s done is that they had two options,” he said. “One was that they could double down on their direct strategy and cut resources, and cut support to the channel. Take a shorter-term view and focus on winning deals. Working with partners can take longer to get deals over the line. It’s more work for the salespeople. And that might have been the strategy for Dell 10 years ago.

“They’ve taken the opposite approach, which is they’re investing in partners for the long term,” he continued. “And they’re choosing to increase the investment in the channel and reduce investment in their direct sales. And that is going to be the differentiation between successful and unsuccessful vendors in the next 12-18 months.

“A move more toward direct in the current climate is absolutely the wrong approach. Our belief is that the most successful vendors will be ones that invest in building a partner-led model today.”