Ummm..not quite......
Dell went direct in the late 90's which helped reduce prices somewhat and of course killed off some competition (remember Gateway Europe?). Going direct was great momentarily for its retail products, quick growth and revenue but not profit.
In doing so though in both consumer and corporate sector, Dell cut out the partner and went straight to the customer in direct competition with its own channel (in most cases it’s the partners who initially brings the business to the OEM). This move alienated its systems integrators / resellers as well as its distributors and retail channel.
In corporate accounts, you cannot sell direct as your only channel to market or compete with your customers especially when you require their help to complete turnkey projects. The Vendor / Partner relationship is critical – sort of a symbiosis for all IT vendors. Key account knowledge, customer contact and products that the OEM does not supply are vital components of the sales process and are supplied by the reseller/integrator.
The after-effects of this practice is shrinking market share and distrust from IT partners which it’s feeling now in most of its major markets.
(BTW according to their website HP who are market leaders in EMEA have over 600 HP “Preferred Partner” resellers for servers alone in the UK)
IDC quote - IDC EMEA PC Tracker - Preliminary Results Q2 2007, “Dell remained adversely affected by slow corporate demand plus its absence from the retail channel. Current strategy redefinition and recent product refreshes for consumer (Inspiron) and Vostro for the SMB market should allow the vendor to reinforce its position moving forward.”
“Strategy Redefinition” is corporate speak for – we $$$$ up and now we gotta fix it quick – which in this case means rebuilding the partner program (retail channel, resellers, etc).
Unfortunately the heady days of pre Y2K, shrinking margins and fierce competition lead to price wars instead of product and market differentiation by the OEM vendors, costly mistakes were made……now Dell and others are finding it harder to keep afloat with single digit margins flogging hardware over the phone with negligible market growth and customer IT hardware spend dwindling.
Paris Hilton – ‘cause life would be so much simpler if I was as smart as she!
