Potential Channel Benefits If Dell Goes Private
Potential Channel Benefits If Dell Goes Private by UCStrategies Staff
It has recently been announced that Dell is potentially heading towards a private equity deal; this news could reap benefits for both Dell and the channel.
Most public companies are pressured into going private by the investment community, making them focus on the quarterly transition. However, a private Dell would be able to pay more attention to long-term value.
Currently, Dell is being forced to take risks and make long-term bets; this is because the company is in the midst of changes and in channel-building mode.
The previous direct-only sales structure was introduced by Dell around five years ago, and the company was insistent that this model was not a religion but simply a strategy. The sales model was then meaningfully made available to the value-added channel. However, Dell was by this stage already selling via partners and its program was too simple, proving to be unprofitable for partners.
From that time, Dell has succeeded in strengthening its team and has invested in the channel. Furthermore, the company has had to race to a bigger model which exceeds PC sales. Having now molded a formalized channel and made many acquisitions, Dell is struggling to fight in the face of falling PC sales in the global market.
The cloud sales model is attracting the solution provider channel, which is adopting to it much faster than market suppliers. Dell has its own channel which it can leverage, but more heavy investments need to be made. It is also important that a competitive partner base is constructed, and this should be well-versed and able to find new decision-makers within the midmarket and high end of the small-business market which is seeing the benefits of cloud deployments.
It can be argued that Dell's transition path is inhibited by the Wall Street quarterly performance treadmill. A longer-term business can be provided to Dell if the company utilizes a private equity play, taking it off the market.
According to UBM Tech Channel data, the time to revenue from new partners can be made shorter with up-front investment. Programs which can be used by suppliers to increase demand for partners, even as they are being recruited, is also useful. This is advantageous due to the sales resulting in a higher percentage of enabled and engaged partners.
When a newly acquired partner is brought on by a vendor, it takes between 12 and 18 months for that partner to generate enough sales for the vendor so that the latter can make a profit over the price of recruiting, enabling and supporting the partner.
With component prices and the mastering of just-in-time delivery, Michael Dell has been able to secure a working model. This ensures that pricing trends become less expensive. In earlier times, competitive bids were secured by Dell through cost-based product pricing, and sourcing and manufacturing disciplines became beneficial in the market.
Some argue that Michael Dell's engagement in the business following privatization will cement investment in its channel strategy. Moving away from its PC focus and towards a more services-driven cloud model could certainly be noted as a positive move for Dell and its channel, despite the pressures of quarterly earnings and meeting expectations.
Developing its ability to invest for a longer-term return and constructing a stronger channel could provide Dell with a private structure which is better suited for the company in the future. (CY) Link