A relationship's longevity, it seems, is not necessarily a good metric of how successful it is.
Just ask AGJ Systems. The Gulfport, Miss.-based managed service provider (MSP) has had a 12-year relationship with Dell, but one that has been fraught with frustration.
Recently, one of AGJ's former employees got a job working in IT for the City of Gulfport and needed to purchase 100 ruggedized laptops for its police department. "The first people he thinks of are us, and he shot me an email and asked me for a quote,'' recalled Ryan Giles, CFO at AGJ, which is on the state's Express Products List of approved vendors for departments needing to make purchases.
After pricing out the laptops on Dell's website and learning it should cost the city around $250,000, which would have netted AGJ a 10% commission, Giles called his rep at Dell, who told him he had to go online and register the deal.
"Of course we did the song and dance, and we went on and tried to register the deal,'' Giles said. "You have to justify to [Dell] why you should be on the list.''
In the past, however, when AGJ had tried to register deals, Dell had notified them that they weren't accepting any new MSPs in Mississippi, he said. This time, however, was different.
"The most frustrating part of this is that the reason they declined our deal registration is not because we weren't on the list. They came back and said someone at Dell Direct already contacted this customer and is working around us," Giles said.
Giles said his former employee told him he didn't bypass the process and reach out to Dell directly. It's also not the first time Giles has found himself trying to register a deal, only to find out that Dell has one of its internal sales reps working it, too.
Now, he said, he has stopped pushing Dell to AGJ's government customers.
"I have always theorized that they take the registration information and go directly to the client," he said.
AGJ is not alone. While channel conflict is nothing new, a 2013 study by industry group CompTIA found that six out of 10 channel companies said conflicts had increased in the previous two years, with 21% saying conflicts had risen significantly. Another 8% said they experienced no conflicts at all.
"It's something that ebbs and flows, depending on what's going on in the market,'' said Carolyn April, director of industry analysis at CompTIA."We happen to be in a period now … that is leading to a spike in channel conflict."
The main reason is that "cloud computing has really changed the landscape dramatically,'' April said. "It's still very early on, and how it's changing the landscape is it's opening doors for vendors to go directly to customers, and customers have a ton more leverage in this market. They're able to source their solutions without anyone helping them out. That's something that's really changing the way the channel is able to sell."
The problem is not likely to go away, noted Jerry Koutavas, president of ASCII Group. "Unfortunately, we are not seeing channel conflict going away. If anything, it has been on the increase. Market pressures are pushing more companies to optimize sales by utilizing as many channels as possible."
'Aggressive' communications with customers
Vendors utilizing their own direct sales channels and forcing their partners to compete against them is the prime reason for channel conflict, according to Joshua Liberman, president of Net Sciences, a 24-year-old systems integrator and IT service provider in Albuquerque, N.M.
Liberman said they have become accustomed to this trend, but they used to call this getting Dell'd. He said the vendor has embraced the channel "to varying degrees."
"The experience we've seen time and again is working up a good price -- maybe a low six-figure price -- and then finding out Dell has gone directly to the customer and offered them a better deal," he said, adding that Net Sciences is not selling Dell products right now.
I don't have proof they're taking the information we give them and giving it to their sales team to sell against us, but if I were a betting man, I'd say that's what they're doing.
Ryan Giles, CFO, AGJ Systems
Dell's Deal Registration program "helps protect our partners who proactively promote Dell's products and solutions to their customers," said Jim DeFoe, vice president of North American channel sales at Dell, in a statement. "We realize that across our partner base, each partner may have a different experience when registering a deal and may not be familiar with Deal Registration program guidelines."
DeFoe went on to say that when a partner submits a deal and it is denied, it can be for several reasons, such as if the deal is already registered by another Dell channel partner or the deal is already a Dell "segment forecasted opportunity," meaning a customer the internal sales team has already been working with. "When it's already a Dell segment forecasted opportunity, we suggest the partner reach out to their channel sales team, and they can help determine who the partner can work with on this segment team opportunity." He said the company announced in December that it is "aligning our segment sales and channel sales teams to foster collaboration and incenting our segment sales teams to work with the channel teams, which helps to significantly reduce conflict."
Dell isn't the only vendor Net Sciences has had experienced channel conflict with. Liberman said they've also had problems with Symantec, which has been "very intrusive in terms of aggressively communicating with customers even though we manage their systems." Although his company contacts customers to let them know when their annual renewals are coming up, Symantec is also "notorious for sending emails."
"We are in communications with [customers] two months out, and then definitely one month out, and they go after them multiple times before, and it causes consternation and confusion," Liberman said.
In that instance, he said, it's not so much a case of Symantec trying to be competitive but more of a "communications issue that fogged up the mirror a little bit."
Symantec was using a third party to provide customers with a renewal notification, and the customer could either renew with their preferred reseller or directly with the company, according to Ken Fleming, vice president of renewals at Symantec. But this changed on April 1. "All renewal notifications will now come directly from us, where we refer customers to their preferred reseller. Customers may only renew through their preferred reseller -- not directly with Symantec," he said. "Our concern is to make sure that customers stay protected and have current support. But we're always looking for ways to better support our partners and improve the renewal process for customers."
Intel, Liberman noted, has also pulled away from its white box builders or systems integrators like Net Sciences. "My gut is they will also [pull out] in the server market. And without their backing, it will be much harder to pursue what we do, and if that happens, we'll have to change our focus," he said.
Intel is "very committed to the system-builder community and continues to invest heavily in it," said Todd Garrigues, director of North America Reseller Channel Programs. Intel recently closed a record year in the channel, he said, and the company is planning a launch of next-generation server platforms this year. "We have also been increasing our investment in benefits for system builders over the past three years, such as Points and online trainings, and will continue to do so."
Net Sciences is also a gold partner of SonicWALL, which was bought by Dell, but Liberman said that relationship has also changed. He said after Net Sciences has done an analysis of what the customer needs and puts together "five or six quotes," they'll find that the customer is working with Dell Direct, which has "skipped the part where they analyze needs, and without knowing a feature set," they quote prices that are cheaper, and that's what most customers care about.
Strengthening the relationship
AGJ's Giles said when he goes to peer group meetings, he finds that "many of the big IT companies have stopped selling Dell because [Dell is] very channel unfriendly."
"I don't have proof they're taking the information we give them and giving it to their sales team to sell against us, but if I were a betting man, I'd say that's what they're doing." He contrasted Dell to the way Lenovo, Xerox and certain other vendors work: If a customer calls them, those vendors refer them to a partner, he said.
"If my Dell rep sent me a lead, I'd fall out of my chair,'' Giles said. "And we get calls like that from our Voice over Internet Protocol [VoIP] vendors. They'll say, 'We got a call from a client, and they need 100 handsets. Would you like to quote it?' They know we can configure it and set it up."
"We've gone through Dell training. They just frustrate me almost on a weekly basis," he said.
When it came to working with its city customer on the ruggedized laptops, AGJ ended up quoting them a price on Panasonic Toughbooks, which he said were around $3,000 apiece, compared to the Dell machines, which were about $2,500, Giles said. "That was a big-enough price difference, so the customer couldn't justify the difference … so we ended up not winning the deal at all, because Dell backdoored us and got their direct team involved."
He said Dell would have won the sale either way, "but they managed to upset a partner like me who sells hundreds and thousands of dollars of hardware a year." For all of AGJ's municipal customers, he said, they will now instead sell HP or Lenovo.
When AGJ was smaller, Giles said they had a rather strained relationship with Cisco. "Then they sent us leads, and we knocked them out of the park, and it turned out to be great relationship."
He initially thought they were the only ones having issues with Dell, but said that when they got involved with peer groups and talked with other companies around the country, he heard others say they won't sell Dell any longer either. "Dell will sell everything right out from under you," Giles said. "So, maybe it's an industry trend."
Giles said he recognizes that hardware and software are commodity based and that most of their money is made on selling services, but they still need to sell equipment and software, too, without losing money on it. He added that they still sell Dell for nongovernment clients and recently placed a $10,000 order for a dentist's office.
"Even though it's a love-hate relationship, at the end of the day, we end up buying from them for pricing. That's what the customer wants. They don't care about the hassle Dell gives you. They want a good, quality PC at a good price." The customer is right, he said: Part of the systems integrator job is to sell the best equipment at the best price. "It would be different if Dell was poor quality, but I can't honestly say that."
But the ultimate feeling remains: "It's like I'm competing with Dell to sell Dell," he said.
Dig Deeper on Channel Conflict
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Do you believe channel conflict is on the rise?
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