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EMC partners keeping close watch on Dell's new channel sales program

EMC partners are facing stiff competition from Dell sales reps in the small and midsized business (SMB) storage market as Dell prepares to launch its first channel sales program.

Five months after EMC begun clamping down on direct sales to remove conflict with EMC partners, the company is now hearing rumblings from resellers about another stumbling block in channel sales efforts -- Dell Inc.

EMC partners, many of whom have already complained about EMC's longstanding and close partnership with Dell in the small and medium-sized business (SMB) market, are reassessing their competitive position as Dell prepares to launch its first formal channel-sales program.

Founder Michael Dell announced his intention to build an explicit channel-sales organization to supplement the undeclared channel strategy that Dell has employed through for years.

"The whole reason we are [developing a structured] channel is to essentially provide additional routes to market to customers we don't directly tap with the direct model," according to Praveen Asthana, director of worldwide marketing for Dell storage. Asthana declined to reveal any specific plans, however.

More on EMC and Dell
EMC to clamp down on direct sales, clear way for channel with SMB customers

EMC's revamped channel has a lot of fans, but not everyone is happy 

EMC struggles with fragmented channel, bitter VARs

Dell's (not-so) secret channel strategy

More on Dell's un-secret channel and why VARs like it 

That's not good news to EMC partners. "Dell is a pain," said Mike Chapman, CEO of San Carlos, Calif.-based Redbridge Inc.

According to Chapman, Dell is responsible for his company losing one or two big deals that significantly affect its total EMC sales for the year, which contribute not only to reducing revenue, but also lost rewards from Redbridge's participation in EMC's partner incentives program.

"What we don't like and what we want to yell at EMC about is, when you've created business or EMC has agreed to work business with you, and all of a sudden Dell finds out about a deal and either through purchasing or through C-level management creates a deal through them. That's where you want EMC to stand up and protect you," Chapman said.

So far, though, EMC has not yet declared either its role in or opinion of Dell's market expansion, despite questions from its partners, many of whom will be among the 7,000 customers and value-added resellers (VARs) at the annual EMC World conference in Orlando next week.

"I have not seen enough details to comment on Dell's channel plans," said Pete Koliopoulos, vice president of global channel marketing at EMC. Koliopoulos said he'll meet with Dell officials sometime over the next 60 days to find out more about Dell's channel strategy.

"I don't know how this is going to affect us, I don't know how much overlap they'll be with the rest of our partner community; if they're going to go after certain verticals, and how they will they approach the commercial marketplace or the midtier. It will be interesting to see," Koliopoulos said.

Dell and EMC signed their original five-year partnership in 2001, billing the union as a way to accelerate both companies' storage systems businesses. The two renewed the agreement in September of last year -- a pact scheduled to last until 2011.

The arrangement has allowed Dell to sell a wide range of EMC products, including the Centera and Symmetrix systems. But it has been particularly successful with the entry and midlevel CX and AX line, shipping more than 34,000 Dell/EMC branded networked storage systems to approximately 10,000 customers worldwide.

That has helped drive Dell's storage revenues to $600 million for the quarter ending Feb. 28, representing 4% of Dell's overall business.

Dell is now responsible for 10% of EMC's accounts receivables, and executives from both companies said they believe those numbers will continue to grow.

"This is a very good relationship. They address a certain part of the market and give us reach into places that we can't get to and so they are very important to us and the rest of our reseller channel is equally important in bringing value to the table that other parts of the channel can't bring," Koliopoulos said.

Some protection for EMC partners

As Dell's sales have increased, Koliopoulos said, EMC has heard many complaints from its partners like the ones Chapman has expressed, and the company has put registration procedures in place so that when partners register deals, in a certain set of instances, partners are protected from Dell. Koliopoulos gave no indication that EMC would take further action at this time on the matter.

"If Dell is offering non-branded Dell equipment -- that is EMC-branded equipment -- we can protect the partner through deal registration and basically not allow or not give Dell any kind of price release in order to compete." Koliopoulos said. "Does that work every time? No, but the vast majority of the time, the partners have told us that it has fixed a lot of the problems they've had with Dell in the past," Koliopoulos said.

Those problems are fairly serious, according to Chapman and other EMC VARs.

"Dell's direct sales force competes in selling EMC SAN solutions at desktop margins, severely compressing margin and relegating the sale to a transactional level," according to Dan Schneider, chief technology officer at Lewis Center, Ohio-based Sarcom Inc.

"Every year, Dell will take anywhere from $500,000 to $1 million worth of business from me, and it's typically on one or two very big deals. Dell will come in and say to our customer, 'I will give you volume discounts.' For example every million you buy from me I'll give you an extra 10% discount and it does not matter if it's servers or if it's EMC storage," Chapman said.

Redbridge sells between $5 million and $7 million worth of EMC products.

Keith Baskin, storage practice manager at Norcross, Ga.-based Optimus Solutions said competing with Dell presents "a challenge."

"Over the last 12 months we've lost about five deals worth $500,000 to Dell. If it's strictly a price play I'm not going to beat Dell," Baskin said.

Baskin also said EMC's recent changes in their registration program have help to protect the rest of the channel against Dell.

"The biggest complaint has been that you would go in and do all the work and then Dell would show up at the last minute and cut the price out. The program is not perfect, but if an EMC partner registers a deal they are better protected now," Baskin said.

In the meantime Dell's Asthana, said Dell is looking at competing just as aggressively, if not more so with EMC's partners saying that Dell can offer a broader range of technology including servers, desktops, and software.

"You don't have to have multiple service people coming to your shop; one to do servers, one to do storage and so on. We test our products to work together, we work with application partner like Oracle and Microsoft and SAP so that their software running on our servers hooked to EMC storage is working very well,"Asthana said

"Those are some of the things we are offering to customers that other VARs may not be able to offer," Asthana added.

Let us know what you think about this story; email: Nicole Lewis, Senior News Writer.

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