Channel orders up as partners put Dell in pole market position

Diego Majdalani (Dell Technologies)

Dell Technologies is riding the wave of accelerating channel sales with partners now responsible for more than half of all customer orders in Asia Pacific and Japan (APJ).

Created by a perfect storm of heightened end-user demand, competitive market takeout tactics and aggressive rebate incentives, the technology giant is placing growth ambitions in the hands of an expanding ecosystem across the region.

“We keep growing, our channel is strong and we remain ahead of the market,” observed Diego Majdalani, president of Channels across International Markets at Dell.

During the first quarter of FY23, the channel drove 56 per cent of all new and reactivated buyers across APJ with ecosystem order revenue increasing 12 per cent year-on-year. Within this context, server and storage order revenue reported double-digit year-on-year growth of 28 per cent and 24 per cent respectively, aided by a 12 per cent rise in sales via distribution.

Such growth has ensured that partner rebates in the region also grew 28 year-on-year during the first three months of the new financial year, maintaining momentum following 42 per cent growth during FY22.

“This offers a sense of our growing business and how the channel is heading in the direction that we want it to head in,” Majdalani added. “Our rebate spend continues to increase which shows that we are driving the behaviour that we expect and creating profitable deals for our channel.”

Speaking to Channel Asia during a whistle-stop visit to Singapore, Majdalani said the vendor has benefited from an initial spike on the client side of the business which at the time, “clearly caught the market by surprise”.

“There wasn’t enough supply or manufacturing capacity for the orders coming in but due to our supply chain excellency, we were able to respond significantly better than the industry average which drove more business to our partners,” he recalled. “Now after two and a half years of providing computers, the market is starting to slow down until the next refresh wave starts.”

With interest in PCs and devices waning aligned to pre-pandemic levels, Majdalani also referenced the growing importance of an infrastructure ecosystem which continues to “over-perform” across server and data management segments.

“More customers are coming into our server business and more partners are reselling our products so we’re gaining share,” he noted. “For data management, we’re seeing different flavours of data usage and management. This could be the classic data warehouse or data management projects in a company or extend out to the edge or to telco and different use cases of AI [artificial intelligence].”

In short, Majdalani views data management as an “expanding business” for partners to pursue in APJ and beyond, spanning an end-to-end portfolio encompassing primary and object storage plus hyperconverged infrastructure and data protection solutions.

Emerging partner opportunities

In assessing the state of the market, worldwide spending on technology is set to hit US$4.5 trillion this year, rising by three per cent from 2021.

According to Gartner, IT expenditure growth will be much slower paced than 2021 due to spending cutbacks, geopolitical uncertainty and the global talent crisis. Indeed, 2022’s growth rate is seven per cent lower than 2021’s 10 per cent growth as inflation remains “top of mind” for everyone around the world. 

“The money pot is expanding at a single-digit rate but isn’t exploding,” Majdalani clarified. “Within that expansion, we are taking a disproportionate amount of the investment versus the industry or our competitors.

“But it’s difficult to draw a line because we have two extremes -- direct accounts, directly served and directly managed plus partner-led, partner served and partner managed etc.”

In some instances, the channel is leveraged as a fulfilment vehicle but the middle-ground -- viewed by Majdalani as “core” -- is when direct teams collaborate with partners in specific accounts.

“We get the best when we work together,” he noted. “But having said that, 75 per cent of all storage orders in our International markets flow through the channel, rising to 80 per cent in APJ. Our partners realise that when we compare product to product, we have best-in-class in every category and that counts in the channel.”

Such a bullish assessment also extends to the customer as end-users increase reliance on third-party technology providers to drive transformation projects.

“Partners must not only look at solving the current customer challenge today but ensuring they are the partner capable of solving the next challenge,” Majdalani advised. “The smartest partners are finding out where they want to play as the lines between solutions become blurrier but most importantly, they are realising this is a partner play.”

Majdalani stressed that as emerging technologies flood the market -- whether edge computing, AI or machine learning -- the importance of the partner operating at the heart of solution deployments heightens.

“This is not a vendor play,” he stated. “When you look at the complexities of new solutions and the need to stitch together a number of different technologies, that’s at the core of what a successful partner does.

“And customers want partners capable of solving multiple elements of a problem, not just a single element. Customers do not want partner A to solve problem A, partner B to solve problem B and so on, they want someone capable of taking responsibility at an end-to-end level.”

Credit: Dell Technologies

The customer opportunity comes as partners “switch allegiances” to Dell because of double-digit product line growth, healthy rebates and supply chain predictability.

From India to New Zealand -- and all regions across APJ -- the ecosystem is prioritising financial profitability and solution delivery above all else as markets emerge from the shadow of COVID-19 motivated by a desire to rapidly expand.

“Partners have the opportunity as we move more aggressively to multi-cloud, especially in the services space,” added Tian Beng Ng, senior vice president and general manager of Channels across APJ at Dell. “If this was just a pure hardware play then perhaps the value-add might be less, but that’s not the case and the role of the partner is even bigger today.

“Some are naturally more skilled than others in multi-cloud but our priority is to work with the channel to enable partners with the right tools and solutions -- but they must match that support with investment also.”

Best of both worlds

When speaking to Channel Asia, Majdalani emphasised that the channel remains an “integral part of the business” in driving market growth, which now accounts for more than 50 per cent of the vendor’s order venue.

During FY22, the business reached more than $100 billion in revenue, of which partners delivered $59 billion in orders.

“One of the biggest changes that we’ve made during the past two and a half years is to have no direct or channel structures,” he explained. “There are no internal swim lanes where the channel ends and the direct business begins. We look after our routes to market and ensure accountability for everyone concerned.”

Majdalani -- who reports to Aongus Hegarty as president of International Markets at Dell -- said the change is anchored in the belief that customer preference stands tall as the deciding factor in any deal.

“What does the customer prefer?” he asked. “Do they prefer to work with a certain partner or to leverage the channel for a specific piece of work?

"We have flexibility with our process to account for customer preference but it is shaped by strict rules of engagement. The chance of misunderstanding or misbehaviour is more related to the IQ of the people involved, not the process itself. In looking at more than 100,000 transactions, I can hand on heart think of less than 50 serious issues.”

Such dynamic offers opportunity for the channel to leverage the best of both worlds as Dell continues to press ahead with aggressive growth across direct and channel businesses.

“Having such a strong direct sales team is an asset to our partners,” Tian Beng added. “At a recent ARN Roundtable in Sydney, partners were very complimentary of our sales coverage and viewed this as a strength. In fact, the feedback was that it’s an advantage having Dell reps covering accounts to bring partners into deals compared to competitors who cannot make the required inroads or introductions.”

As noted by Tian Beng, the most common scenario is partners and Dell sales executives covering customer accounts as a joint effort.

“We call this our collaboration play which is especially key in large accounts and represents a sizeable chunk of our channel business,” he said.

With Dell’s channel approach now engrained into the partner psyche, the ecosystem appears to be ridding itself of the initial reservations that dogged the early years of the new-look strategy.

“We have a hybrid model which no doubt scared the channel at the beginning,” Majdalani accepted. “It certainly did for some in the past but now, if you fast forward six or seven years, then you realise that we’ve been true to our approach.

“If you look down the road, this is a maturing industry with fewer players. The number of partners selling our solutions continues to increase each quarter and that shows that the trust is there.”