Dell Taps Distributors to Boost SMB Share

Partners applaud computer maker for going beyond long-time 'build to order' model.

Dell Computer Inc. (NASDAQ:DELL), a stalwart pioneer in the direct marketing of computer equipment, has turned to distributors Ingram Micro Inc. and Tech Data Corp. to win a bigger share of sales to small to medium-sized businesses.

Under terms of the deal, Dell will provide Ingram Micro (NYSE:IM) and Tech Data (NASDAQ:TECD) with 11 preconfigured desktops and three preconfigured notebooks from its Vostro line.

The agreement also includes some of the company’s monitors and extended limited hardware warranties. The two distributors each have long-standing relationships with Dell for sales of third-party software and peripherals and those arrangements will not be disturbed by the new one.

Dell officials attributed the distribution agreements to a desire to get product into customers’ hands faster.

“Our partners often have cases where they need a product and need it quickly,” said Greg Davis, Dell vice president and general manager, global commercial channels. “Our agreements with Tech Data and Ingram Micro meet that need and provide an opportunity to grow and expand the reach of our partners.”

Resellers interested in the standard configuration units available through distribution will retain the option of buying directly from Dell, Davis said.

Both Ingram Micro and Tech Data viewed Dell’s move as a wholesale endorsement of the channel and its ability to get to SMB customers, and each praised the vendor for making it.

“Two-tier distribution is the most effective and efficient way to get product to the SMB marketplace,” said Keith Bradley, president of Ingram Micro North America. “It’s great to see a vendor such as Dell finally realize that.”

“To see that Dell is recognizing the value of distribution and the efficiencies and access to product in our model benefits us greatly,” said Joe Quaglia, Tech Data senior vice president of U.S. Marketing.

Product list could expand

For now, sales are restricted to the United States, but all involved parties said that the agreement will extend to Canada in the near future. The distributors acknowledged that if the arrangements succeed, their expectation is that the list of available products will expand to include Dell’s servers, printers, projectors and accessories.

“As our server and storage division continues to scale for us, [adding Dell servers] would be a natural extension,” Bradley said.

Both Tech Data and Ingram Micro quickly pointed out that the agreements are intended to uncover new SMB customers for Dell and not designed to snatch market share from competitors already selling through the distributors. Dell believes it can up its SMB share by leveraging the extended reseller and customer lists, rapid delivery times, logistics, support and resources afforded it by distribution.

“We view this as an incremental revenue opportunity,” said Bradley. “We’ll identify VARs that have targeted end users with less than 25 seats and have our telesales organization call to educate them on customers in their area they can sell to,” said Bradley.

“We know there is a large SMB community that currently buys Dell product,” said Quaglia. “Dell definitely doesn’t want us to lay back, they want us to hit that market,” he said.

Dell’s step into distribution fleshes out a channel sales strategy the vendor initially crafted two years ago and positions it on footing similar to that of key rivals Hewlett Packard Co. and IBM Corp., both of whom distribute computer equipment through Ingram Micro and Tech Data. IBM declined to comment on the deal, citing company policy.

Prior to the agreement, Dell’s two-tier distribution efforts had been confined to countries and markets where it believed it could not reach channel partners on its own. The company had steadfastly refrained from using distributors in segments such as SMB where it believed it could tend to partners directly.

But a growing number of its 15,000 U.S.-based solution providers, many of whom hone in on the SMB market, voiced interest in obtaining systems without waiting the typical five-to-10 days for delivery when purchasing directly from Dell. Both Ingram Micro and Tech Data have pledged to provide same-day shipping of Dell’s products to resellers.

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TAGS: Dell,marketing,Tech Data,Ingram,channel

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