Opinion
Dell's Channel Pricing Problem
By Steven Burke
 One of the most critical issues with any channel program is making sure that your partners have price parity with your direct-sales team. It's an especially sensitive issue during difficult economic times when customers are looking for every last dollar of savings.
Partners need to know if they are quoting a customer a price on a product—even a single unit price—that is in line with what the vendor is offering either on its own Web site or from a direct-sales rep.
Many solution providers are complaining that Dell Direct is, in some cases, quoting prices that are 10 percent to 15 percent below the channel price on low-quantity servers or PCs.
One of the partners told me that their customer relationship is being undermined by Dell. Whenever his company gives a price quote to the customer based on what he is getting from Dell, more often than not, the customer calls him back saying that he is getting 10 to 15 points better pricing from Dell than the partner can offer. This kind of a spread becomes gouging in the customer's eyes. That pricing spread, in fact, is keeping this partner from even quoting the price of Dell products.
Greg Davis, Channel Chief, Dell Worldwide admits that that channel pricing parity is an issue the company faces on its mainstream hardware business. According to him, Dell is attempting to implement the same kind of pricing model it has used to great success with its EqualLogic business.
It's no surprise that this was a business Dell bought 19 months ago for $1.4 billion. That investment has paid off handsomely because Dell has done such a good job of maintaining EqualLogic's channel momentum. Channel partners, in fact, give Dell credit for not undercutting them.
"The pricing and the way that we have our storage product line set up is working very well," said Davis. "I never have an issue or a complaint with respect to storage because of the way we set it up. We are working to get that same process into our server product line and hopefully through the rest of the product line."
What the Dell case shows is just how difficult it is for a longtime direct-sales company to transform itself into a channel company. All the processes and policies that Dell has built since its inception 25 years ago were built to support a direct-sales model. Now Dell is changing that direct-sales DNA to make way for a channel model. It is not something that can be done overnight. It's a journey.
If Dell wants to continue to see its channel confidence improve, it needs to get this channel pricing issue resolved. |