Dell Woos Government Channel

Less than a month after Dell revealed plans to scrap its white-box program, CEO Kevin Rollins faced a crowd in the nation's capital touting reliance on the channel for public-sector business more than any other target market. With almost half of Dell's government sales supposedly coming from the channel, such reliance appears legit, though some VARs see it simply as a means into lucrative federal contracts that might not last.

Obviously, Dell has long touted its direct model of doing business, and VARs have long beaten the company up for it. But that all changes with government, Rollins said in his keynote at last month's FOSE conference, pointing to recent partnerships with 10 government VARs that target the federal market.

"We seek the true integrator who [can] add value to the government," Rollins said. "To them, we are a best friend. Where we've had a rub is with resellers that are just that: resellers. To [them], no, I suppose we are not a good partner."

Among the 10 government VARs to form either new or extended partnerships with Dell was Crofton, Md.-based Force 3, formerly part of Dell's GSA program as a small minority-owned business, but is now too large.

"[We were] pleasantly surprised when Dell recently extended our Letter of Supply," says Tim Carney, vice president of contracts at Force 3.

The rest of the companies in the announcement are still small businesses--some women-owned, some minority-owned. Given the federal government's requirement to provide 23 percent of its IT budget to small businesses, and a specified amount of that to the women- and minority-owned set-aside categories, those partnerships provide access to a whole collection of contracts that Dell couldn't bid on directly.

"There is a very strong commitment by the federal government to work with small VARs," says Don Parsons, vice president of Evansville, Ind.-based Automated Office Solutions. "I am sure Dell knows that and will use it to their advantage."

That's fine for some who figure it to be a win-win for Dell and for the small firms it selects as partners. Tampa, Fla.-based American Data & Computer Products (ADCPI), for one, recently graduated from the small-business program, and has sold Dell products into state, local and federal government for some time.

"I can't say it all runs extremely smoothly; we've had our glitches," says Terry Casto, vice president at ADCPI. Dell doesn't extend any terms, for example, and sets up flooring accounts--essentially special credit accounts--to avoid carrying any receivables other than its own. "But it all works out just fine," Casto says. "It has been a good relationship."

Also in his keynote, Rollins went counter to a popular trend in the market and warned government and enterprises alike against relying too heavily on outsourcing as a strategy, saying that agencies need to keep core competencies close to the vest.

"Outsourcing is useful, but only in narrow and guarded, and contained areas," Rollins said. "You don't outsource things that are very strategic." Instead, he said, IT functions, such as help-desk and professional services, can be handed to the private community.

Given that perspective, as well as past performance with the channel, some VARs regard Dell's commitment as shaky and subject to turn on a dime should a more profitable alternative emerge.

"As long as it is good for everyone, I think Dell will play nice," Parsons says. "If something happens to make Dell more [money] by cutting out their partners, they will do that in a heartbeat."