Dell's SMB Giveaways Spook Channel

A flurry of Dell SMB service giveaways has potential channel partners worried about the vendor's motives as Dell launches a channel recruitment drive.

Arian Soheili, managing director of Cantatus Systems Group, a Vancouver, B.C. managed service provider, cautioned other solution providers in a Dell recruitment session at XChange '07 in Orlando, Fla. that he had received a direct mail piece from the vendor offering free services that competes directly with his own managed service offerings. Soheili fears that Dell will offer even more aggressive bundled managed services offerings in the wake of the vendor's acquisition of SilverBack Technologies last month. Some partners believe Dell is aiming to bundle the SilverBack technology on every notebook, desktop and server it ships out the door.

The letter, which Soheili received last week and was examined by CRN, touted free managed service-like offerings bundled directly with Dell's new Vostro line of small business notebooks and desktops which were introduced last month as both a channel and Dell direct small business product line.

"VOSTRO doesn't end with new notebooks and desktops," the Dell letter reads in part. "In fact, that's just the beginning. At the heart of Dell's new Vostro systems, you will find the most comprehensive standard support services designed for small business."

Among the services bundled with systems at no additional cost are one-year online data backup, one year PC tune-ups, and 24/7/365 support through DellConnect provided by dedicated small-business trained technicians, the letter said.

"This is calling them on their doublefaced approach to the market," said Soheili, whose managed services make up about 20 percent of his business."This is a huge threat. We have got the exact same business. We sell offsite managed service backup and support. We will never be able to compete with these guys when they are selling a PC at low competitive prices and including the services we charge money for. They are giving all this stuff away." Dell's free online backup service is a $49 per month per user, service for Cantatus with a one-year tuneup, amounting to about $300, said Soheili.

Chris Bates, director of Dell's Solution Provider Direct Division responded that he was not familiar with the letter sent to Cantatus by Michael Lombardo, Director and General Manager, Home and Small Business, Dell Canada.

"We don't have a lot of answers figured out," Bates said. "But we are really excited about having SilverBack on board. But the big picture here is you have a whole organization aligned with your success. We do have an element of Dell that is direct, but at the end of the day it's about offering customers choice."

NEXT: Solutions Providers Wary Of Dell

Soheili isn't the only solution provider concerned by a Dell managed services threat in the wake of the Silverback acquisition. Other partners said they are also watching closely to see how Dell goes to market with the Silverback technology. About 40 percent of the partners listening to the Dell recruitment pitch indicated they are currently offering managed services.

Ted Warner, president of Connecting Point of Greeley, Colo., a solution provider who derives more than 40 percent of his gross profit from managed services, said Dell has to unbundle the managed services from its notebook, desktop and server business so that solution providers have the choice to use Silverback or their own managed services software. If Dell doesn't offer that option, he said that it's extremely unlikey he will partner with the vendor.

"I think they have to be really careful with this thing. I think this XChange session is helpful for them," said Warner. "There's no perfect answer. They are going to tick somebody off -- either their management or solution providers."

Tracy Butler, president of Acropolis, a St. Louis managed service provider, said he was disturbed by the direct mail service offering and the Dell feedback that its Silverback unit would be working closely with both Dell's direct and indirect units. "This shows the left hand doesn't know what the right hand is doing," said Butler. "Silverback reports to both sides of the house. Indirect may not compete with me directly but the other side of the house does. That's a big issue."

Dell, for its part, has said its plan with the Silverback technology is to offer basic managed services direct and let solution providers handle more advanced managed services.

SilverBack CEO Dan Phillips said Dell's managed services effort is going to raise awareness with end user customers. "All of the activity in this marketplace is between the (managed services) tools vendors and the VAR," he said. "There is a huge hyped market in that segment. But there is no end user pull in this market. So is there channel conflict in this market today? No, because there is no end user market there. The opportunity we have with Dell is Dell has 4 million end users. Dell has the ability to create just a cookie cutter simple managed service offering that propogates the market with millions of end users so they know what managed services are."

Phillips insisted there is room for both Dell direct and channel partners to play in a booming managed services market. "Dell is not going to be able to deliver the added value that value-added resellers can provide," he said. "There is going to be a very large opportunity for application management monitoring, configuration management, voice over IP. It's a strange time because we can't talk about specifics. But we will be able to in a few months. Dell is going to have a very, very specific defined managed service offering. That is as far as they are going to go. It will be a kind of a service offering you can roll out in volume. And then there will be a very large specific solutions for the channel."