Dell Mulling Low-Priced MSP Offering

The appliance, which is currently on the market and starts at about $300, provides device monitoring, network management, event reporting, content filtering, VPN capabilities and firewall protection, according to sources familiar with the vendor’s plans. The deal between Dell and the OEM is expected to close later this year, the sources said.

Dell declined to comment on this story.

The Round Rock, Texas, vendor initially sees an opportunity to offer managed services to small businesses that cannot afford the cost of a solution provider or MSP, said sources in direct contact with Dell that understand its strategy with the appliance.

Dell plans to broker remote managed services using the appliance in conjunction with a back-end MSP, sources said.

The approach is reminiscent of CDW’s move last year to offer point-and-click managed services for point products such as SonicWall firewalls using a hosted MSP service from Network Partners, Richardson, Texas.

The MSP threat from Dell is real, said Don Sivitz, CTO of Full Services Networking (FSN), an SMB VAR and MSP in Cincinnati. “It worries us,” he said. “Dell’s expertise isn’t in services, but they want it bad enough.”

Sivitz, who partners with Hewlett-Packard for hardware, said a low-cost MSP offering from Dell likely will get the attention of his customers, who often ask him why they can’t just buy less-expensive hardware from Dell. “We have to explain the value proposition [of HP]. And we’re not going to let Dell get near our customers.”

Similar to how Dell won in the discount PC war, it wants to stake out a piece of the SMB MSP business by winning on price, said a source at a managed services vendor who worked with Dell on a recent OEM deal that collapsed when the OEM refused to comply with a demand from Dell to raise the price of the OEM’s own branded products so Dell could undercut it.

Dell has long said it needs to increase services revenue. During its fourth-quarter earnings call on Feb. 16, Dell said revenue growth had waned. On that call, Dell President CEO Kevin Rollins said news of changes to the company’s business model could come in April.

Many MSPs at last week’s MSPAlliance 2006 Managed Services International Conference in Orlando, Fla., said Dell has become noticeably more aggressive in its attempts to gain access to SMB customers using MSPs.

At CMP Media’s XChange Solution Provider event in Atlanta last month, Sivitz said Dell approached him wanting a complete list of his customers in return for a percentage of the hardware sales Dell could close with them. According to Sivitz, Dell said it would inform FSN when a customer was buying hardware and make its own suggestions to customers about what and when to buy.

“They told me we could forget about our other [hardware] distributors, and they would take care of it,” he said.

Michael Cooch, CEO of Everon Technology Services, an MSP in Boston, said Dell’s regional representatives lately have been appearing at Everon’s doorstep more than ever before. The Dell teams want more influence over the hardware buying decisions of Everon’s customers, but Everon is not allowing it, Cooch said.

“[Dell doesn’t] get it when it comes to services,” said Larry Baum, chairman of The Computing Center, an MSP in Ithaca, N.Y. He, too, sees Dell’s SMB MSP ambitions accelerating but said he doesn’t put much stock in them.

Dell’s effort to offer Web-hosting services for SMBs in 2000 also demonstrates Dell’s inability to successfully offer managed services, said Michael Corey, CEO of Ntirety, a database MSP in Boston. “[Dellhost.com] fell apart, and Dell did nothing but point fingers at everyone,” he said. Dellhost.com now redirects to Appsitehosting.com, run by IT outsourcing MSP VeriCenter, Houston.

During the Feb. 16 earnings call, Rollins said Dell’s consumer customer-service performance had become unacceptably subpar and that the company was increasing service resources to turn this around.

Bill Crowsey, CEO of O-Tec, an MSP in Dallas, said Dell’s plan to use a discount appliance to win MSP market share won’t work, mainly because it was Dell’s success in the discount PC market that contributed to the migration of VARs from project-based work to managed services.

“Everyone has conceded the hardware side of IT to Dell, but not services. That won’t happen,” he said.