Today is a delicate day for Dell’s PartnerDirect channel program. The technology giant is carefully rolling out a new effort called ProManage-Managed Services. On the upside, Dell has designed the program to include VARs that want to get started in managed services. But on the downside, some critics will consider this Dell’s attempt to sell all managed services directly — on a nationwide (US) basis — to small and midsize businesses. Before you listen to the alarmists, here are the facts, and my own perspectives.
First, Dell’s official statement about ProManage-Managed Services. The new nationwide (US) service is:
“Built from the ground up for small and medium businesses, the web-based service proactively monitors and manages IT networks, prevents system issues before they occur, and eliminates costly downtime. The expansion to more than 5,500 U.S. towns and cities follows two successful pilots in Dallas and New York City, where Dell helped one customer increase staff productivity by as much as 60 percent
Most of the official press release speaks directly to small and midsize business owners. But Dell points out that VARs and MSPs can participate in the program:
“Starting as low as $9 per month with no upfront investment or long-term contract required, ProManage–Managed Services are available direct from Dell or one of its PartnerDirect Registered or Certified Partners enrolled in the new ProManage Sales Agent program.”
What Dell Is Doing Wrong, And Right
Let’s be clear here: Dell is selling managed services directly to small and midsize customers, but MSPs can participate in the process or continue to offer Dell Silverback on their own to customers. But what does all that really mean?
First, Dell’s mistakes:
- Dell’s press release and follow-up Webcast include perspectives from Dell executives, analysts, small business owners and IT managers working in small business. If Dell had included one of its MSP partners — just one — in the official press release or in the Webcast, the MSP could have articulated how it cooperates with Dell in some areas and potentially competes with Dell in other areas. Coopetition is a fact of life. Articulate it.
- Dell also should have mentioned that it remains loyal to established MSP partners (the Silverback crowd), most of whom surely don’t plan to become ProManage sales agents.
- Yes, VARs and MSPs can become “agents” for Dell ProManage-Managed Services. The problem: Many VARs hate the “agent” terminology. But stick with me and I’ll explain why Dell’s agent model might be different.
- Initially, VARs and MSPs cannot re-brand Dell ProManage-Managed Services as their own. Again, stick with me and I’ll explain how this may change.
- Much of Dell’s ProManage partner messaging is limited to Dell’s own channel blog. The Dell blog is a great resource for channel partners. But those messages should have been stronger in the mainstream PR announcement.
Let’s be honest: MSPs competing with vendors is not a Dell-specific issue. My strong belief, and you can quote me:
“All MSPs will wind up competing with major hardware and software providers as all big vendors move into the software as a service (SaaS) market. For the sake of shareholders, Dell has no choice but to offer managed services direct and indirect. The same holds true with Microsoft in the SaaS market. But Dell has to be extra-careful when communicating its managed services and SaaS strategy, because some VARs remain wary of the company’s old direct sales heritage.”
Perception is reality. And some MSPs are going to perceive Dell ProManage-Managed Services as Dell’s massive direct-sales MSP initiative. But read on.
What Dell Did Right
Do MSPs actually fit into this strategy? Yes.
MSPs can still offer Dell’s managed services platforms (i.e., Silverback Technologies) on their own to customers.
But here’s where things really get interesting: Many resellers and VARs have struggled and failed in the MSP market. Others don’t have the time or resources to build out a full-blown NOC. In those scenarios, Dell plans to position Dell ProManage-Managed Services as an MSP alternative to Zenith Infotech’s services. Will Dell succeed? I don’t know. Zenith seems to have a pretty loyal following. But mark my words: Dell will reach out to resellers and VARs that are seeking an alternative to Zenith Infotech’s offerings.
Also, Dell’s agent model for ProManage-Managed Services involves more than Dell sending a recurring monthly check to MSPs. I hate the “agent” term as much as the next guy. MSPs want to strengthen their own brands; they aren’t out to build Dell’s brand.
But there is some value to Dell’s agent approach. According to Peter Klanian, senior manager for channel sales at Dell:
- MSPs that re-sell ProManage-Managed Services will be involved in customer status report meetings between Dell, the MSP and the end-customer. And both the customer and the partner will receive monthly reports for all parties to review.
- Partners can register their pending ProManage-Managed Services engagements with Dell, in order to mitigate the risk of Dell’s direct sales force targeting that customer.
- Partners receive 15 percent recurring revenue on ProManage-Managed Services.
- Over time, it sounds like Dell will allow MSPs to re-brand ProManage-Managed Services as their own, but that capability is not currently offered.
Klanian’s ultimate perspective:
- VARs that offer ProManage-Managed Services are looking for a lower-risk, lower-reward business model because Dell is responsible for the Service Level Agreements to end-customers.
- VARs that continue to offer Dell Silverback managed services on their own are seeking a higher-risk, higher-reward business model because the MSP is responsible for SLAs to end-customers, and can often charge premiums for additional add-on services.
MSPs Still In Control?
Now imagine the following scenario: A small reseller signs up a customer for ProManage-Managed Services today. But over the next few years, the reseller evolves into a full-blown managed service provider with its own network operation center (NOC) tied to Dell’s Silverback platform. In that scenario, Klanian says, the Dell partner can migrate the customer from ProManage-Managed Services into the MSP’s own NOC.
Dell will need to drive home that point aggressively in the days ahead, as some skeptics will surely consider ProManage-Managed Services a complete direct sales play. Plus, Dell’s Silverback MSPs will need to articulate why their services are more valuable — and therefore cost more — than Dell’s own starting price of $9 per month.
In my mind, Dell’s primary press release did a poor job describing how MSPs can potentially participate in the process. But Klanian is working overtime to clarify the situation.
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I re-read the post five times. Joe, I have never read such an opinionated piece about Dell that shows the full picture. If I may, I’d like to offer my own pros/cons.
Cons:
1. Price: I have to admit the $9 starting price is going to impact some MSPs that focus on price, price, price instead of the value of their services.
2. Direct marketing: I already receive numerous online conference invites from Dell targeting SMBs directly. This will surely increase the volume of that direct marketing. Dell better balance that with channel marketing to guys like me. And if my customers receive a direct solicitation, it better include a line about partnerdirect.
Pros:
1. NOC help: We’re still figuring out our own strategy. We do need a help desk service and we don’t really want to build a NOC. Say what you want about Dell before Partnerdirect, but I will be investigating Dell’s NOC services for my customers. Time is money. Dell may wind up giving me both.
2. One-stop: I looked at the link to the Dell press release and I like the fact that they are introducing anti virus, storage and other services. I don’t want to piece together multiple hosted services from a mix of companies. Nor do I want to invoice separately for multiple back end services. If Dell lets me give customers one invoice for all services, I’ll take it.
In conclusion, I came across MSP Mentor while researching Autotask. I can’t believe you’re here. Nice site. And if this comment doesn’t wind up in a spam filter or in a monitoring system I will be all that more impressed.
Vic: Glad you found us. I like your point on direct marketing. Both sides of Dell’s brain (direct and indirect) need to make sure the marketing and branding is accurate and balanced for all parties (end-customers and partners).
Thanks again for reading MSPmentor.
Joe, I would like mention a few differences in the model being proposed by Dell as compared to the model offered by us at Zenith Infotech. Before I start I would like to mention that this comparison is not being made to position our offering as superior, but is a factual comparison based on what I’ve understood about Dell’s model.
1) Zenith allows and encourages our partners to white label our managed services completely. I do see you mention that this will change.
. I dont think an MSP can provide any semblance of good service making a 15% margin. Services is a very person-intensive business and I don’t see 15% being a sustainable margin.
2) We do not define the price and the service package. We rather encourage our partners to define pricing and service packages that meet the need of their customers. Zenith is a component of what makes a total package – more like a auto-parts company. End customers buy the car brand (here our partner brand) and rarely know the manufacturer of the components. What a healthcare customer needs is very different from what a community bank needs hence a once size fits all managed services program which looks more like a product SKU may fit the business of a pure-play reseller but not an MSP.
3) Our partners make a lot more money than 15% (I will not put in exact numbers – Zenith partners I need your help with some comments here
Akash: Thanks for offering thoughts. And for helping MSPmentor to drive a dialog with aspiring MSPs.
I’m hearing from more and more readers, asking me which tools they should choose. We’re not in the business of reviewing or recommending tools. Rather, we want to make sure we direct readers to the most appropriate resources for information.
Whether it’s Zenith Infotech, Dell or numerous alternatives, the MSP software industry is filled with companies that are eager — yes, eager — to answer questions from resellers, VARs and MSPs that are looking for new opportunities.
And there are quite a few great “try before you buy” programs that solutions providers can test before making a tool or service decision.
Selecting a tool is a lot like selecting a car: There are a lot of great cars on the market, but which one fits your personal needs? Do you rent, lease or purchase?
Surely, you’d take a few cars for test drives before making a final decision, and you’d explore which financial model(s) you want to pursue before writing your first payment check…
Great discussion guys. I received direct mail from Dell a few days ago about their ProManage managed services. I am in the process of testing MSP service platforms and will launch a managed services startup later this year. With the movement of vendors such as Dell competing with MSPs, do you think the managed services industry will remain a viable space for IT companies to remain in?
Andre: We will be discussing your very question during the HTG Peer Group Summit next week. I’m moderating a session that explores the future of the IT consulting/MSP/VAR industry. As technology vendors introduce SaaS and managed services, how do MSPs themselves evolve?
I don’t have all the answers (hopefully, the conference panel will). But I do think Dell introducing managed services directly to SMBs is a bit like AT&T introducing local calling service. Yes, long distance providers experienced some success in the local market. Completing that thought, I think Dell will get their share of “local” SMB customers.
However, look at all the disruptive technologies and companies that moved into the local/long distance space as well: Skype, Vonage, VoIP service providers, Asterisk options, and dozens more. MSPs will continue to find, explore and promote disruptive technologies. And as long as they hold onto those local customer relationships — through face-to-face interactions — the small business MSPs will do fine.
Another thought: IBM manages to compete AND cooperate with Microsoft, Oracle, Dell, HP, etc. I think MSPs should get used to a similar coopetition mindset.
Vic -
Call me. We can do what you are looking for and we don’t sell to your end customers. What a concept.
Justin Crotty
Ingram Micro Seismic
714-382-4836
justin.crotty@ingrammicro.com
As a Dell Certified MSP I should be worried, but the announcement of the ProManage service scare the daylights out of me. The sheer size and marketing power of Dell is what can really hurt us, the little guy, in the end customer’s eyes.
What is interesting is that Dell purchased Silverback Technologies about 2 years ago. If you read through the “Weekly Scorecard”, this is actually a reduced version of what us loyal SilverBack customers have had for years. I was hoping to see the culmination of Silverback and Everdream come up to be a great product. Alas, I’m glad I started implementing Kaseya which kicks Dell’s @$$.
(Sorry for the rant… Just got off the phone with a long-time customer who has been swallowed up by Dell. So much for the rules of war.)
Dave: No need to apologize for the rant. But I do request that you share your company info when posting comments. There’s always room for healthy debate on MSPmentor.
But we do watch the site to make sure rivals aren’t taking shots at each other anonymously. All constructive comments are welcome. But we prefer they not be posted under generic/anonymous names…
-jp
Joe Panettieri
Editorial Director
MSPmentor
I am sorry if this is too long but I have quite a bit I would say on this subject.
So looking at some pros and cons:
Pros:
1. As Dell and the other big boys enter the market, they will lend validation to the Managed Services model. In the short term this will raise awareness of Managed Services with end clients and provide a larger prospect base for everyone.
2. Another pro is if I am not an MSP today. If I am an ISP, ISV, single man consultant, print supplier or just like to sell something, I can pickup Dell’s managed services to augment my primary income making more money from each client relationship I have. Sorry Akash, but I think I will have my wife’s company sell IT services now too.
3. I really don’t see many positives if I am an MSP.
Cons:
1. Was it a mistake for Dell not to have a channel partner included in their announcement? Sure it was a mistake if you are committed to working with partners and a channel. I think you are too kind Joe saying it was a mistake they need to correct. The fact is they simply didn’t think about including a partner because they are not channel focused. As an overall organization Dell is about Dell. Frankly, their whole channel program was mentioned as an after-thought in their announcement because it is an after-thought (intentional or not).
2. Also look at Dell’s model. Are they really committed to the service and being a service company? I really don’t believe so. I could be wrong, but my opinion is that the move into managed services is just so they can keep their hardware business going. It is no different than Microsoft moving into the SAAS market as they work to salvage their own model against players like Google and Salesforce. I can tell you that as the big players take off their gloves to fight each other they will crush many of us in the middle and on the sidelines.
3. Next, I have listened to the debate for the last 3 years or more about Dell and other big players entering the market. The response I most often heard or got from people was that Dell, Microsoft or Cisco can’t provide the service right. They won’t be able to provide a high quality personal service. This is true but not the point. The real point is as Dell’s pricing hits the street all MSPs and aspiring MSPs will find it harder and harder to get new deals, close new business and, most damaging, will begin to feel huge downward pressure on their margins. Are we all so naïve as to forget 10 years ago what happen to hardware margins as Dell and other large players entered the market? How many of you are still white box builders? How many of you even think about selling hardware? Bottom line is each of you will eventually, sooner than later, have to have a managed service offering close in price to what Dell or Microsoft markets or you mid-as-well not market because clients are not going to call you. Think about it. I send you a $45 dollar marketing slick and I get one for $9 dollars. Personally, I am calling the $9 one first. It simply is what it is.
4. 15% simply is not sufficient to sustain a services business. Many of the smaller MSPs out there managed 300 or so desktops and the best ones 2500-5000. At 15% you get to make $1.35 a desktop. On 300 desktops you make $405 dollars. I know many MSPs managing 300 desktops with 2-3 employees. How do you sustain that on $405? I know I know. You have other services you can provide to the client. So now you are the break fix arm for Dell or Microsoft. What do you do? Let the big boy collect his money, send you your little piece and you, the MSP, now write a service agreement the end client signs to cover issues onsite as needed. MMM…… sounds like Break Fix to me. And all of this is perfect timing for Dell to announce: the economy down, businesses more and more sensitive on pricing, and now the compounded issue of Dells’ pricing.
Bottom line is the Golden Age of Managed Services is just now beginning and the big players are going to start slugging to get their share. As an ecosystem and as managed service provider we will have some great years ahead of us but we need to begin searching our souls for the next business transition we need to make. Whether it is Dell, Microsoft, Cicso or any other big boy coming into the managed services market, they are going to sell and make money. Where does the money come from? It has to come from all of our margins. Simple as that. Dell is not creating a market. Microsoft is not creating this market either. It is already there, we all make our living there and the money they bring in is the money the channel makes today. I believe managed services is very close to repeating the history of the hardware business 10-12 years ago. Like George Santayana said, “Those who cannot remember the past are condemned to repeat it.”
Hey Clinton: Please don’t apologize for a “long” comment. I will be back Friday with more detailed reaction to your comment. Sorry to be so brief this evening.
I am in the same place as Dave. The lack of continuing development on the Silverback/Everdream products is truly disheartening. Mix in the business as usual attitude at Dell regarding communication (or lack thereof) and it reaches a breaking point. I think Peter and his team have done a decent job in their respective area, but unfortunately remain a little cog in a giant machine. I’ve begun testing with Kaseya and Zenith.
My typical customer is 25-100 users. We do still sell hardware to them and typically look at 20-30% margins. They know they aren’t getting Wal-Mart pricing, but they also know we stand by every decision/purchase we recommend. If a solution ends up being a wrong fit, we take the whole thing back and work it out. I brought HP/SuperMicro/Asus customers into my Dell relationship and they will just as easily retreat with me. I brought them over because I was sold a vision of a company that was working many angles to make deployment and management much easier than how I was doing it. A vision that, practically speaking, has laregely gone unimplemented since it was cast roughly 18 months ago.
I don’t, however, mind the ProManage offering at face value. I felt it was coming from Dell’s first communication at the Silverback Partner Conference in 2008. Their efforts in this area will only help educate my smaller (25) prospects to the managed concept. The Dell message will be broad and lack personalization critical to a SMB without internal IT. The awareness Dell creates will continue to legitimize the MSP model to owners who have better things to do than read about my industry. Sales engagements continue to show me that Officers in 100-300 user companies are aware of the MSP model. The 15-50 aren’t so informed. For my business, margins are 3x higher for 25 users than 100 users. I look forward to Dell buttering up my future clients.
Mark Shipman
TekServ1, LLC.
Good points Mark. As a MSP utilizing Silverback, when we learned that DELL was offering Managed Services through agents we were pissed, but we soon realized the hidden advantages you mentioned
David Brisbin
Med Tech Solutions
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