Industry Viewpoint - A direct life is not always a good life

I am getting tired of all the arguments for direct sales boiling down to Dell. You're in the middle of a serious conversation and suddenly it veers to the channel. Is direct better than indirect? How quickly the D word finds its way to people's lips is miraculous. Most people resorting to this common ground would not understand one of Dell's real strengths if it jumped up and bit them on the business plan. It's a common story. People look at the obvious examples of companies that have made it big by going direct and they draw the wrong conclusions based on simplistic arguments. What they don't recognise is the drive for excellence and forceful market knowledge would have made Dell a big success even without the direct approach. It's all much more complex than just having this sales model or that. Is IBM successful because it chose an ambitious pricing strategy? Partly, but not entirely. Are iMacs successful because they are in cheerful colours? Partly, but not entirely. Is Microsoft huge because it developed Windows? Partly, but not entirely. So, if we can limit the impact of simplification in these cases, why not penetrate the value of direct sales for Dell? Because it has been drummed into our heads that direct is good - just look at Dell. Dell is a great marketing company that doesn't hold any stock. It's light on its feet, keeps its costs reasonably low, but like a lot of good marketing companies, succeeds because opposition is sparse. Actually, if we ignore manufacturing and compare like for like, Dell's direct cost of sale is nine per cent. The average hardware margin for a Var and a distributor combined on a corporate deal is less than this, so on the face of it, the indirect route is cheaper. Dell succeeds because it is almost a virtual company - making nothing, buying in what it needs with a minimal assembly line to put these together. Indirect manufacturers do the same and that is the challenge, not trying to compete with Dell. Analyse the direct versus indirect argument carefully and the average values do not conform to the Dell recipe. Dell or no Dell, the indirect model is more efficient. It allows everybody to do what they do well. The real value of resellers is they go the extra mile. That includes the added value in the sales process - all resellers are Vars on some level. Most manufacturers couldn't be Vars if they wanted to. A Var can deliver a PC, fully configured any way you want tomorrow morning - a feat that Dell cannot. A Var can beat Dell on cost and add all the other elements that Dell finds it difficult to do - installation, configuration and integration, support, training, break and fix maintenance and advice. Dell is not the only game in town. Vars provide a better, more cost-effective service to the average corporate customer. But be under no illusion that this rant will stop people taking Dell's name in vain. The only hope is that this other tide, consisting of real reasons and true analysis might be trickling in. Once people are prepared to use some real arguments and analyse the real world, we can discuss the merits of the D word once more.

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