May 022012
 

Original article by Joseph Kovar at CRN

Dell (NSDQ:Dell) has made changes in how solution providers procure Compellent storage products for their customers which make it possible for partners to get ordering and discount information quicker and in many cases offer lower prices.

The changes to the Compellent ordering and configuration process stem from Dell’s move to standardize many of the processes and channel programs of its recent acquisitions.

Dell in February closed its $800 million-plus acquisition of storage virtualization vendor Compellent.

Since then, Dell has moved to integrate the technology and channel programs of its different storage technologies, including those of its EqualLogic, Compellent, Exanet, and Ocarina acquisitions.

Dell has simplified the process by which solution providers order Compellent products, get their discounts, and apply for special pricing, according to both Dell and its solution providers.

However, the actual impact of the changes in terms of pricing to customers is hard to quantify as various observers of the company and its channels look at it from different angles.

Financial analyst Raymond James wrote in a research report about a variety of major IT vendors that Dell has lowered the price of Compellent products to its channel partners by 30 percent due to improved supply chain efficiencies and volume purchases of hard drives compared to what the much smaller pre-acquisition Compellent was able to do.

As a result, solution providers are keeping larger margins for themselves compared to what they could keep before the acquisition, and are offering 10 percent or higher discounts to customers, Raymond James wrote.

One solution provider, who asked to remain anonymous due to the sensitivity of discussing prices, said he has seen a downward price adjustment of about 30 percent to channel partners which will be reflected in prices to customers.

The adjustment is likely a result of price competition between Dell and EMC, former partners who last year parted ways as the two started pursuing independent storage strategies, the solution provider said.

“I expect it has a lot to do with the war between Dell and EMC at the SMB level,” the solution provider said. “EMC and Dell are at war.”

As a result of falling Compellent prices, the solution provider said, it is now possible to take Compellent technology into areas where lower-cost Dell EqualLogic products were previously more likely to be sold.

“Our Dell rep recently told us that for deals of up to $80,000, EqualLogic is better,” the solution provider said. “But with the new prices, I can get a bare bones Compellent down to $15,000. I could never do that before. In the past, with really small deals, there was not much Compellent discounting.”

Another solution provider who also preferred to remain unnamed because of the sensitivity of talking about Dell storage prices said that there could be a misconception about pricing discounts which are likely less than what others have noted.

That solution provider, who was a long-time Compellent partner, said that under the pre-acquisition Compellent system, partners would get a very specific price through the partner portal based on the configuration, and then have to negotiate further discounts.

“That was not a sustainable model,” the solution provider said. “Now we get our discounted price when we configure the system. So Dell is not really lowering the price. It is lowering the initial discounts so we don’t have to negotiate.”

As a result, the solution provider said, prices haven’t changed much.

“Instead, it’s the process to get our pricing which has changed,” the solution provider said. “On most deals for me, there’s no difference in price. With our experience with Compellent, we figured out over time where our discounts would be.”

A Compellent spokesperson said that the company, after it was acquired, standardized its pricing methodology to be closer to that of Dell (NSDQ:Dell)’s methodology, which may have resulted in simplified pricing and quicker configuration of the Compellent products.

Compellent also allowed for negotiations in the procurement process before the acquisition by Dell, but things have since been simplified to allow partners to focus more on the actual configuration of their customers’ storage, the spokesperson said.

Pre-acquisition Compellent partners had ultimate control of the configurations, which was a good thing but which also took a lot of time to handle, the spokesperson. Since the acquisition, Dell has simplified the process while maintaining the customization capabilities of partners. Dell has also simplified the pricing process while taking into consideration the level of the partner in the company’s partner program, the spokesperson said.

As a result, there may be some small changes in the prices to the customer, but not necessarily across the board, the spokesperson said.

Our take

The simplification of Compellent configuration and pricing has been a long time coming. The king of “complexity creates more money” is of course EMC, which has perfected the art of configuration confusion. Keeping the customer off balance and unsure about what is needed for a specific configuration always means there is room for “extras” that the unknowing customer ends up paying for.

Dell’s move to more standardized pricing is a welcome move toward transparency that should increase end user’s trust and decrease their costs.

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