Dell’s SonicWall Buy Frightens Some Resellers
Dell’s acquisition of SonicWall has left some resellers fearful that the business they have built selling the latter company’s network security products may be diminished under the computer maker.
The concern is that Dell will start selling SonicWall firewalls, anti-spam systems, e-mail security and other products as part of bigger hardware deals, essentially gutting the business of resellers who sold the appliances as standalone products.
“They could give it away,” Gary Berzack, chief operating officer for New York City-based SonicWall reseller eTribeca , said. “(Dell could say) buy a million dollars of Dell servers and we’ll give you all the SonicWall you want for free.”
Such concerns stem from Dell’s roots as a seller of low-cost PCs to consumers and businesses. The SonicWall acquisition, along with the purchase of SecureWorks last year and Kace Networks in 2010, reflects Chief Executive Michael Dell’s strategy of building the company’s software business to make it less reliant on PC sales, which have suffered from the growing popularity of tablets and smartphones.
That shift is why Tom Snyder, co-founder and chief operating officer of Oakland-based Xantrion, a Dell and SonicWall reseller, believes the acquisition is a positive. Dell is unlikely to hurt its nascent software business in order to sell PC hardware that carries much lower margins. “It’s a failed business model to try to make money selling hardware, number one,” Snyder said. “Number two; there wasn’t much margin in SonicWall anyway.”
Rather than hurt his business, Snyder, whose company is a premier partner with Dell, expected SonicWall to give customers another reason to buy Dell products. In addition, Snyder was unhappy with SonicWall’s partner program and looked forward to it being replaced with Dell’s.
“Honestly, SonicWall’s service and partner organization stinks, from my perspective,” he said. “They had a good small business firewall, but their enterprise-class firewalls are not suitable for enterprise use.”
Xantrion was never able to get SonicWall to improve its high-end appliances, so the company hopes it will get better under Dell. “As far as I’m concerned, I’m happy to see Dell buy SonicWall,” Snyder said.
Snyder’s view of Dell support was not shared by another reseller of Dell and SonicWall products. “Dell is a huge organization and on a whole they do OK, but there are many situations that we experience each year that really calls into question Dell’s follow through on service commitments,” Ben Stiegler, chief executive of San Francisco-based SynerTel, said.
Besides support quality, Stiegler feared Dell would change or drop SonicWall programs he liked, such as the “secure upgrade plus” promotion. Under the program, customers can buy a security appliance for a monthly subscription that guarantees upgrades to the latest product every couple of years. “That’s good because it ties the customer to the VAR and it cements in the solution,” he said. “Who knows how any of that might change in a Dell world.”
The uncertainty has been worsened by a lack of specifics. In an e-mail sent to SonicWall’s 15,000 partners and obtained by CRN following the acquisition announcement, Marvin Blough, vice president of worldwide sales for the company, said Dell would provide channel partners with the “opportunity” to join its reseller program, but provided no other details.
In the meantime, Blough encouraged partners to “maintain a business-as-usual mentality and focus on closing deals in the current quarter.” While it makes sense to close business, the comments did not instill confidence that the same programs would continue after the acquisition is completed in the second quarter.
Also rankling some SonicWall resellers is how John Swainson, president of Dell software, did not issue any public statements welcoming them to Dell. Such comments would be “instrumental” in making resellers feel there’s a future with Dell, Berzack said.
“You’re talking about a successful low to mid-market product being acquired by one of the largest iron manufacturers in the marketplace today with no published strategy on our inclusion or benefit and no recognition of us providing any benefit,” he said.
In a research note, financial services holding company Raymond James estimated that Dell paid roughly $1 billion for SonicWall, which was bought by investors led by Thoma Bravo in 2010 for $717 million. Raymond James, which maintained its “strong-buy” rating on Dell, said the acquisition announced Tuesday was led by Swainson, who “was muted with regard to Dell’s software strategy.”
Swainson is expected to provide more details at Dell’s upcoming analyst day in June, and resellers will be listening.