Dell Technologies Cuts Services Revenue Requirements In Half As Partners Struggle To Hit Targets

Dell Technologies is cutting its services revenue requirement in half for its Titanium-level partners in response to solution providers' widespread inability to meet the program's lofty goal, sources tell CRN.

The Round Rock, Texas, IT behemoth will announce that it is bringing the annual services revenue requirement to $3 million from $6 million for Titanium partners. That announcement will be made following a series of Partner Advisory Board meetings scheduled for Oct. 11-17, according to solution providers with knowledge of the situation.

A source familiar with the changes said revenue requirements would be reduced across the program's Gold, Platinum and Titanium tiers, but the source didn't know if each tier would see a 50 percent reduction.

[Related: Dell EMC Channel Chief John Byrne Offers Carrot, Stick To Spur Services Growth]

"We are putting the final touches on our program thresholds and levels for next year, which we will communicate shortly," a Dell Technologies spokesman said in a statement to CRN. "We have been very consistent that selling services is a ticket to the dance, but more than that, it’s a pot of gold for our partners, and we want them attaching more. We’re pleased with the progress, but there’s always more work to be done."

The quota reduction is driven by a change in the way Dell Technologies calculates discounts on sales, according to a top executive at one Dell Technologies Titanium-level partner who had been informed of the decision. "It used to be if there was a 'discount off' sale, it was only 'off' the hardware and software," the executive said. For Dell Technologies' current fiscal year, which ends in early February, discounts have been coming off attached services, as well, "and support numbers aren't where they should be because of that," he said.

Apart from the accounting change, the quota reduction illustrates a key challenge facing Dell Technologies' partner program, which is the result of the integration of two programs after Dell's $58 billion acquisition of EMC. Namely, that smaller Dell partners "status matched" into the new program's Titanium level find it difficult to meet the tier's lofty revenue requirements.

On top of that, services have been central to Channel Chief John Byrne's strategy, and Byrne has been adamant that partners attach services to every deal.

The $6 million services goal was going to be difficult to achieve regardless of the accounting change, partners said. A top executive at one Western U.S. Titanium partner who had recently informed Dell Technologies that his firm wouldn't hit the $6 million goal said he received word about the 50 percent goal reduction this week.

A top executive at an East Coast Titanium partner said he was half expecting Byrne to cut core revenue requirements, too. Many Titanium partners status matched into that tier despite annual revenue well below the tier's threshold face demotion to the program's Platinum tier, he said.

"I know what the services quota was all about and why it was important," the executive said. "They were big targets, and it makes sense for them to reduce it. I was waiting to see if they'd cut the core requirements, but it doesn't look like they're going to do that, and I think a lot of people are going to lose their Titanium status. A lot of people are not going to be Titanium next year."

Partners could reach the top tier in Dell's pre-acquisition program with $5 million in annual revenue.

The Dell Technologies program is broken into two tracks. In track one, the top-level Titanium tier requires partners selling a single product line to do between $50 million and $100 million in revenue. Track two requires top-level partners to bring in between $25 million and $50 million in revenue across two or more product lines.

In track one, a solution provider selling a single product line hits the Gold tier with between $5 million and $15 million in revenue. That partner can get into the Platinum tier with between $25 million and $50 million in revenue.

In track two, partners that sell one portfolio can make Gold with between $500,000 and $3 million in revenue. Moving into the Platinum tier requires partners to sell two or more product lines while booking between $5 million and $15 million in revenue.

Dell Technologies executives were aware of the challenge the aggressive new tier requirements presented to partners. Just as the integrated program was launched, Dell's Byrne said he and his team were playing matchmaker for partners they thought would be well-suited and would find it difficult to the program's revenue targets on their own.