Dell Lays Bare OEM Ambitions

Tuesday Apr 3rd 2012 by Michael Vizard

System builders may need to reconsider business models as server platforms gets more intricate

Rather than compete against commercial vendors many "white box" manufacturers shifted their focus to custom systems. As opposed to selling PCs and servers directly against Dell and Hewlett-Packard, they determined it was more profitable to build systems for specific vertical application areas such as healthcare.

Of course, that’s a business that commercial vendors also covet, so it should come as no surprise that after formally embracing the channel Dell would begin targeting the custom systems market. Dell today announced the an OEM Partner Program that places Dell at the center of building OEM systems and working with channel partners to find applicable markets. The program is divided into to two core components. An OEM Channel Partners program focuses on solution providers that want to participate in the program, while the OEM Solution Partners is where Dell will act as a clearinghouse through which third-party manufacturers can work with Dell to market their products to Dell OEM channel partners.

According to Ron Pugh, executive director and general manager for Dell OEM Solutions, Dell is trying to create a "one-stop" shop for channel partners that want to create custom systems based on Dell equipment that eliminates the need to test and validate third-party products that are compatible with Dell systems.


As Dell gains more credibility in the channel it’s only natural that the company would branch out into the custom systems space. The question that many builders of custom systems will need to ponder is whether it’s in their interest to work directly with providers of core components such as motherboards or if it makes more financial sense to base their efforts on systems that have been built by Dell.

Given the manufacturing muscle that Dell brings to that equation, many system builders may find that the better part of pricing valor is customize base systems from Dell rather than continuing to build every system from the ground up. That’s especially relevant in an era of virtualization and cloud computing where the complexity of building servers that function like "private clouds in a box" is increasing. Rather than simply leveraging motherboards to build servers, system builders now need to master virtual networking and management technologies that customers are increasingly expecting to be baked into the platform.

Of course, there are going to be custom system scenarios where the level of intellectual property being applied requires the system builder to build systems from scratch. But there are plenty of scenarios where the economics of building those systems from scratch don’t make as much financial sense as they once did.

The concept that many solution providers will have to get used to is whether they trust Dell or any other commercial systems vendor. Customers of custom systems are not easy to come by, so the loss of any one customer can be devastating. In addition, custom system vendors are likely to be concerned about the level of support that may be provided. Nevertheless, there are more than a few that will view Dell as a strategic partner that allows them to compete more cost effectively against rival custom system builders, so whether Dell is a friend or foe will basically come down where custom system builders think their value proposition will be provided in the years ahead.

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