Dell Slashes Partner Account Manager Ranks, Reduces Pay Level For Channel Reps

Dell Technologies’ channel partners are seeing an exodus of longtime partner account managers in North America, causing major concerns for many solution providers.

Dell Technologies has cut the number of partner account managers (PAMs) in North America, reducing the ranks of veteran channel managers and slashing the on-target earnings (OTE) for rep positions by as much as 30 percent, sources said.

Executives at multiple top Dell partners, all Platinum level or higher, told CRN they have lost highly respected, veteran partner managers that were best in class and have been replaced by PAMs with less experience who are being compensated at a lower pay level.

One top executive from a global solution provider said his company’s longtime PAM was recently terminated, while Dell’s specialty product sales rep assigned to his company was “coached out,” persuaded internally to take a different position.

“My PAM who worked and covered us for over 15 years got terminated last month. One of our product overlay reps took a new job and there’s going to be no backfill,” said the global solution provider top executive, who declined to be named. “Another product overlay rep is going to cover a region versus just being dedicated to us. … The Dell [PAM cuts] are big and broad.”

[Related: Dell Direct Sales In Conflict With Channel Partners]

Another executive from a top regional solution provider said Dell’s PAM coverage is shrinking. “Dell’s channel account coverage is definitely getting smaller, and the coverage teams that they’re providing the channel teams have shrunk–they’re consolidating for sure,” said the executive, who declined to be named.

The regional solution provider executive said there was a “big change” in coverage starting in the second half of Dell’s fiscal year, which began in August. “Our account manager, who we loved, got taken off of us and moved to a different coverage area. We have somebody else now, but our new guy is covering more partners than our previous person did, where I felt we got a lot of TLC, a lot of eyes on what we were doing and a lot of help. It doesn’t feel like we’re getting that with the new guy because he pretty much told us, ‘I’m covering a lot of partners,’” he said. “It feels like Dell is asking them to do a lot more coverage than before, and Dell has also reduced our specialist resources.”

The upheaval in the PAM ranks comes as some top-level Dell partners are looking at moving PC customers to HP and Lenovo in the wake of an effort by Dell to take more laptop and desktop sales in North America direct.

Key executives at multiple high-level partners have been advised by their Dell PAMs that pushing client deals direct instead of through solution providers is now one of Dell’s top priorities, the executives said (see related story).

Solution providers said Dell’s PAMs have been critical in helping grow business through account planning and quarterly business reviews.

“The question for Dell is are they sending the message to the channel that the channel reps aren’t that important anymore and that it is really about the entire end-user team?” said a top sales executive for a large national solution provider, who lost a critical PAM that was coordinating multiple opportunities with Dell line-of-business sales reps. “Our rep put plans together on how to grow the business.”

Executives from multiple top Dell solution providers told CRN the Round Rock, Texas-based company has also lowered the pay scale for remaining PAMs, cutting OTE—the potential, projected commission a salesperson can make if all targets are met—by 30 percent.

“A lot of managers have left because of that pay reduction, and now they are being replaced by cheaper inside sales reps,” said the CEO of a top Dell partner who spoke on condition of anonymity. “Dell has told employees the job is at a new, lower level of pay. It affects all partner managers.”

Having less-experienced PAMs in place could potentially stunt the growth of Dell’s channel business, solution providers said, noting that PAMs typically work as the liaison between a channel partner and the vendor, helping push deals and sales opportunities through the channel.

“The partner account manager basically is your biggest proponent that tell Dell’s salespeople, ‘Hey, you should work with this partner for these various reasons,’” said the global solution provider executive.

The top sales executive from a national solution provider said Dell has lost some talented channel reps who took buyouts because they didn’t want to take a 30 percent OTE cut.

“I think they underestimated who was going to take a buyout package,” “I’m worried that the reps that are staying don’t want to work that hard or are not that good and can’t get a job anywhere else,” he said. It’s a bad move.”

A high-ranking sales executive from another Dell channel partner, who did not want to be identified, said the partner manager reduction and the pay cuts are reverberating through the channel. “They have to find people to fill these jobs from within the company and are having a hard time because of the 30 percent salary reduction,” said the high-ranking sales executive. “Who is going to stay with a 30 percent salary cut? They are going to be left with ‘B’ and ‘C’ players rather than ‘A’ players.”

Executives Dell made available to CRN to address the issues did not answer point-by-point questions about the changes but said the company routinely reviews its operating models.

“We review our operational models regularly to ensure we’re optimizing and simplifying our engagement with partners, which we know is important to both our partners and our sales teams,” said Dell Global Channel Chief Rola Dagher.

In the same interview, Dell’s Cheryl Cook, senior vice president of Global Partner Marketing, gave a similar response to detailed questions: “We routinely look at our coverage and our operating model to ensure that we’re optimized for growth, but that we’re also positioning the adequate level of support to maintain the momentum and velocity that we’re all enjoying.”

Dell Technologies’ founder and CEO Michael Dell in a separate interview with CRN said channel partners are a critical part of the company’s ecosystem.

“As you think about the diversity of solutions and capabilities that we have, and that being augmented by the unique skills of our partners and their incredible reach, it’s an unbeatable combination. That’s why we’re winning in the market and continuing to grow share, so our channel partners are a hugely important part of our success,” said Michael Dell. “We spend a lot of time making sure that they’re engaged and understand all the capabilities that we have, that they’re trained up, we listen to their feedback, and they’re a critical part of our whole business ecosystem.”

Dagher and Cook highlighted the strength of Dell’s channel business in recent quarters, noting that channel order revenue in North American grew 25 percent year over year in the first half of 2021. In addition, over the past 12 months, Dell’s global channel business delivered $58 billion in orders.

Those figures do not encompass the month of August—the time frame when partners said they first began seeing the changeover in PAMs and reduction in channel coverage.

Some partners said the “drastic changes” in Dell’s PAM coverage comes as Dell Technologies is striving to cut operational costs before it spins-out margin-rich VMware.

Dell is set to spin out its 81 percent stake in VMware in early November. Although the two companies will keep a deep technical and go-to-market partnership, VMware will essentially become an independent company for the first time since 2004.

Dell’s total operating expenses climbed roughly $600 million year over year in its recent second fiscal quarter 2022, which ended July 30, 2021. Dell’s operating expenses rose from $6.02 billion in second quarter 2021 to over $6.61 billion, representing a 10 percent increase year over year.

This sizable increase in operating expenses led Dell’s net income to fall 20 percent year over year, from $1.1 billion in second-quarter 2021 to $880 million in second-quarter 2022.

“To increase margins in the short term [for Wall Street], they can drastically reduce their operating expenses and head count that corresponds to it so that they don’t get immediately dumped on during their first earnings statement post-VMware,” said the global solution provider executive.

Several key reasons behind why Dell is spinning out VMware are to attract new investors, simplify its capital structure and help Dell achieve an investment-grade credit rating.

“The implication of the spin-out is Dell has got to reduce their costs because they’re going to get exposed for being a very marginal, commodity-based hardware company, so they’re trying to rapidly reduce costs,” said the global solution provider executive. “They can no longer sort of hide under the fat of a margin-rich software company that they owned. Dell will have to be able to stand on its own two feet. Luckily for Dell, they’re the market-share leader of hyperconverged infrastructure and many of the storage and data protection platforms. But you have to win it on the technology, and you also got to do it in a relevant margin profile to be interesting to the street. … They’re going to be under a lot of pressure.”