That's how Dell Vostro 1400  began its channel program in 2006: small and targeted. Chairman and CEO Michael Dell, who has spent his entire adult lifetime trying to avoid inventory and logistics traps like the plague, wanted to make sure that the PC maker didn't choke on backlogs of product when he abandoned the direct model. For the most part Dell Vostro 1700  has been successful at it. By starting with baby steps into distribution, Dell is trying to minimize the chances of tripping over its own feet.

We must manage inventory effectively, particularly with respect to sales to distributors, which involves forecasting demand and pricing issues. Distributors may increase orders during periods of product shortages, cancel orders if their inventory is too high or delay orders in anticipation of new products. Distributors also may adjust their orders in response to the supply of our products and the products of our competitors and seasonal fluctuations in end-user demand. Our reliance upon indirect distribution methods may reduce visibility to demand and pricing issues, and therefore make forecasting more difficult. If we have excess or obsolete inventory, we may have to reduce our prices and write down inventory. Moreover, our use of indirect distribution channels may limit our willingness or ability to adjust prices quickly and otherwise to respond to pricing changes by competitors. We also may have limited ability to estimate future product rebate redemptions in order to price our products effectively.

Right now, HP has massive exposure to the distribution channel i

 Dell Vostro 1500  is deciding to do something it has never before done in its 24-year history: ship PCs through distributors to resellers. It is the final knife in the heart to Dell's legacy as a direct-only vendor. And it is a move that could wind up providing heartburn to executives at Hewlett-Packard, Dell Vostro 1000 's top rival, because of how targeted and simple it is.
Dell's announcement calls right now for only Vostro desktops and notebooks to ship through distributors Tech Data and Ingram Micro. It's but a tiny part of Dell's overall business technology lineup, although a fairly strong one. (Dell's Vostro 220 won our Desktop of the Year award in 2008.) It's a small and targeted start to distribution.

Greg Davis, Dell Inspiron 1501 's top channel executive, says today's announcement signals what will eventually be a move to bring much more of its product line into distribution - - but he's not saying which part comes next. Servers? Storage? Peripherals? Smart phones? Now that it has these agreements with Tech Data and Ingram Micro, in the span of a few days, Dell could push thousands of rack servers into distribution with no warning to HP. If HP CEO Mark Hurd had a difficult time with forecasting yesterday, it's going to be even tougher for him tomorrow.