Dell Launches Itself, 2.0

Dell says it has hit the reset button on its business.

The Round Rock, Texas, PC maker, which has been battered by sagging financials—in part, the result of customer satisfaction problems—a probe by the Securities and Exchange Commission and questions about the leadership of CEO Kevin Rollins, has embarked on a companywide effort, called Dell 2.0, to put itself back on track.

The plan, detailed at the companys Sept. 12 Technology Day here, aims to simply offer customers more of what they want. Whether customers want Advanced Micro Devices processors, improved product design, or more responsive service and support, Dell says it will offer them all. The company expects the changes will put it back in customers good graces and thus return it to a more historical growth pattern when it comes to revenue, profit and unit shipments.

"The Dell experience is the No. 1 priority of the company. It is where we are going to invest this year and for the long term to provide the best customer experience, bar none," Rollins said. "We know that when customers are happy and we meet their needs … the revenue of the company continues to expand."

To that end, Dell introduced two AMD-based Dimension desktops at Technology Day and will offer servers with a choice of two or four AMD Opteron chips. Dell also is revamping its professional services for large customers and its technical support for small businesses and consumers who, it says, have been frustrated by being transferred among support techs.

But Dell, which has been criticized of late by some corporate customers, will have to work to convince them that Dell 2.0 is more than a marketing statement.

To be sure, customers wants can be a moving target. At one time, simply offering aggressive prices directly to customers sufficed. Dell rapidly acquired new customers and grew into the worlds top PC maker. But, now, several Dell customers said that, beyond low prices, they also want technological innovation and more proactive support from Dell.

"Dell really excelled at commoditizing the basic stuff, making it cheaper and having a great service angle," said Lew Moorman, senior vice president of strategy and corporate development at Rackspace Managed Hosting, in San Antonio. Rackspace, which maintains more than 17,000 servers, is a large Dell customer. But it recently turned to Hewlett-Packard for AMD Opteron-based servers after lobbying Dell to bring Opteron servers to market.

Moorman said he fears Dell has lost its edge as competitors such as HP have cut costs and lowered prices while continuing to spend on R&D. Moorman added that he sees a technological and innovation gap between a cost-focused Dell and a more engineering-driven HP that, if not addressed, could slot Dell into an indefensible middle ground where its products are less innovative and its prices no longer stand out.

"The whole idea of the direct model is to listen [to customers]," Moorman said. "To me, [Dells decision to launch Opteron servers late in 2006] just happened so late in the game. It made me question a little bit: Are they really listening?"

Indeed, low prices just dont go as far as they once did, said Tom Miller, senior director of IT at FoxHollow Technologies in Redwood City, Calif., and an eWeek Corporate Partner. "Dell does a good job on pricing," Miller said. "But when you go beyond pricing, what else is there?"

Rollins, in his address, said Dell has listened to concerns about processors, tech support and even product design.

One thing the company has made an effort to respond more proactively to is energy efficiency, Rollins said.

Dell, he said, designed its new OptiPlex 745 corporate desktop, launched Sept. 12, with the feedback of IT managers. The OptiPlex 745, which is based on Intels Core 2 Duo processor, runs quieter and uses as much as 70 percent less power than its predecessor. It also includes a new Dell Client Manager tool that centralizes management functions such as software patch management.

However, the new Dell 2.0 initiative is likely to be a tough sell for the company to both customers and analysts, many of whom believe Dell should be taking additional measures. "I wanted more details on specific strategies—sort of a bigger vision," said Richard Shim, an IDC analyst in San Mateo, Calif., following Rollins presentation in New York.

Given Dells troubles of late, Shim said analysts want to know, "Is that a sign that the [Dell direct sales] model is broken or that it just needs tuning?"

Indeed, Rollins and Dell Chairman Michael Dell offered few additional details, other than mentioning plans to continue working with suppliers; open new factories in areas such as Eastern Europe; and, while keeping its direct sales model, continuing to explore strategies that will augment it.