Tom Miller has been keeping a close eye on Dell for years.
The senior director of IT for Fox??ÃHollow Technologies, a cardiovascular health products company in Redwood City, Calif., Miller has been a longtime Dell customer. His company of about 600 employees is standardized on Dell servers and PCs.
And Miller has watched as Dell over the past year has rolled out innovations, embracing technologies that it historically has kept away from; a revamped management structure; and new services offerings. Most recently, the company hinted it may more fully jump into the channel. All this is happening under the guidance of Michael Dell, who retook the CEO reins in January after Kevin Rollins resigned.
Like other customers and analysts, Miller understands the moves Dell is making, but he said the company has some distance to go. He said Dell continues to struggle to address the pain points he experiences with mastering operational excellence and compliance. After a while, Miller said, price-Dells traditional trump card-matters less and less.
“What we are continuing to look for is Dell not just providing products at a competitive price like its rivals, but at what Dell can provide in terms of a whole enterprise solution that addresses the customers needs,” said Miller, who is also an eWEEK Corporate Partner. “Im less concerned about the announcements. What I want to hear is how Dell is going to differentiate itself from its competitors.”
Addressing customer problems is a key focus of the moves Dell has made over the past year, said Kevin Kettler, chief technology officer with the Round Rock, Texas, company.
“As weve reflected back here in the last six to nine months, theres a lot more in front of us that we can engage and address,” Kettler said. “We are moving to a solutions orientation for our customers. It isnt a conversation about the underlying technology these days. Its around a set of problems they have, a set of pain points they have.”
That focus comes at a time when Dell is trying to regain its footing in the industry. The company lost the top spot in the global PC market to Hewlett-Packard in the third quarter of 2006, and its share has continued to decline. IDC said Dells market share in the first quarter of this year slipped 6.9 percent. HPs share increased nearly 28 percent. The Securities and Exchange Commission also has launched a formal investigation into Dells finances and accounting, which has hampered the companys ability to release its quarterly earnings.
Dells responses have been varied. The company now offers chips from Advanced Micro Devices in its hardware, and this month announced it will offer consumer desktops with Ubuntu Linux preinstalled and will support the interoperability agreement between Microsoft and Novell. Dell also is venturing further into services, such as with its Data Center Solutions division, which helps businesses design and deploy data centers.
“Historically we have products that would be available to those people configuring data centers,” Kettler said. “Now we are doing custom design for those data centers as required to. … That is new for Dell. The company is moving from build to order to design to order.”
He said Dell is taking a more holistic view of its offerings. “When we talk about these things, we talk about hardware, software and services,” Kettler said. “You can expect us to offer changes in that space as well. “
Analysts and customers said they believe that Dell, especially with Michael Dells day-to-day leadership and a new executive team in place, can bounce back, although the company will have to push itself.
“I dont think its [a question of] if Dell will get back on its feet; its more a question of when will Dell get back on its feet,” said Samir Bhavnani, an analyst with Current Analysis West.
Next Page: Rethinking the direct-sales-only model.
All this comes as Dell might make the most dramatic change of all: rethinking the direct-sales-only model. In a memo written to employees that found its way into reporters hands, Michael Dell and his new management team hinted the company had reached a crossroads. “The direct-sales model has been a revolution, but it is not a religion,” Dell wrote.
FoxHollows Miller said he supports the direct-sales approach and Dells ability to deliver products at a good price. Its not a well-kept secret that Dell already has a channel program. The company formed its Solution Partner Direct program about two years ago and has been actively recruiting channel partners since that time.
Many solution providers already do business with Dell, although few talk about it publicly. Some say their customers are often the impetus behind Dell deals. The customers believe they are getting a better deal with Dells lower prices, so the VAR ends up dealing with Dell. But the VAR ends up picking up the pieces when customers deal with what many say is Dells abysmal level of customer service.
One VAR who deals with large customers said Dell has stepped up its recruitment efforts in the last few months. The VAR, who asked not to be identified, said the leaked memo from Michael Dell actually trailed such channel sales efforts, which were well under way.
However, just the idea of Dell creating and publicizing a solution provider channel raised the ire of some VARs, who questioned whether resellers could ever trust a company they say undercuts them.
“No matter how many times a wolf tells you its going to be a nice sheep, its still a wolf,” said Tony Stirk, president of Iron Horse, a Springfield, Va., VAR. However, Stirk said he still thinks there are ways to work with a company such as Dell. “Some of us couldnt care less if we got to do the installation and service work,” he said.
Non-VAR observers say Dells efforts to fix itself must go deeper than just the channel. Known primarily as a PC maker, Dell has found itself in a market with razor-thin margins. While rival systems makers such as HP play big in other spaces, such as servers and storage, Dell has remained primarily a PC business.
Indeed, Michael Dells leaked memo mentions that the company is looking at the data center as a source of diversification, although some industry observers, who requested anonymity, said Dells expertise beyond the PC is nonexistent. If it wants to be in the data center, Dell may find itself as a reseller of someone elses technology, or it may need to acquire another company that plays in that space, they said.
Dells strength has not been technology innovation. For example, the companys R&D budget for the fiscal year ended Feb. 3, 2006, was just 0.8 percent of revenues. As with other systems companies, that number was lower than in previous years. That is in contrast to HPs R&D budget, which was 3.9 percent of revenue for the fiscal year ended Oct. 31, 2006.
“Dells approach to innovation has been a market leadership position. … Weve chosen to deliver in terms of innovation using a different model than the rest of the industry,” Kettler said.
Lew Moorman, senior vice president of strategy and corporate development at Rackspace, in San Antonio, said he is interested in what Dell will do to innovate, since the company has lagged behind HP in R&D. Still, the changes Dell is undergoing show that the company can rebound, Moorman said. “It shows at least that there are no more sacred cows over there anymore,” Moorman said. “I think Dell has really incredible ideas, and Michael Dell and his new team seem to be looking at some fresh ideas and a new perspective.”
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