Dell might be trying to evolve from simply being a box maker to becoming an enterprise IT solutions and services provider, but it doesn’t mean the company that made its name by selling PCs is moving too far away from its client roots.
Over the past several years, the giant tech vendor has spent billions of dollars buying dozens of companies to help build out its capabilities in such areas as networking, storage, security, software and the cloud, and then working to integrate all of it into solutions it can offer customers.
However, even during the obstacle course last year that was founder and CEO Michael Dell’s eventually successful $25 billion bid to buy his namesake company and take it private, he continued to reiterate that a priority of the company once the deal closed would be to continue to invest in the client business.
That was on display earlier this month during a two-day event at the vendor’s Round Rock, Texas, campus, where executives unveiled significant advancements in its Precision workstation portfolio, including the introduction of its virtual workstation strategy and the Precision M2800, an entry-level 15-inch mobile workstation.
The event, which was attended by dozens of analyst, journalists, partners and customers from around the world, illustrated the importance of the client business to Dell and its enterprise ambitions. It was a point driven home by Jeff Clarke, vice chairman of operations and president of client solutions at Dell, during an interview with eWEEK at the Dell campus.
“You look at our small business customers, our midsize business customers, our large customers—two out of three of our new customers … start with a purchase of our business notebook or our business desktop,” Clarke said. “The relationship begins with the device on the edge, so with the belief that we want to acquire more customers, which I’ve said publicly, which Michael has said publicly, is what we’re trying to accomplish … it puts the PC business front and center on the commercial side to go and acquire more and more new entrants into the Dell family.
“We’ve talk about that publicly, how getting and winning confidence with the notebook and desktop … will then let us sell the server, the storage, networking, services, software into that account, and over time, building a deeper relationship is what we’re all about.”
Dell, like other tech vendors such as Hewlett-Packard, Intel and Microsoft, has been hit hard over the past two-plus years by the contraction in the global PC market, as users turn more of their attention to smartphones and tablets. Like those other vendors, Dell is looking to grow its reach in the industry. A couple of years ago, as the vendor was busy buying companies to build out its enterprise portfolio, it drifted away from focusing on clients, Clarke said The result was several quarters of revenue declines in the client business. However, over the past two years, Dell has refocused its efforts in the client space, refreshing its OptiPlex commercial desktop and Latitude business notebook lines, growing its Precision workstations and being aggressive with pricing, Clarke said.
“I think what you’re seeing is that the tone and the tenor is much more balanced on the edge of the network—the PCs—all the way to the back office, with storage servers, network, services and software, to build solutions for customers, and that’s where we’re moving,” he said. “Fifteen months ago, before we made the change, you’d have seen a fairly significant decline that was about seven quarters in the making of losing share. We’ve changed that tide,” with much of the growth coming on the commercial side.
Dell Exec: PCs, Workstations Are Key to Enterprise Push
When Dell announced its financial earnings in August 2013, before it went private, the company’s End User Computing unit saw a slight bump in revenues for desktops and thin clients, but a decline in mobility sales.
The company over the past year has worked to establish its commercial products “around our built-for-business platform, and built for business to us means the most secure, the most manageable, the most reliable notebooks, desktops and workstations,” Clarke said.
During the Dell event, he and Pat Kannar, product marketing director of Dell Precision workstations, spoke about the effort behind differentiating Dell’s client offerings from those of rivals Lenovo and Hewlett-Packard, saying it’s a combination of the hardware, Dell’s own software capabilities around management and security— such as Reliable Memory Technology for improved uptime, Dell Precision Performance Optimizer for greater application performance and CAS-W for caching—and the work it’s doing with software partners to optimize the hardware for their applications.
Ed Caracappa, director of global sales and business development at Advanced Micro Devices, told eWEEK he has seen Dell over the last two years become more focused on the user and enabling the applications they’re running on the workstations, a move that has helped the tech giant in the market and made it easier for companies like AMD to work with it.
Dell also is trying to make it less expensive for businesses to embrace workstations, Dell’s Kannar said. Many organizations opt for less-expensive, high-end PCs to run their compute-intensive applications rather than make the financial leap to workstations, which tend to offer faster server processors and better graphics capabilities. Dell’s new Precision M2800 comes with a starting price of $1,199, closing the price gap between entry-level workstations and high-end PCs and hopefully expanding the customer base for workstations.
“[Dell is] trying to bridge that gap between individuals who [go for] affordability and choose to buy a traditional system like a Latitude or a consumer system,” Kannar said. “It’s a great opportunity for us now to grow that market rather than just relying on its own organic growth.”
It also helps that Apple, whose computers have been a favorite of creative users, is turning more of its attention to the mobile space, he said. Among those attending the Dell event were some “switchers”—users that went from Apple systems to Dell workstations.
“Fortunately for us, Apple is growing in a different direction … where they’re not necessarily taking those [creative] professionals as seriously as they have in the past, which creates a beautiful opportunity for us,” Kannar said.
Roger Kay, principal analyst with Endpoint Technologies Associates, said he understands to some extent Dell’s reasoning for keeping some of the PC business—for example, having such a large business helps keep component prices down, which helps it compete with the likes of Lenovo. However, Kay said Dell should consider doing something more to lessen its exposure to the fickle PC market, like ridding itself of the consumer line. Enterprise PCs still offer OEMs big volumes and steady profit margins.
“The thing I detect is that … it’s a little more personal and a little less rational,” he told eWEEK. “I think it’s just that Michael Dell likes PCs. It’s what he grew up on.”