I’ve been tracking and writing about Dell since the late 1990s, when Dell was riding high on its success in essentially reinventing the PC and x86 markets with its direct and efficient supply chain model. Over the years, I have watched Dell go through several fits and starts as it struggled to move past its traditional hardware and product-centric comfort zone.
Fast forward to 2010, when I attended Dell’s Solutions for a Virtual Era industry analyst event, where Dell first outlined its new vision to move from a product-centric to a solutions centric company. By the 2011 conference, Dell had put some more meat on the bones, highlighted by several acquisitions that leveraged cloud computing, remote services, and an expanding services play. Here are some of the things I heard this week that shaped my impression of Dell’s progress.
- Focus on the midmarket. Dell’s acquisitions over the past year have continued to reflect this strategy. In addition, Dell’s newly minted Software Group has the potential to build on Dell’s vision of providing “end-to-end” solutions that are modular and configurable for small, medium or large business needs. But, as Dell scales solutions up to satisfy the needs of larger companies, the challenge will be to also scale them down for smaller ones. Large customers can exert tremendous control, and make it all too easy to divert resources away from SMB needs. Dell needs to proactively include and plan for small business requirements from the get-go across solution areas to make this commitment stick.
- Services and solutions growth. Enterprise services now account for 30% of Dell’s business, and have doubled over the past five years. This means Dell is successfully changing the conversation from products to solutions, and that customers view Dell more as a trusted partner and less as a commodity vendor. The best proof points here were the Dell customer stories from Current Motor, which makes electric scooters; Pixomondo, which won an Oscar for visual effects, or VFX, in Hugo; and Blackbaud, which develops cloud solutions for non-profits. These companies see Dell as an end-to-end IT solutions vendor, and as a partner that can help them use technology to disrupt and create competitive advantages in their markets. Show these guys and others like them off at every opportunity! In addition, I’d like to see Dell offer things such a cloud-based, turnkey infrastructure management (including mobile) for SMBs, or a service to help them manage their social media activities. IT expertise and staff are scarce in most SMBs, and Dell can fill a big gap with these types of offerings.
- Filling the gaps to reshape the company. The focus is on stringing together innovative, successful and manageable acquisitions (especially when compared to HP’s seemingly ill-fated Palm and Autonomy debacles). It’s impressive that many of the companies that Dell has acquired, including Boomi, Compellent, SecureWorks and KACE, are growing faster now than they were on their own. It’s also a good sign that Dell is significantly boosting R&D spending. That said, it would be great to see Dell place a few bets to create an early mover advantage in newly emerging areas so that it can shape a market from the ground up.
- Taking a channel-friendly approach. One company can rarely do it all in terms of providing end-to-end solutions to SMBs. But building, growing and nurturing the channel is never easy–especially for a vendor who pioneered the direct sales model in the PC industry, and whose first priority is to bring greater efficiency to the market. But I think that Dell is really moving the needle here, based on the evidence that Dell’s channel has grown to more than 100,000 partners and that $14 billion went through these partners last year. And, Dell is creating some innovative new programs, such as a social media training program to help give its partners an edge. Dell will also need to create targeted strategies to woo partners that can add value in vertical markets, new geographies, and in hot solutions areas such as mobile, business intelligence, social and cloud.
- Listening to the voice of the customer. Dell has brought corporate listening to a new level. Whether crowdsourcing new product ideas via IdeaStorm making this year’s analyst event much more interactive based on our feedback from last year or conducting extensive customer surveys for input, Dell is listening. Dell is acting on this input as well: CMO Karen Quintos told us that Dell has incorporated over 450 ideas from IdeaStorm into Dell solutions. In addition, 88% of Dell team members understand how important Dell employees are to the Dell brand and their role in listening to customers. The customer-centric mindset that Dell team members have could prove to be one of Dell’s biggest assets in an increasingly social and transparent marketplace.
- Tackling consumerization on the client side. In an era of consumerization, mobile devices and bring your own device, Dell is in a tough spot. Building clients with enough consumer appeal that “prosumers” will prefer them won’t be easy. Unlike Apple and now Google, Dell can only control the hardware design. Arguably, Dell’s new Ultrabook XPS 13 is more physically elegant than a MacBook, but is that enough? The question remains, how much exponential innovation can Dell bring to bear when it doesn’t control the operating system or developer ecosystem? Obviously, Dell will face the same challenges in the tablet and phone markets. Unless it can find a way to create breakout differentiation, this will continue to be one of Dell’s most vexing challenges.
- Developing an internal IT strategy that maps to Dell’s external goals. Sanjeev Aggarwal and I met with Dell’s new CIO, Andi Karaboutis, and were impressed with her disciplined approach to ensure that Dell’s systems can support Dell’s new end-to-end solutions business model. It’s not easy to change systems to accommodate the new workflows required for service solutions. But she seems to be making great progress, and is using a lot of the technology that Dell has brought in via its acquisitions. This approach should stress test these solutions–and Dell’s success in using them is a great marketing testimonial.
I don’t think that market perceptions have quite caught up with the progress that Dell has already made. Dell should accelerate the shift by making sure that all of its customer-facing channels–from web site to ads, Facebook page to sales people, fully reflect the Dell of today.
The net-net is that while Dell clearly has some challenges ahead, the event left me with the impression that Dell’s transformation is well under way.
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