| | By Mick James
Many years ago, when
I was an IT journalist,
a senior colleague
returned rather
shamefacedly from a
press conference to
launch a new player in
the UK PC market. He'd
been chatting away to
one of the marketing
team, and trying to
brush away the
fresh-faced young
employee who kept trying
to butt in on the
conversation. If I say
the company was Dell,
then you can guess the
punchline – the young
man was founder Michael
Dell, taking what was
then considered to be
the incredible gamble of
launching his direct
sales model outside the
US.
It's hard to remember
now how revolutionary
Dell's irruption into
the market was back
then, when you could
pick up a PC in
Woolworth's or get one
on the web with a few
keystrokes. Compaq might
have broken IBM's
monopoly on corporate PC
sales but it was Dell
that really put the
personal into PC –
anyone could have one.
But that's the problem:
Dell may be ubiquitous
as a PC manufacturer but
it no longer stands out
from the crowd, and the
market has punished it
harshly with a long-term
decline in share price.
Some of the actions that
Dell has taken to remedy
this have made headline
news – the return of
Michael Dell as CEO, the
reductions in headcount,
opening of new retail
channels to the consumer
with the likes of
Wal-Mart and Tesco.
Less well publicised
are Dell's activities on | |
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| | to be disruptive and
there's a profit excess.
For 20 years services
have been delivered with
the same methodology and
approach."
For example, Dell
believes there is the
opportunity to offer
"factory services" in
areas such as
application packaging.
Typically a labour
intensive, on-site
operation, Dell aims to
replace this model with
small, on-site teams
backed up by a "factory"
in India, radically
reducing cost. Another
area is remote
management – outsourcing
not the data centre but
the management of the IT
infrastructure.
"Remote management is
very attractive for
financial services
companies who are not
allowed to have their
data outside their
territory," says
Argouges. "But it also
makes a lot of sense for
the SMB (small-to-medium
business) market, where
to transfer your assets
to another data centre
is very complex and
involves a lot of legal
issues."
In both of these
cases Dell is building
on acquisitions to take
IP developed in local
markets to a global
scale.
"We are looking for
companies to acquire
with both skills and IP,
focusing on small
companies that are very
well-recognised in their
markets," says Argouges.
"Then we use their IP as
part of our global
platform."
The double
opportunity for remote
management, SMBs and
global financial
institutions, highlights | |
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| | another interesting
aspect of Dell's market
position. It is pretty
much unique in covering
all segments from large
corporates and the
public sector through
SMBs to the consumer.
SMBs, as a highly
fragmented market,
represent a particular
opportunity.
"By addressing SMBs
we are also being very
disruptive in that we
are different from the
local services provider
that has the proximity
to the customer but not
the scale," says
Argouges. "Even if you
are not a very large
SMB, say 50,000 people,
you might still need to
simultaneously migrate
1,000 people in Belgium,
France, Italy and Spain.
There's a very effective
cost advantage to
working with Dell."
Dell's consulting
activity is also set up
in an unusual blend of
an insourced and
outsourced model. Rather
than employ a large
field force, the company
has a core of around 500
systems architects and
project managers who
take on the high-level
design, consultancy and
implementation. Delivery
is undertaken by a
network of local
partners, who are
nevertheless more than
sub-contractors.
"It's a very
innovative model of
joint investment in
training and support,"
says Argouges. "Our
partners really are an
extension of our
organisation. Some are
large global partners we
already use for support
but the majority are
small niche players –
they are getting access
to contracts they would | |
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| | never otherwise
address."
Argouges is also
using this model to
build partnerships with
some of the large
systems integrators such
as Atos and Accenture.
"For the large
integrator it's much
more simple to work with
Dell than with HP and
IBM, which also have the
application and
application management
services," he says.
"It's really a rational
fit. They are not
interested in
installation and get
access to our services."
By pushing into
services Dell is not
creating a separate
business. The company
maintains a single P&L,
and customers will still
interact through a
single Dell salesman.
The move does seem to
offer significant
opportunities both to
increase services
revenue with existing
customers and increase
the hardware market
share by reaching out to
new customers with a
more in-depth solution.
And (as I have long
argued in these
columns), the SMB sector
is ripe for
exploitation. So an
intriguing move for
Dell, but Argouges
insists, one that is
well within the
tradition of the
company.
"Our objective is to
simplify IT and
services," says
Argouges. "That's always
been the main message of
Dell: the simplification
of IT."
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| | the corporate front,
where it still enjoys
sizeable market shares.
What has been happening
has been a quiet but
steady push in services,
which now account for
around 10% of revenue.
Some might think Dell is
a little late to this
party, but according to
François Argouges,
director of Global
Infrastructure
Consulting Services for
Dell EMEA (Europe, the
Middle East and Africa),
the move is very much
aligned to the more
general trend in the
marketplace. Last year
the services division
grew by more than 90%,
mainly through targeted
acquisitions.
"Our strategy is
really to provide
solutions for the
enterprise market,"
explains Argouges. "But
we are focusing purely
on infrastructure, not
the applications level
or the business process
level."
This means that Dell
is very much not
offering a "me-too"
model which will compete
head on with the likes
of HP and IBM – the
intention is rather to
be disruptive.
"At Dell we aim to be
disruptive either by
delivering a new model
to the market or in the
offering itself," says
Argouges. "Michael Dell
has said that he only
wants to go into a new
market if it's large, if
there's an opportunity | |
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