Dell's dilemma
For many, Dell is synonymous with PCs. Bad results for the company reflect a general slackness in the market, Dell says — a reasonable excuse, were it not for the fact that its four closest rivals are picking up steam.
In its day, Dell revolutionised the industry, taking an axe to the dead wood of manufacturing and distribution. Don't build a computer and leave it in a warehouse until someone wants it: sell it first, then build it. Buy your components when you need them, not before. Get the customer to configure the machine online. The results may be dull, but they're cheap and they work.
It was a bold and effective strategy. It embodied all the attributes IT itself was supposed to have — efficiency, aggression, innovation — and, like much IT, it lended itself to being copied. Dell, which has for so long prospered by letting others take the risks and then repackaging the successful ideas, now suffers from the others doing the same with its own business model. What's more, they're doing it better.
There are problems that need to be fixed quickly. Pre- and post-sales support is frequently disappointing; when buying, it's often hard to navigate the options and end up with only what you wanted and nothing more. And despite Dell acknowledging problems with its outsourced support some time ago, the complaints continue. With everyone offering similar commodities at similar prices, it doesn't take much of a dent in a reputation to seriously damage sales.
In the longer term, Dell must remember how to innovate. With the Alienware acquisition, it has shown itself willing to explore niche markets. It should do more along those lines: with Linux desktop software and online services maturing, there's room for low-cost, high-performance computing that doesn't rely on the old Windows way of working. As Apple is so spectacularly proving, the appetite for non-Microsoft products is a long way from being satisfied.
It's far too early to write Dell off. It's still number one, and it's been there for a long time. But if it wants to squelch the growing suspicion that it's no longer master of its own destiny, it will need to come up with a new way forward that's not just more of the same old. Time to ditch the dull.