Dell's pact with IBM: The big deal that isn't

After making this big services deal with IBM, I just have to wonder, What's going to keep Dell around anymore anyway?The new goal at Dell must be to become the low-margin hardware source for one of the few companies that has a hope of making money over the next 10 years, IBM Global Services.

After making this big services deal with IBM, I just have to wonder, What's going to keep Dell around anymore anyway?

The new goal at Dell must be to become the low-margin hardware source for one of the few companies that has a hope of making money over the next 10 years, IBM Global Services. Needless to say, direct marketing of PCs to the corporate buyer is probably dead, or, at the very least, has hit its peak. IBM will become as big a source for Dell sales as the phone and Web are today.

If you can't tell by now, I don't think this type of deal, or any of the other services deals Dell has made in the past few months, will do anything to help the company grow over the long haul. In fact, the strategy could work to hurt business.

Certainly, having the weight of IBM Global Services behind a product will make Dell hardware a more compelling buy to customers searching for enterprise solutions. It dovetails nicely with all that IBM technology they are buying. Without the IBM technology, Dell would remain stuck delivering midtier boxes. Without the IBM services, Dell doesn't really have a means of delivering enterprise-class hardware to customers.

The problem in this deal for Dell becomes failure to make contact with the customer on some pretty important deliverables: integration and support. The one thing that Dell does really well—getting the box in the customer's hands on time and at a great price—is important, particularly compared with the competition. However, the impact of price on customer satisfaction diminishes every year as competition erodes margin for everyone. The way to impress customers will be through service and support.

With IBM calling on enterprise-level accounts, will customers be thinking of IBM or Dell when it comes time to make the next round of enterprise technology purchases? If I just saw IBM integrate Dell hardware into my infrastructure successfully, I'd ask IBM for input prior to making my next purchase, before I asked someone at Dell. Will IBM recommend Dell hardware before someone else's? I don't think it will, unless IBM is getting a cut.

Dell and other PC manufacturers are falling into this trap of thinking that providing services will create brand affinity. It will, only not to the brand they hope it will. Dell's Internet access and online backup services are perfect examples. Dell offers Internet access to its "portal," Dellnet.com. Dellnet.com, in turn, should create affinity through value-added services such as @Backup Corp.'s @Backup, which allows users to back up their data over the Web. For an online backup service, @Backup definitely delivers value, so buyers will be thinking about the service, not Dell.

The FUD factor works in Dell's favor. Users will likely worry about getting access to their data should they leave Dellnet.com. A more positive view on the service would be that Dell could actually leverage the service to deliver a PC, with preloaded applications and data to your doorstep.

@Backup isn't doing an exclusive deal with Dell, though. The company has similar deals with Gateway, Toshiba and even software vendor Intuit.

What do you think will happen to Dell when Gateway signs a service deal with IBM? Write me at michael_caton@zd.com.

Newsletters

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
See All
See All