Dell: Give our transformation time

Dell: Give our transformation time

Summary: It took IBM a decade to transform from a hardware giant to a software and services juggernaut. Dell is in year three or four, says the company's services chief.

TOPICS: Hardware, Dell, Servers

A Dell executive batted down questions about the company's strategy to transform into a software and services giant and said investors need to give the transformation time.

Steve Schuckenbrock, president of Dell's services unit, said it took IBM a decade to transform from a hardware-centric company to a so-called "solutions" outfit. Dell is in year three or four of its master plan.

The Dell services chief said:

First, the Company has changed dramatically over the course of the last 5 or 6 years. If you think about -- we had about a $10 billion enterprise and services business, five years ago, and now it's about a $20 billion business as we sit here today. And the growth momentum of that business is significantly changing the mix of the Company, where now 34% of the business is revenue from services and the enterprise business, and a little over 50% of the profit comes from those two areas.

So that is a good indication that our strategy is working and we are beginning to see the mix shift that we look to. Obviously, we want that to be the majority of the Company from a revenue standpoint as we project out into the future.

When you consider all of the elements of the transformation -- acquiring and integrating companies, investing in our own IP and R&D capabilities, which we are now investing quite heavily in relative to anything we've done in the past; shifting the culture to a solutions culture versus a transactional culture -- all of these are really important pieces of work that I think are just taking the time that they take.

If you look back to any analogues like this in the past -- not to say that we are trying to emulate any of these other companies. But if you look at IBM, it was a 10-year transition, really, from a hardware company to a solutions company. And we are in our third or fourth year. I would characterize -- you ask a five-year question. I would characterize the first couple of years as really kind of a turnaround of some basic blocking and tackling that needed to be done in the business. That went quite well; certainly able to get the margins up and do a lot of positive things in the Company, and the last two or three years have been really focused on this transition to a solutions company.

Dell's challenge in the short-term is that it still is a PC-centric business and has to navigate bring your own device as well as Windows 8 demand and tablets. The big question is how long Wall Street will wait for Dell to transform.

Related: Dell, HP and the folly of the consumer PC business

Topics: Hardware, Dell, Servers

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  • They're in trouble

    If Dell plans to become more service oriented, they could be in big trouble. If you buy their hardware and need support, you end up in an overseas call center that couldn't be less competent or accommodating or more rude to its callers.
  • NEED: something shiny and sparkly...

    When compared to the other Big Boys, Dell does not have a history of product invention or any prominent product innovation; the company started out as a PC builder of someone else's components and has, when all is said and done, just supersized that model to include services and products invented and incubated by someone else. Can anyone think of a tangible, recognizable product invented by Dell? I can't.
    There are analysts who say that, despite their current woeful state, HP is in a better position to rise from the ashes and hold investor's attention, because their legacy of product technological innovation suggests they're still capable of building something that no one else has, yet. Dell's efforts at R&D had better produce something that people cannot afford to ignore, if long-term viability, much less sustainability and growth, is the end game.