Dell cribs services playbook from larger rivals

Dell is beginning to sound a lot like IBM, HP, EDS or any other technology services provider. The big question is whether it'll succeed at running infrastructure for customers.

Dell is beginning to sound a lot like IBM, HP, EDS or any other technology services provider. The big question is whether it'll succeed at running infrastructure for customers.

One of the big takeaways from Dell's conference call Thursday evening--aside from the lack of guidance, slight hostility from analysts and shakiness of the presentation in some areas--is that the PC giant wants to go become more of a services provider. The message: We're Dell, we can simplify your architecture and run it for you. Consultants need not apply. The big picture: Dell wants to sell more software and services so it can offset its low-margin foray into the retail channel and improve the earnings outlook.

For a while, Dell's Stephen Schuckenbrock, president of global services and chief information officer, sounded like he was back at EDS. Schuckenbrock gave a high level view of Dell's services plans on the third quarter earnings conference call and talked about a few unnamed customer success stories. But the overview was a lot like the rest of the call--full of high level discussion but short on specifics.

 

In a nutshell, Dell wants to take its hardware and wrap it in its newly acquired software lineup, which includes Everdream (see the Greenbaum-Farber debate) and ASAP. Dell also wants to standardize services. In theory, Dell's plan just sounds swell, but it's harder than it looks on a PowerPoint presentation. Cowen and Company Louis Miscioscia sums it up:

Within SMB and Enterprise, Dell is working to design new products and services which work together to create a more 'simplified' approach to IT. This will be a very difficult task to accomplish in the near term, as many providers have promised this in the past and fallen way short. The main issue is that almost all companies want to capitalize on their prior investments in IT, and not scrap everything to start clean.

Here are some snippets from Schuckenbrock presentation on the conference call (transcript):

I would highlight that the legacy services companies that have evolved essentially have done a job of masking IT complexity and throwing consultants and expensive systems integration resources at the problem. And in fact, what you can see is based on $1.4 trillion of spend, about 60% of that spend in fact goes to services, or essentially for every $1 you spend on innovation and hardware and software, you spend $3 on consultants to make it all happen.

We believe we can do much better than that by using our hardware and our services, combining them together into what I’ll call technology arbitrage and taking advantage of the world class supply chain capabilities that we’ve demonstrated in our first 23 years.

My take: It's hard to argue with Schuckenbrock's take on simplification. The problem: Companies aren't going to rip out what they own. Dell's services approach may be fine in a green field project, but it will have an uphill climb because IBM, HP and EDS have more established relationships.

Schuckenbrock also argues that Dell's supply chain can become a services tool:

Everybody seems to understand a lot about how our supply chain can offer customized products but the ability to integrate hardware, software, embedded services agents in the machine, pre-attach, pre-wire, pre-configure and ship to the customer something that essentially has four cables coming out the back, two power, two network cables, all which can be remotely managed from that platform is a wonderful capability that’s substantially enabled through our world-class supply chain and nobody else can do what we can do in that arena.

My take: Here Dell could have some promise and these efforts could pay off in the data center. However, isn't it likely other hardware/software/services types are doing the same thing?

Schuckenbrock on Dell's services army:

From a sales perspective, we have thousands of feet on the street that have direct access to SMB and large customers. Those sales leaders have the ability to take our products and these solutions out to the market, especially as we simplify, standardize, and productize the services that we sell.

In addition to our thousands of sales people that call on our customers every day, we’re also very much embracing and driving the same solutions out to our strategic partners as they drive our solutions to our commercial and consumer customers.

And then finally, I’ll talk about service and support. In the commercial business, we have over 10,000 people and we have about as many again in the consumer business that exist to support our customers every single day. It’s all they do 24 by 7 to make sure that we in fact service our customers’ needs. It’s been substantially a reactive capability in the company but it’s a world class asset with all of the infrastructure required where we can make investments to turn that into a proactive capability to actually anticipate problems and solve things before they cause issues for our customers.

My take: Can a sum like "over 10,000 people" compete with much larger rivals? In a word: No.

Schuckenbrock on next generation support:

We have about a $4 billion business in support services and that $4 billion business continues to grow in a very healthy manner. We do think, as I said, we have the ability to reconstitute our offerings in that space, better align those to the specific ways our customers have told us they want to consume services -- as an example, dedicated capability to support our customers who leverage help desks isolated from the support that we can provide to those customers for their end users. Our customers will have the ability to customize their service experience through this and configure it specifically to the things they need to support their businesses. We will be launching these capabilities in the first quarter of next year.

Client lifecycle services is the next piece that I’d like to highlight. As you look at this area, we just announced our intention to acquire Everdream. That investment will give us a systems management platform that will allow us to remotely manage the client lifecycle all the way from our factories through the retirement of those assets. This will include the moves, the adds, changes, patch management, asset management, and all of those elements in between and it will allow us to increase our value add to our clients and reduce our cost structure at the same time.

My take: All of these steps are headed in the right direction. The challenge for Dell will be one of perception. Can it elbow its way into big accounts with the big boys already established?

Schuckenbrock on using Dell's internal IT department as a weapon:

I would like to highlight infrastructure simplification services. In addition to my responsibility in running services, I also happen to run Dell IT. Our IT organization has done many world class things in the optimization of X86 infrastructure and we meet with customers on a regular basis to tell them how we’ve applied tools like virtualization, how we’ve embraced the best practices around power and cooling and what we can do relative to security, back-up recovery and archiving, et cetera.

Not only will Dell IT become a good services customer, but we intend to externally face all of our pragmatic, practical experiences so that we can help assist our customers with the implementation and to achieve the benefits associated with those technologies.

My take: This tune sounds familiar. Oh yeah, it's the same one that IBM and HP sing.

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