Dell - the company that wants it all

"You may say you want it all… but where you gonna put it?" Woody Allen

The other day two colleagues in silicon.com's sales department were talking about buying a new PC. Let’s call said salesmen Matt and Patrick. One was advising the other about purchasing options and it seemed the most important criteria were price, after-sales support and how easy networking the computer would be, preferably wirelessly. Now while no two buyers are exactly the same, it is pretty safe to assume most of the major PC providers are aware of these key demands which, with the odd exception, head lots of buyers' lists. One such provider is PC giant Dell. We say PC giant but that's probably not very PC, as it were. Dell is also very much a provider of servers, storage, services and some networking gear. Soon more Dell networking equipment will be on offer, as will Dell printers, while its Axim PDA - already somewhat of a hit in the US - will reach our shores soon. Why would Dell care about Matt and Patrick? Well, the company may already sell over two-fifths of the world's business PCs, and 15.7 per cent of all PCs worldwide in 2002's fourth quarter, according to analysts - and it may even be unique among top-tier vendors in making money on each of those units - but it realises there isn't a whole lot that differentiates one PC from another now and it must look elsewhere to ensure a rosy future. And that elsewhere is in being an enterprise IT provider, in selling - directly, it says - higher-margin servers, storage, networking equipment and even services. silicon.com was at the Dell HQ in Round Rock, Texas, last week, where our reporter generally nosed about, put a number of questions to execs - some handily emailed in by readers - and wondered: Is Dell Computer about to write the next glorious chapter in its 18-year success story - or is it on the verge of fatally over-stretching itself in an effort to maintain its forward momentum? We're not sure anyone knows the answer. The case for the prosecution (those that say Dell will hit a wall) notes the company has, in the span of a year, managed to annoy former partners such as 3Com, Cisco and Palm by announcing it will compete with them in handhelds and networking. It has also irked HP, with its printer plans, but let's not pretend there HP wasn't already concerned with the way Dell has been attacking the PC and Unix server markets. Others throughout the industry, including rivals, developers and users, have long criticised Dell for the way it operates. They say Dell doesn't innovate. They say it spends little on R&D, pinches everyone else's ideas and then squeezes any market by coming in later on with cheaper prices thanks to a super-efficient in-house manufacturing process. Dell would say it simply looks for markets where standards have emerged. This has long been the case with personal computing, is becoming the case with some Linux-based computing, and isn't the case with handheld computing - though Dell will say otherwise, betting in that space on the Microsoft PocketPC OS. (Not one of its bigger bets, admittedly.) It would then say it innovates with its processes - the area where it does hold a large number of patents - and, perhaps most importantly, simply gives customers what they want, not what it thinks they should have. It's hard to pick a fault in the model, certainly if you're a shareholder or customer, but easy to ask if we'd have an industry if every vendor adopted the same approach. So, back to the question at hand, and the case for the defence. For all the burnt bridges with some partners, one relationship is perhaps instructive. The Dell-EMC storage teaming is a success story. Dell resells the lower end EMC kit, what mainly used to be Data General Clariion products, while EMC concentrates on what it knows best - high-end, non-commoditised storage systems. According to Jeff Lynn, VP Dell Services and a man with time at Compaq and IBM on his rap sheet, a year ago the market for storage area networks (SANs) was complex, with a SAN proposal being a seven to 10 day procedure. Only Dell determined 80 per cent of the SAN market was starting to look similar, came up with four offerings, four price points and fixed prices - and took a major share of this emerging market. It now even plans the same approach for services, an area we've long been told requires a unique human touch. The clever money is on Dell building up this area - already its fastest growing - but also keeping the partnerships with the likes of Unisys and Getronics. Here, it's quietly indirect. The point is that something like networking or printing may not be totally commoditised but parts of it are so straightforward that Dell can apply its model and keep on growing. The company will milk demand for add-ons such as Wi-Fi home and office networking kit and depend on its customer service reputation globally. (Though here is one area where it must get even better, judging by emails this publication receives. How about a single customer service point for enquiries in the same way there's a single member of staff to whom products can be tracked back?) It will keep on hanging back until it feels the time is right for a product - note its reticence over Intel's 64-bit Itanium 2 processor and its distance from the tablet PC market - but when it enters, do so with brutal efficiency. When silicon.com asked Michael Dell if his company is over-expanding, he said: "You can look at many points in our history and say the same thing. But we do worry about that." Dell was certainly a company Matt and Patrick were considering and for thousands of enterprise customers this vendor is a real option. But while there are many more inefficiencies for Dell to squeeze out of all sorts of markets - did someone say cash registers? - this publication predicts Dell will find life harder in the next three years, even hitting the odd wall. It won't fail but it will slow. Growing pains aren't just for the very young.