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Dell moves beyond selling just PCs

Dell has grown from nothing into a US$41.4 billion company in only 20 years, and its next target is US$60 billion in annual sales. Where is the extra revenue going to come from? Dell is already manufacturing PCs at a phenomenal rate -- almost one per second, more than 84,000 a day -- so the years of explosive PC growth may be coming to an end. Dell is therefore focusing more on its business outside the US, and turning to two new areas: peripherals and services.

Selling peripherals such as printers, scanners and even TV sets is fairly simple. Dell already has the sales and fulfilment infrastructure in place: it can take an order and ship a product.

"As we standardize our approach to overseas markets, there are great opportunities to standardize the service offerings as well," says Neil Hand, director of worldwide enterprise team at Dell in Austin, Texas.

Forget about having US$1,800-a-day consultants climbing all over your offices, re-engineering your business and ordering custom programming. What Dell has in mind is a menu with a price list, like McDonald's.

The services will be straightforward and clearly defined: maybe you want PCs delivered from the factory with your software already installed. Perhaps you want a Microsoft Exchange mail server set up, or a high-performance computing cluster installed. Or you just want someone to take away old PCs, erase the data on the drives, and dispose of them in an environmentally friendly way.

"Our services strategy is very closely tied to our hardware strategy," explains Jeff Kimbell, director of marketing in Europe, responsible for the non-consumer part of Dell's business.

"We're not building a services business in order to become a services company: we're building it to complement and enhance our core hardware business, so customers get a better experience," he said.

Instead of selling services and hoping hardware sales will follow, most of Dell's service offerings ride on the back of hardware sales: do you want installation with that?

This may not appeal to large companies with lots of IT staff -- Dell has a Professional Services group to handle those.

However, small and medium-sized businesses (SMBs) are often short of information technology (IT) skills, and could be interested. They also represent a relatively untapped market.

"They have a good point," says Alan Mac Neela, a vice president of Gartner Research in the UK.

"The SMB market is very poorly served, and has been for a long time. Selling services with hardware -- we call them `product affinity services' -- would be quite interesting, because they have the ability to do that. But one of the issues with SMBs is that you need to sell to an awful lot of them to make a reasonable amount of money, and that's going to be tricky," he said.

Dell reckons that on current sales, it is making US$3 billion a year from services, and Mac Neela thinks that is not to begger than all of Dell -- US$42.6 billion last year.

The big problem with services is that it is people intensive, whereas Dell runs a famously tight ship. Wouldn't a global services offering require an enormous staff?

"Traditionally it would," says Aamir Paul, senior manager of services marketing for Dell in Europe.

"But we said: `Let's not get feet on the street, let's get the right partners. There's a supply chain out there, let's use it to drive standards on behalf of our customers.' It's not outsourcing: customers are still dealing with Dell, with a single point of ownership," Paul said.

Dell says it is taking the same approach as it did when supplying PCs direct -- process definition, standardization, commoditization, inventory and supply chain management, and so on. But instead of supplying a PC, it's supplying a service such as Transfer My PC.

How many SMB customers will actually want to pay for installation, data migration, server consolidation and similar services is another matter.

If they don't have a clear idea of their own costs, they may not find the list prices attractive. But since Dell is not making big investments in staff, offices, equipment and infrastructure, it's probably not too bothered.

"There's a lot of frustration out there today," Kimbell adds. "Our strategy is about making customers happy, because happy customers come back and buy more stuff."
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