Dell cashes in on demand for services

ROUND ROCK, TEX. — Dell president and chief operating officer, Kevin Rollins, sat down with Canadian IT reporters and IDC analysts during a recent meeting at the company’s headquarters. Rollins talked about Dell’s focus on enterprise customers, the company’s growing services business and his role

as Michael Dell steps aside to become chairman and hands him the CEO title. Joining him was Lawrence Pentland, Dell’s vice-president and general manager of Americas, based in Toronto.

Q: Kevin, now that Michael has stepped down as CEO how will your role change and how will changes take place over the next few months (Dell announced last month he will step aside as CEO on July 16)?

Kevin Rollins: Truth be told it’s not going to change much and that’s because Michael and I have been running the company together as a team for a number of years now, and have worked out that relationship of what we both do and how we collaborate. Michael has a much better bent and love — intuition really — for technology so he will continue to do that. That’s why the company started and where his core skills are. He is also very good working with customers, so he will continue with that. As I take away his CEO duties, he will be able to fill it with those other things and then I will continue to run the business from an institutional and strategic perspective. We collaborate on everything. We don’t carve up the company into little pieces. We don’t make decisions unilaterally.

Q: Dell has made a joint announcement with Oracle that will see database software pre-installed on Dell servers. The offering is being directed at small-to-medium businesses. Is Dell going after the SMB market specifically right now?

KR: Enterprise for us has two meanings: Great big companies but also data centre products. This was an enterprise product announcement, but for small to medium enterprise business customers. I think the value and interest of this new offering is that Oracle has traditionally been very expensive, fairly difficult to implement — great product but has had some challenges and so small to medium business has been blocked out, it’s been just too hard to do. With this new product it has been simplified. The whole load time now is about 15 minutes to load the database versus before, which was hours with lots of hand-holding. We can load it in the factory, put it on a system and small-to-medium businesses can get this product, and it just works out of the box, and the price is extremely right for users. I think what it signals is something we’ve talked about for years, which is the standardization of technology and as it gets more developed you can simplify and reduce the cost and get it available to many more customers.

So, this is a database that is kind of sliding into that standardized mode. We’ve seen it in hardware and it’s one of the first indications of seeing it in software. I’m not suggesting all software is going to go there, but certainly with this one it is an indication you can get standard software with standard hardware and now a new category of customer can utilize that technology.

Q: Where is the services business going for Dell and, specifically in Canada, how is the services business performing?

Lawrence Pentland: It is similar to that offered in the U.S. There is growing demand in Canada from both large corporations and large government institutions for services. There will also be some announcements forthcoming around this.

KR: It’s about $2 billion worldwide for us but it’s growing at about double the rate of core hardware business and by $2 billion we’re talking about the enhanced services — not break/fix. So enhanced services are growing very rapidly, extremely profitable.

Q: Where is that growth coming from?

KR: Large corporations, and there are several elements there: DMS (Dell Managed Services), which fundamentally are a form of little “”o”” outsourcing. The customer says we want you to take the whole thing — and we have several companies such as Boeing, Ford, Philips, who are doing that now. We don’t jam that down a customer’s throat though — if they want to do it, we’ll do it with them, but it’s a large and fairly lucrative service contract for us and for them and locks our hardware in. Unlike other companies it’s not about ‘Get the service, we don’t care about the hardware because it loses money.’ For us, hardware makes a lot of money. For others it’s ‘Run away from the hardware because the service is all that makes money.’ We use (services) to enhance the hardware package.

There is also installation and deployment services where people install a large cluster, a big server installation, a large SAN installation and they need deployment services. We go around to wherever their data centres are and work to install, to deploy, bring them up and that’s another set of services growing quite rapidly. The last one is Dell professional services, which is usually migration services and involves software. So for companies doing a Unix migration or Linux installations we can provide services to them to make sure it goes smoothly.

Q: Lawrence, you mentioned Dell is No. 1 in sales in the education market in Canada. Is the interest from post-secondary institutions to create wireless schools driving your business in the education market when it comes to laptop sales? In some cases vendors are offering schools hardware at significantly reduced costs just to get in the door.

KR: Not every higher ed institution plugs that cost into their tuition and then gives a student a laptop, but there is a big move throughout to go wireless. In some rare cases they mandate it and that tends to make a little bit of sense because multiple environments, whether OS or hardware, are difficult for CIOs to maintain.

LP: There was a big win with laptops recently in Canada at Acadia University for the next three years and we took that from IBM. I personally went down to call on them. I haven’t heard of a larger deployment of laptops at a higher education institution in Canada (4,500).

KR: We win our fair share of those because we have honed our model to meet their needs. With the ones we don’t win, there are sometimes going to be giveaways. We don’t do that. If you have too many giveaways you have to gouge other customers to pay for the giveaway, or you make no money. That’s not a strategy, that’s a go-out-of-business approach.

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Jim Love, Chief Content Officer, IT World Canada

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