TORONTO — Dell is taking the same approach to selling enterprise IT as it does to selling home PCs: cheap and lots of it.
The company made its name by selling equipment direct to consumers and driving down prices by offering bundles. Dell
now plans to sell enterprise equipment and service in blocks to the same effect.
“”We see the market bifurcating, polarizing towards two ends,”” said Don Kerr, director of the Canadian Advanced Systems Group for Dell Canada. Some IT companies will focus on a high level of customization, whereas Dell will tackle the other end of the spectrum: commodity-based products built on common standards.
Kerr made his comments at a briefing Tuesday at Dell Canada’s Toronto headquarters, where the company officially opened its Executive Briefing Centre North — a customer showcase and meeting place with a $1-million product showroom or “”petting zoo,”” as Kerr called it. It’s the latest of three North American centres. The other two are in New York and at corporate headquarters in Round Rock, Tex.
Dell will host 14 of its prominent customers at its Toronto centre on Wednesday to seek feedback about the way the Dell is delivering products and services, and what it can do to improve them.
A large part of that exchange will focus on Dell’s enterprise commodization strategy — an approach that Darren Thomas, vice-president and general manager of storage, likened to that of Wal-Mart. The retail giant has carved out a sizable market by selling such large quantities of consumer goods it can be very competitive on price and actually start making demands on its suppliers.
Ford Motor Co. recently standardized on Dell equipment for its dealers across Canada, completing the upgrade in May of this year. Most of the 574 dealers have a Dell Power Edge server and at least one Dell desktop, said Mike Ryan, marketing and communications manager for i-Connect, the Ford company responsible for dealer IT.
There is still technology in dealerships that is not branded Dell, such as Lexmark printers and Cisco switches, “”but some of those things are being switched out as well,”” said Ryan. “”When a switch breaks, we don’t replace it with a Cisco, we replace it with a Dell switch. They’re faster and we’ve worked out an agreement with Dell, so it just makes sense to do that.””
When i-Connect’s next major upgrade cycle comes around in three years, Ryan said he would carefully evaluate any Dell bundles that encompass greater levels of technology and service.
By reducing enterprise IT to a commodity, Dell believes it can help drive standards in computing. “”What we try to do is accelerate industry standards,”” said Kerr. “”We learn very quickly how to take projects that we’ve done and create SKU’d units.””
He added that if a certain type of technology becomes pervasive in the enterprise, it is adopted as a de facto standard. For example, IT managers initially balked at the idea of adopting Linux, but that soon dissipated and virtually every software and hardware vendor on the market was forced to support it.
“”What Linux is really doing is providing a safe migration path from Unix,”” said Kerr. “”The move from a Unix world to a Microsoft world is quite a bit more dramatic. The move is happening very quickly from proprietary to open source.””
Dell plans to partner its way into some markets and offer hardware optimized to run specific enterprise applications from vendors like Microsoft, Tivoli and HP, as well as its own software products. The company’s chief storage partner is EMC — a relationship that was recently extended through 2008.
Dell is a relatively recent entrant to the storage market and is now playing the role of spoiler, according to Thomas. The company has undercut some of its competitors on price, but more importantly, argued Thomas, Dell is pushing for standards in an industry that emphasizes high degrees of complexity and service.
The quid pro quo in Dell’s alliance with EMC is that Dell gets access to EMC’s technology while EMC gets access to Dell’s customer base and selling strategy. Dell’s push towards commoditization could tip the balance in its favour, said Thomas.
“”Volume will go up through the Dell relationship,”” he said, “”and EMC will be faced with more leadership from Dell.””
The commoditization of product is becoming apparent at all levels of hardware, software and services, said IDC Canada Ltd. analyst Vito Mabrucco. Whereas a few years ago an enterprise would have paid a services company a per-day consulting fee, those same contracts are now being bought and sold as SKUs.
The trend is even being felt in outsourcing, he added, where contract prices are coming down due to the number of competitors selling their services, both at home and through offshore providers.
“”The market is always fundamentally moving towards standardization,”” said Mabrucco. “”We’ve been on that track for 20 years . . . and Dell is going to continue to take advantage of that.””