ROUND ROCK, TEX. – During a meeting here this week, Dell president and chief operating officer Kevin Rollins sat down with Canadian IT reporters and IDC analysts. 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 only 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. It’s something we consider to be a new model for managing and running high-growth companies. The titles will change and therefore there are some legal issues I have to cover as the CEO that he doesn’t cover and some other meetings I have to attend and those kind of things, but that’s a small portion of the job. Michael has a much better bent and love — intuition — for technology and 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 run the business from an institutional and strategy perspective. And we collaborate on frankly, everything. We don’t carve up the company into little pieces — you take this, I’ll take this. It’s much more overlap in terms of how we work. There’s constant collaboration. We’re both in charge, we both collaborate, we both discuss, we don’t make decisions unilaterally. It’s unique because egos get checked at the door at Dell. Most companies don’t know who’s in charge; who’s the senior. We don’t have time for that — get that out of the room and talk about what’s the right decision for the customer, for the shareholder and for employees.
Q: Earlier this week Dell 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 business. 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 technololgy.
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 is 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, Phillips, 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 really locks our hardware in, which is the key. 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. It’s protecting and enhancing. For others it’s ‘Run away from the hardware because the service is all that makes money.’ For us it’s very different; we use it 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. We bought a company a few years ago and migrated that capability so that for companies that are doing a Unix migration or Linux installations we can provide services to them to make sure that goes smoothly.
Q: How do you see the Dell’s direct business model evolving?
KR: I think it’s pretty well defined. It’s predominantly an Internet-based or phone- based model and then field-based. For large corporations, you can’t buy a massive SAN over the Internet, that said we have sold $100,000 SANs over the Internet. Generally though they want somebody to come to them so we have face to face, screen to sceen and on the phone. And that works, we’ve found, in every market, but our evolution isn’t so much how does the model evolve but how do we enter a country and evolve it? We start with corporate sales force and a lot of touch. We go in and set up a call centre to support a field force that begins calling on corporate accounts and then migrate it to small to medium business and the last migration is to the consumer. People think we start with the consumer ads first but we’ve been there a long time before you start seeing consumer ads.
We’re finding that model works with more and more products and services and so we have added this range of services. And the menu will keep growing. When we add a lot of break/fix services and you’ll see us add those as you see the products enter the commoditization or standardization sweet spot, refinements come over time through the segmentation of the direct business model. The corporate direct model and the global company direct model are completely different than the small and medium business and consumer or government — they are all different models with different sales teams.
Q: Do you ever see a time when you would consider creating a channel or developing your partner relationships to a greater degree?
KR: Not a channel, but we have partners now so sometimes customers say we love all your products but we have this particular partner and I’d like them to do the servicing of (the hardware). So we will qualify and certify them to do that if the customer wants. What we find over time is more of those customers say ‘It’s your hardware, you know it you just do it.’ We have IBM service our products in certain places because they are in there doing other things and the cusotmer says, ‘I’d prefer they do it’ so we certify IBM’s service group to do that. Obviously we don’t prefer that, but if the customer wants it they’re the boss.
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 that sector? In some cases vendors are offering schools hardware at significantly reduced cost 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 most college campuses 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 for that. 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 each one of their needs. With the ones we don’t win there are sometimes going to be giveaways and we don’t do that. You can’t do that forever. If you have too many giveaways you have to gouge some other customer to pay for the giveway, or you make no money. That’s not a strategy, that’s a go out of business approach.
Q: What’s Dell’s biggest challenge when looking at the corporate computing space in the next few years?
KR: I think it’s just continuing to execute. The products are coming, the technology is standardizing and they are really coming towards what we’ve preached. The challenge is can we find enough good people for corporate customers. The issue is getting them trained to our model. That includes everyone from executive to front line folks.