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Dell sees revenue growth through intellectual property not PC sales
TIN BOX FLOGGER Dell has said that simply selling computers is not the way it plans to increase profits.
John Everett, Dell's EMEA storage business manager told The INQUIRER that Dell is working hard to change the image it has of a firm that flogs little more than cheap and cheerful desktops, laptops and servers. Everett said that customers no longer want to know what hardware needs to be changed but want to buy hardware that is modular with licensing that allows them to add-on features and services as required.
Everett said that Dell is moving from its previous low margin model to a high margin "intellectual property" model, that is, one that is based on patents, copyrights and trademarks. According to Everett, 80 per cent of Dell's revenue reported in the last quarter was from intellectual property and that allowed the firm to move away from the "rip-and-replace" paradigm that was so popular a few years ago.
While launching Dell's latest Equallogic PS4100 and PS6100 series storage appliances, Everett mentioned that the firm is not only releasing hardware but new firmware, which it will make available to users that have service agreements in place. Everett said that customers like investments in legacy setups, which keep companies' investments alive longer.
Everett mentioned that Dell, like others, is moving more towards becoming a "solutions based company". That means Dell won't just sell hardware but the support, tight integration with infrastructure applications and consultancy. Everett symbolised this attitude in the way Dell's sales force now does business. "They don't go in asking how many PCs are required any more", said Everett.
Given that most commentators believe HP's decision to spin off its PC business was due in part to its razor thin margins, it is logical to think Dell might also be considering something similar. But according to Everett, Dell is not budging, because "customers want to have an end-to-end solution, all the way from the client to the enterprise and vice versa, they want to deal with one company". In effect Everett is saying that having a PC business helps it win contracts for its other business units.
Judging by Everett's comments it is clear that Dell realised a long time ago that selling cheap, anonymous boxes was not the way forward. However, it has already taken steps to increase overall margins to a point where it believes that carrying on with its PC business is actually a help and not a hindrance.
With HP deciding to kick its PC business to the curb, this could be the perfect time for Dell to step back into the number one spot among system builders. And if Everett's claim of customers wanting to deal with a single supplier all the way from the desktop to the datacenter is correct, staying in the PC game might work out to be extremely profitable for Dell. µ
Tags: Dell
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...by not supporting their products long enough leaving many customers, even corporate customers, not happy boys and girls. I've never understood Dell's philosophy of not updating BIOS versions or drivers after only a couple of years. After owning two generations of Dell top of the line laptops I'll never buy another unless at an absolute giveaway price. Ironic that their hardware (at least laptops) lasts much longer than they probably intended.
The other sore point is Dell applying every dirty trick in the book to prevent the customer from upgrading his/her Dell notebook. Unfortunately, I can't comment on their other products.
I don't believe the PC market is dying but it is shifting from the desktop dinosaurs like we've discussed here before. Companies like Dell, HP, and whoever, that don't provide their customers with a positive ownership experience with their products are doomed to fail in the long term no matter which direction they take.
Everyone already has an adequate box -- even the low end ones of today would have been called a supercomputer not so long ago -- and until those burst into flames, are adequate for nearly everything.
But I doubt that Dell will last long with this scheme, either: the IT knowledge required has become more widespread too, besides that hosting services are moving out there, somewhere; the big American buyers can get everything they need elsewhere.
This is the ending stage of the PC hardware era. Now it's up to M$ to better utilize the hardware with software that doesn't just require more varied and more complex physical movements from the user... Knowing M$ as I do, that means operating a computer will soon resemble an aerobics workout... A mandatory one, as in Orwell's 1984, with the Kinect interface shouting orders at you... The future stinks!
I think they’re having their good judgement clouded by the current crop of multi-billion-dollar patent deals. What they need to realize is that “intellectual property” has no intrinsic value (despite what the lawyers might insist), and the patent bubble will burst, it’s just a matter of when.
If they get caught by that, things will become very sticky for them.