Straight to the Point

When most people think of Dell, they probably think of the company that revolutionised the PC market by harnessing the Internet to drive its direct sales model; rightly so given that the company does more online business per year than Amazon, and almost as much as Yahoo, EBay and Amazon combined.

There is much more to Dell than PCs and e-commerce, however. A lesser-known fact is that 85% of the company's revenue comes from business customers - and its not just small-to-medium businesses that rely on Dell.

All of the 10 largest companies in the world rely on Dell technology, as well as the top 10 US banks. As Hugh Jenkins, enterprise marketing manager, Dell UK, explains, the enterprise business has grown rapidly over the last five years.

"The Dell enterprise business ultimately grew out of the desktop business," he says. "As time went on there were adjacent product categories where we knew we could deliver a good product offering."

Building on Dell's success with industry standard PC technologies it was natural that industry standard servers would be the first area of enterprise focus, and storage soon followed. "At the turn of the decade the concept of network-shared storage took off in a big way, and at the time we struck up a partnership with EMC," Jenkins adds.

"From there it's gone from strength to strength," he continues, noting that recent IDC figures have shown that Dell has been the largest supplier of storage area networks to Windows and Linux environments in the UK in recent quarters.

As this statistic suggests, Dell's enterprise offerings are not simply ordered online like the company's consumer portfolio, but Dell has applied its direct model to the enterprise business. "The direct piece is not so much about placing an order for a £20,000 SAN on the Web, but 'who can I talk to directly to work with me on finding the right solution'?," explains Jenkins.

"That philosophy that Dell has grown up with is now also reflected in the way we talk to customers," adds John Coulston, head of enterprise and solutions marketing, Dell UK. "The direct model is not just about a static website, it's taking what Dell offers through a consultative sales model and providing it to account teams so that they choose the most appropriate solutions or products for their customer."

Coulston continues: "If you think about the direct relationship we have with all our large customers it gives us an insight that is increasingly advantageous compared to our competitors. The direct model is really about that relationship with the customer, taking the requirements they have and working with them to get the best out of their environments."

According to Coulston, the benefits of the direct approach extend to managing partnerships on the customer's behalf to reduce complexity. "What impacts a customer's business is a multitude of products, services and technologies. In order for them to make the most of that they need a single point of contact," he says.

"If a customer can talk to one organisation that has relationships with EMC, Microsoft, Oracle and others it empowers it with much more value than having relationships with a number of suppliers."

Of course many large suppliers are vying to be the single point of contact for their customers, managing the partnerships that are an inevitable part of any enterprise computing system. Jenkins argues that Dell's traditional hardware focus gives it something of an advantage over its competitors in this regard, however, as it has never had a software business of its own that potentially competes with its partners.

The flip side of that coin is the argument that Dell perhaps lacks the enterprise experience of its competitors, in terms of enterprise-level service and support and state of the art product engineering. Dell is just an assemble-to-order box shifter, right?

Not at all. As well as servers and storage, Dell's enterprise business also includes server management software and a large services business. "The services piece has progressed from maintenance-oriented to professional, more consultative, engagements around infrastructure," says Jenkins. [For more on Dell's IT Infrastructure Services, see sidebar.]

Enhanced services is also a growing part of Dell's portfolio, worth 11% of its $14.4bn revenue in its fourth quarter ended February 2, compared to 9% of $15.1bn the year before. That equates to 6.7% growth from $1.4bn to $1.5bn year-on-year.

Dell has got a lot of publicity recently given its decision to embrace the channel alongside its direct sales approach. In some ways the move has been pre-empted by its enterprise business, where the company already sells through partners such as Accenture and EDS.

"In the services business we do work with some partners in some areas," he explained, adding of the new strategy: "it talks to a realisation that the direct model has evolved to a point where it embraces partnerships with key partners that are selling all or part of our product/service solutions. Dell is evolving a more defined strategy for how we take these technologies to market."

While Dell's decision to distribute its consumer PCs via Wal-Mart has received a lot of attention , Jenkins does not anticipate a significant change of direction in the enterprise business given the partnerships it already has in place

In the meantime the assemble-to-order tag is also worth considering more closely. While some competitors might see it as a sign that the company lacks engineering expertise, Jeff Wartgow, EMEA alliance manager, sees things differently.

"One of the most obvious symbols of our quality is that if you buy a server from one of our competitors it will show up in about 15 different boxes. How can they claim to have better quality than Dell when they haven't finished putting the product together?" he asks.

Indeed Jenkins insists that it is a mistake to think that because the company is a supporter of industry standard components, it is not an engineering-led company. "Dell has never had a legacy proprietary business that sucks up billions of dollars of research and development, but it is not true to say that Dell doesn't do engineering and validation," he says.

An example cited by Jenkins is the PowerVault range, in particular the NX1950 unified storage server system. It was designed from the ground up to simultaneously store both file and application data while supporting a range of operating environments, such as Windows, Unix, Linux and Mac OS.

"The PowerEdge server range is designed from the ground up by Dell engineers from the subsystems through cooling and redundancy into the management tools and system ergonomics," he adds.

It is also worth considering that the hardware market has moved towards Dell's way of thinking in recent years, with standards-based servers replacing proprietary systems. With all vendors offering systems based on standard building blocks, how those are assembled and delivered to customers becomes the important issue.

"If you take the server space 10 to 15 years ago there were new things such as multi-processors and RAID storage. Now customers expect those things from any manufacturer so it is going to be about how you're innovating to help a customer solve their problems," says Jenkins, who also cites Dell services offerings such as Virtualisation and SAN Readiness Assessments. "All those things are Dell offerings designed with Dell's intellectual property ."

Jenkins also cites Project Hybrid, Dell's recently announced strategy to revamp its data centre products with a focus on reducing power consumption and building on virtualisation capabilities.

While details of the Project Hybrid deliverables, due in the second half of the year, are thin on the ground, they will come with a focus on reducing deployment time, power consumption, management costs.

According to Coulston, energy efficiency is one of the major issues customers are looking to solve that is driving demand for the company's enterprise offerings. "A customer conversation we have on a consistent basis is the energy efficient data centre," he said.

"As power costs continue to rise, the kind of power and heat costs that have occurred have led customers to question how do I build the data centre to get the most out of my power costs?

It is one of a number of challenges that customers are facing, however. "The continued major challenges customers are facing stem from complexity in their organsation," adds Coulston. 'With the ever-increasing focus on the CIO and delivering return to the board you have a very different IT organisation than you had a few years ago."

"There's obviously new technology that we're having conversations with customers about all the time. A big issue is consolidation: [customers are asking] 'how do I physically do this, and how do I configure the servers that I've got to be optimised? Another area is systems management; how can they provision and re-provision the system they have to get the most of the resources they have?" he adds.

"Consolidation of storage infrastructure and the huge growth of data, that is a constant concern for customers. How do I back it up and archive it, but also recover it? That whole storage strategy is definitely a big topic of conversation for us. Customers are looking for a partner that can simplify the conversation and simplify IT."

The second Dell article (All For One...) can be found here