Dell Corp has suffered a major blow to its ambitions in IT services, after electronics giant Philips pulled the plug on a five-year 75,000-seat desktop-management deal after only 12 months.
Dell, and its subcontractors Getronics and Atos Origin had been awarded a project to standardize Philips’ desktop infrastructure based on Dell’s OptiPlex PCs, Latitude notebooks, and Precision workstations, and to support the equipment across 60 countries.
A statement from Dell said: Both parties have now concluded that the program in its current format does not sufficiently guarantee successful completion and therefore Philips and Dell mutually agreed to cease this development activity.
The size of the deal was not disclosed, but was thought to be in the region of $700m, with Getronics claiming a slice worth between 80m euros ($95m) and 90m euros ($107m) to deliver deskside support, and Atos Origin getting a $30m share to provide helpdesk, server, and applications support.
Philips spokesperson Jayson Otke told ComputerWire that the main problem had been in rolling out a standardized desktop platform across a large company with diverse desktop requirements. He said: We realized that the one-size-fits-all approach was not going to be the best solution… When we look at future solutions for managing our desktop infrastructure, we will consider the variation in needs of our business units.
Dell was originally awarded the contract in December 2004, some two-and-a-half years after the companies had agreed a five-year, $5bn deal for Philips to supply components including CRT and flat-panel monitors to Dell. Otke that there had been no change in this part of the relationship as a result in the termination of the desktop-management deal. The components supply deal is set to expire in February 2007.
Phil Morris, COO at outsourcing advisory firm Morgan Chambers, said Dell has suffered problems with its services business model, which sees it subcontract large parts of projects such as break/fix support to third-party vendors, while attempting to deliver a standard infrastructure to a large corporation with varied and constantly changing requirements.
He said: There have been question marks hanging over Dell’s ability to step up to the plate on service delivery, and it has had major challenges with a number of major outsourcing deals. There is a big difference in building a PC to order for a Joe Schmo home user, and supplying a standardized desktop infrastructure for a company with 75,000 seats and a continuous churn, while operating it remotely.
In Dell’s fourth fiscal quarter ending February 3, 2006, its revenue from enhanced services grew 27% year-on-year to $1.4bn, accounting for 9% of total sales. The company has other large desktop-management deals with Honeywell and Boeing Corp, although the Philips deal was by far its largest services contract.