Dell reveals a cohesive strategic mindset geared for increased market presence
 

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Dell now has the hardware, software and services pieces in place to bundle offerings that advance customers’ ...

Dell now has the hardware, software and services pieces in place to bundle offerings that advance customers’
businesses. Dell, over the last several years and with a quickened pace the last seven months, has been quietly
rearchitecting its solutions portfolio and removing internal barriers to collaboration to encourage its hardware,
software and services product, service delivery and sales teams to collaborate toward one common goal:
delivering the bundles that solve customers’ problems. Based on insight delivered by the vendor at the 2014 Dell
Annual Analyst Conference, TBR believes Dell successfully transitioned to operating as a private firm, that its
strategy remains largely unchanged from a year ago and that the corporate culture is optimistic and energized
about building the new, solutions-oriented Dell.

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Dell reveals a cohesive strategic mindset geared for increased market presence Document Transcript

  • 1. TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C. TBR EVENT PERSPECTIVE Dell reveals a cohesive strategic mindset geared for increased market presence Dell Annual Analyst Conference Austin, Texas May 29 to 30, 2014 Authors: Lindy Hanson, Vice President, Services John Spooner, Vice President, Platforms Stuart Williams, Vice President, Research Ezra Gottheil, Principal Analyst, Devices Christian Perry, Senior Analyst, Data Center Jane Wright, Senior Analyst, Security Joseph Walent, Analyst, Services TBR Perspective A new Dell dawns Dell now has the hardware, software and services pieces in place to bundle offerings that advance customers’ businesses. Dell, over the last several years and with a quickened pace the last seven months, has been quietly rearchitecting its solutions portfolio and removing internal barriers to collaboration to encourage its hardware, software and services product, service delivery and sales teams to collaborate toward one common goal: delivering the bundles that solve customers’ problems. Based on insight delivered by the vendor at the 2014 Dell Annual Analyst Conference, TBR believes Dell successfully transitioned to operating as a private firm, that its strategy remains largely unchanged from a year ago and that the corporate culture is optimistic and energized about building the new, solutions-oriented Dell.
  • 2. www.tbri.com pg. 2 TBR The company faces intense competition in its core markets, but the new Dell will build upon its acquired software, cloud, security and services businesses to provide powerful new, higher-margin offerings that help its customers achieve better business outcomes. Dell will continue to build, design and sell individual infrastructure components — servers, storage and networking — as well as create and leverage prepackaged services such as deployment. TBR believes that, in modularizing these key pieces, Dell has begun a successful transition to building the bundles that allow it to operate as a solutions purveyor. The key to Dell’s successful delivery of solutions is a high level of collaboration between Dell’s hardware, software, services and sales arms. Through the analyst meeting and a series of one-on-one discussions, TBR observed healthy collaboration between the leaders of each segment. TBR believes that because Dell is working more diligently to integrate acquired software solutions such as StatSoft with existing pieces of its portfolio, melding its intellectual properties across business units, it can now more effectively meet the requirements of customers seeking one-stop-shop solutions. Because of the need to sell both piece parts and full solutions, Dell’s execution challenges are still exceptionally high, and require focused leadership and daily commitment to overcome. Those challenges are measureable and addressable when integrating the Dell software portfolio with its infrastructure and services capabilities, as well as revamping its sales conversations and marketing messaging. There are five challenges to the success of the strategy, all largely tied to the go-to-market execution: market awareness of the breadth of Dell’s portfolio; customer permission to play in Dell’s noncore markets such as software and services; portfolio integration and evolution to fully address opportunity and create new markets; direct sales maturity and capacity, and transactional swim-lane management of the nearly 18,000 generalists to sell the portfolio; and continuing channel, alliance and OEM partner expansion and maturity as Dell accelerates revenue growth and expands addressable markets. CEO Michael Dell and his senior leadership team shared the post-privatization strategy for Dell, a business focused on helping customers of all sizes accommodate change and fuel growth. An entrepreneurial spirit infused the analyst event, with senior leaders discussing how they are building mutual success instead of fostering separate silos. Key Dell customers and partners appeared in keynotes and panels, reinforcing the overall message of a firm focused on long-term growth by meeting customer demand to transform their infrastructures through cloud, connect their people via mobile devices, inform decision making through analytics and protect business and personal data via security. Given the interconnected challenges, Dell executives continued to manage expectations for incremental and tactical improvements. TBR believes Dell improved its performance in the past six months in software, services, the channel and segments of its hardware business. Dell reduced its debt by $1 billion in the last quarter, and the long- range guidance remains positive. Dell has not provided key business data metrics as it did while a publicly traded firm, and TBR believes market confidence and customer awareness of success call for more transparency. Dell breaks down its walls TBR believes Dell’s ability to seamlessly collaborate within its numerous segments to build solutions will be an advantage in the marketplace and for its customers. Just as the silos between servers, storage and networking hardware continue to disintegrate, Dell is working to eliminate the walls between its own business units, including those that provide hardware and software. Dell’s goal is to provide an integrated portfolio that addresses overall business and IT needs as a customer’s business grows, and TBR believes the company still has work to do to match the broad solutions capabilities of competitors such as IBM. Dell’s internal efforts to break down business unit silos are laudable, but their ultimate success is tied to Dell’s ability to sell across this more integrated portfolio. Dell recognizes the channel as key to selling solutions and is making pertinent adjustments to enable partners to better sell across Dell’s portfolio. For example, where Dell’s global channel structure was once siloed, it is now cohesive around Dell’s overall business. Dell is using training
  • 3. www.tbri.com pg. 3 TBR and enablement to help partners gain better access to Dell’s end-to-end offerings that span converged infrastructure, storage, networking, software, workstations, thin clients and security. Further, the vendor is incentivizing its sales team to work with partners on selling solutions. Dell’s efforts are backed by a $14 billion investment to expand its portfolio in recent years, but many of those acquired businesses — such as Compellent and EqualLogic — continued to appear as supporting, but separate, pieces to Dell’s overall solutions strategy. However, Dell indicated these sub-brands will begin to diminish as the vendor builds a more cohesive identity. TBR believes this strategy is essential to an evolving data center customer base that increasingly considers the effect of technology purchases on the overall business. Technical hardware requirements remain critical to purchasing decisions, but the prospect of better business outcomes — expanded revenue, increased profitability, faster time to market and customer responsiveness — also drive purchasing decisions. Dell is not resting on its acquisitions. Continued investments in storage, networking and server design will help the vendor better compete against strong competition from HP, EMC, NetApp, IBM, Lenovo and ODMs (original design manufacturers) such as Quanta. Dell’s ability to pull intellectual property from other business units into established elements of its portfolio is key to those investments. For example, Dell said it is working to integrate technologies from RNA Networks, Exanet and Ocarina Networks into its EqualLogic and Compellent products. TBR believes this integration will not only boost the value of established products for existing customers, but will also spark vertical- specific opportunities outside of Dell’s core markets. Dell’s integration strategy mirrors the efforts of key competitors such as HP, which assimilated its storage products under the Converged Storage umbrella to better engage customers as their businesses grow and their requirements change over time. Although there is a focus on end-to-end sales, Dell wants the first customer engagement — whether through end- user computing, data center hardware or software or services offerings — to be highly successful. TBR believes Dell’s strengths in direct touch with customers will foster success in pulling through additional elements of its portfolio, particularly lower in the midmarket where competitors rely heavily on channel partners and Dell has a long history of direct engagement. If Dell can convey its best practices to partners over time, its channel sales will increase accordingly. This will be crucial as Dell faces stringent competition from established solutions competitors, such as HP, and newer competition from Lenovo when that vendor completes its acquisition of IBM’s x86 services business later this year. Devices sees a turnaround Jeff Clarke, vice chairman, operations and president, client solutions, strode on stage to the song “He Is Not Dead Yet,” from “Spamalot,” and proceeded to demonstrate that not only are PCs not dead, but also that Dell PCs are not dying. He asserted that PCs are an essential part of Dell’s strategy, noting that 70% of Dell’s business customers start their interaction with Dell through PCs. Dell has turned its languishing PC business around. Prior to five quarters ago, the decline in Dell PC revenue and unit sales exceeded the decline in the PC business as a whole. TBR believes Dell inadvertently communicated a lack of interest in PCs and neglected the consumer market. The company’s leaders spoke almost exclusively about its expansion in software, services and solutions, and PC customers (especially consumer customers) sensed a lack of commitment. Dell refocused on PCs and tablets approximately quarters ago, prior to going private. The company revamped its products and ensured that it competitively priced products in all significant segments. It also re- educated the sales force and included PCs in its embrace of the channel. The results of all these efforts were illustrated by the improved numbers Clarke reported. Dell will face increased challenges in the devices market. All three of the top PC vendors — Lenovo, HP and Dell — are benefiting from the decline of Acer and Toshiba, and from Sony’s exit from the PC business. Lenovo, HP and Dell are now established as the top three PC vendors, and they will compete aggressively for market share in an
  • 4. www.tbri.com pg. 4 TBR enduring but slow-growth and low-margin business. Dell’s PC volume and revenue would be remarkably close to that of Lenovo and HP if it were to acquire Acer, which would help Dell regain its position in the consumer PC market. Despite the challenges, TBR believes Dell will sustain its resurgence in PC, tablets, and associated services and peripherals. Dell will use its acquired IP in security and management to differentiate its products in the commercial segment, and we think it can appeal to consumers with the same capabilities. The company will not repeat its mistakes with PCs and consumers, and its new products will demonstrate its revived commitment to the category. Dell is well positioned to sell services, software and peripherals that complete its devices offerings, driving margins, customer satisfaction and customer loyalty. Lenovo, HP and Dell are now all focused on the same goal, and TBR believes their healthy competition will drive better devices and better services. Services assumes a central role As Dell continues to accelerate its transformation from a purveyor of products to a deliverer of solutions, services play an increasingly critical role. According to Suresh Vaswani, president of Dell Services, “Services is the thread that binds hardware and software solutions together.” Dell Services’ role within the larger company continues to evolve, currently focusing on customer engagement in solutions delivery from a consulting- and expertise-driven standpoint. TBR believes Dell Services fills a key role within the organization, helping design and implement IT solutions that customers can easily incorporate into their businesses and that can transform customers’ business models. In this way, Dell Services strives to simplify technology for Dell customers. Dell reorganized its Services arm, reallocating Support and Deployment — the segments most closely associated with hardware — to the hardware businesses to ensure clearer handoff of services and the alignment of goals. The move also provides the streamlined Services organization with more technology independence and the ability to design and broker solutions that incorporate the best technologies for the customer. SecureWorks also split from Dell Services to encourage greater market penetration and underline its own technology-independent value proposition. TBR believes the streamlined Services organization will be able to act more nimbly in the fast- changing IT services market and focus investment on critical client need areas of cloud, application modernization and mobility, calling on its internal technology partners when needed to compile a best-of-breed solution. The greater level of freedom for the reorganized Dell Services will expedite response time to client demand, while ensuring that cooperation across units receives active management at a time when Dell as a whole needs to realize growth. In turn, Dell Services will increasingly target the midmarket, helping customers assemble the flexible and scalable IT that will enable them to grow their own businesses. Extending access to analytic tools for midmarket customers is one way Dell Services will help level the playing field and enable its customers to compete effectively. Another way will be fulfilling a role to simplify the use of the cloud and utility computing models and prepare for the coming tidal wave of gathered data created by the Internet of Things. Dell Services will take an increasingly central role and move to a lead position in customer engagement, accelerating Dell’s use of a consultative business model. Understanding the industry-specific needs and requirements of customers will shape mission-specific solutions with both hardware and software solutions. Security sees integration After acquiring several security vendors over the past four years, including SonicWALL (for firewall and intrusion protection systems), Aventail (for SSL VPN), Quest Software (for identity management), Credant (for endpoint malware protection) and SecureWorks (for managed security services), Dell is in the midst of a widespread initiative to integrate these acquired assets to maximize their value and expand Dell’s security solutions in customer environments. Dell outlined its progress at the analyst conference with examples of the information sharing between the firewall and authentication components of its security portfolio. Looking ahead, Dell is
  • 5. www.tbri.com pg. 5 TBR planning further integrations, such as combining its secure remote access (SRA) and enterprise mobility management (EMM) solutions, establishing common mechanisms and a single control plane to simplify mobile device security. TBR believe Dell’s customers will welcome these integrations, as many organizations are seeking greater integration of their security controls to provide more comprehensive and effective processes for vulnerability and threat management. PCs are often Dell’s entry point into a customer organization’s security repertoire. Dell leverages its large customer base to expand the adoption of its security solutions by embedding its encryption and authentication controls into every business PC it ships. Because Dell manufactures its own PCs, it can integrate these security controls at the BIOS level while the device is still at the factory. This increases the device’s integrity and provides a higher degree of assurance compared to add-on security product deployments, reflecting the vendor’s “better together” value proposition. TBR believes embedded security features can enhance endpoint security by reducing complexity, as the customer’s security team does not need to select and integrate additional agents for many layers of defense. In addition to embedding security into its own devices, Dell stressed its vendor-neutral approach to security at the analyst conference, emphasizing the ability of all the products in its security portfolio to run on non-Dell devices. However, the “better together” value proposition, which improves ease of integration and operation, will be diminished for organizations with very heterogeneous device populations. As Dell continues to optimize its security functions for its hardware platforms, organizations that are standardized on Dell PCs will receive the greatest value from Dell’s endpoint security solutions. Event overview The 2014 Dell Annual Analyst Conference leveraged discussions with executives, partners and customers to provide analysts with information on Dell’s ongoing transformation as an end-to-end solutions provider. Speakers included Michael Dell, chief executive officer; Jeffrey W. Clarke, vice chair, operations and president, Client Solutions; Marius Haas, chief commercial officer and president, Enterprise Solutions; Karen Quintos, senior vice president and chief marketing officer; John Swainson, president, Dell Software; Thomas W. Sweet, senior vice president and chief financial officer; and Suresh C. Vaswani, president, Dell Services. Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com. ©2014 Technology Business Research Inc. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.