Growing beyond a quiet Dell

Michael Dell, CEO of Dell Computer Corp., has been running Dell for half his life. One of the youngest of the technology billionaires, Dell has successfully led the company through rises and falls in the computer market, tapped the technology needs of rising economies and moved Dell firmly into enterprise computing. While visiting Toronto recently, he spoke with ComputerWorld Canada senior writer Chris Conrath about the company, its philosophies, and even a bit about himself.

CWC: You have said you don’t care one way or the other about the Compaq-HP merger. Regardless, are there any competitive advantages Dell can get from this time of uncertainly?

Dell: Absolutely! I think that it is a great time for us to be doing that. In fact if you look at the data in Canada specifically, we have got a lot of new customers that were Compaq customers and were HP customers. So we have benefited from this confusion by providing a very clear strategy and direction of where we are going, what the products are and what the offering is.

CWC: Would Dell consider the amalgamated company more of a competitive threat than the individual parts?

Dell: However challenging it may be, I wouldn’t be the first to say that it is unlikely that they will succeed. There are the fundamentals of economics. Can you take two companies that are both struggling and put them together and create a market leader? To the best of my knowledge it has never occurred, certainly in our industry and rarely does it occur in industries to begin with. So the confusion that exists in the elimination of workforce and the elimination of product lines, for us is an immense opportunity.

CWC: Canadians often feel that large American companies look at Canada as a 51st state. What does Dell do to specifically address this concern?

Dell: We find every market that we go into is different. There are different cultures, there are different ways of doing business, there are different industries and practices. The first thing we do is recognize that all business is done locally and so what you have in Canada, from Dell, is a team that is Canadian who are living in Canada. Lawrence Pentland (Toronto-based general manger of the Americas) has a role, not just for Canada – he actually runs a lot of our international businesses for the Americas, and we benefit in Austin from his perspective on the requirements and needs of the (Canadian) customers.

You have got a banking system that is very strong and has unique attributes and you have got a very vast country, physically. Our team in Canada – they are Canadians.

CWC: Dell has extremely tight partnerships with the likes of Intel, Microsoft and Oracle. Are you going to continue this strategy or is there a possibility of branching out?

Dell: First thing to know is that we do things for the benefit of our customers and our shareholders. So when we create on of those partnerships we don’t do it necessarily for their benefit. We do it for our customers and our shareholders. So for example, if one of those companies screws up or there is a better alternative or there is an additional offering, then we are not afraid to bring another one in. If Linux is rising we go with Linux, if AMD has great processors that make sense for us to use in addition to or instead of Intel, well we will use those.

These are partnerships that we believe have a lot of value and will continue to have a lot of value but for some reason if they don’t or there are new ones required we are not (limited) to these companies.

CWC: It is still difficult for many companies to find qualified personnel for the services market? How difficult has hiring been for Dell, and why would I want to work for Dell?

Dell: When you look at staffing, there are always critical positions, guru type jobs, where there is never enough supply. Some of that has been mitigated with pull-back in the industry, so it is certainly a lot easier (to find the necessary people) than it was a year or two ago. What Dell offers is an exciting company that is continuing to grow. We have a great culture and it is a relatively young company. We are an entrepreneurial company – we don’t have a lot of layers in the organization, so we empower our people and they get an opportunity to make a difference

CWC: Dell is often thought of as a PC company. How do you want business leaders to view Dell?

Dell: That we are a products and services company that is pretty full spectrum. Our strategy is to empower customers to implement their own enterprise computing strategies based on flexible open industry standards. Dell has always been about making it easy for customers and providing the best value.

CWC: Who will be the competition over the next five years?

Dell: Globally I don’t think that the competitors are going to radically change. Maybe our biggest competitor is going to be ourselves. How do we take all of these opportunities and deliver against them and make sure that we continue to execute?

CWC: To some extent Dell has rewritten the book on just-in-time supply chain manufacturing. How much more efficient can your manufacturing get?

Dell: Two things. We have an approach at Dell that says we can improve everything that we are doing. So there is no such thing as “we are finished, we are done,” though there is such a thing as diminishing returns and where to focus our efforts.

If you look at some of our processes, they are quite efficient and we will continue to make them more efficient but there are many other areas where we can continue to drive costs, we can drive efficiency. The Internet can provide some of it. We do that with our suppliers, over 90 per cent of our transactions with customers (are via the Internet). With customers, that takes longer. But it is definitely heading in that direction so there is all kinds of opportunity.

CWC: Hi-tech is full of personalities. Bill Gates, Larry Ellison and the like are often viewed with both reverence and disdain. What do you want people to think of when they think of Michael Dell?

Dell: I don’t really have a great desire for them to think about me, to be perfectly honest. My goals are for the business to be successful and that is my job, so I don’t have a great desire for people to spend a lot of time thinking about me, to have my personal like profiled. It is just not who I am.

CWC: You are a 37 year-old billionaire. What is the driving force getting you into work each day?

Dell: It is several things. I found my passion when I was 19 years old in business and the computer industry. I love this business and that gets me very, very excited. I love the evolution of the industry, I love the way these products are changing the world, changing society. I love competition and I love winning and that turns me on every day. I am having a great time. Unless you have been able to be part of something like this it is hard to know how much fun it is. I got to tell you, it is a whole lot of fun.


Move to into large enterprise market a big challenge for Dell

There is really no debate whether Dell is a successful computer company. It has gained market share, often at the expense of the industry’s biggest players. As Dell continues to grow, it is pushing more and more into the large enterprise market. But as the stakes rise, so too does the competition. For those companies which view running mission-critical applications on Windows with trepidation, Dell offers a Linux solution. Ironically the company has been lent a helping hand by the competition.

“Linux is kind of new but it is gaining more acceptance and I think what has happened is that smaller end vendors like Dell (in terms of target market) are indirectly getting a boost from the bigger players because Sun and HP and IBM have all in the past six months, to a year, come out with a strong Linux strategy,” said Greg Ambrose, server research analyst with IDC Canada, in Toronto. But Linux is not yet at the stage where it is trusted to run mission critical applications at large companies like banks or insurance companies, Ambrose explained. “But it could come to that.”

Regardless, Ambrose said Dell’s foray into the very high end market will not be easy. “Once the boxes are in there it is very difficult to win over a competitor’s customer…it is not impossible but it is rare.”

IBM, Sun, HP and Compaq also have comparable offerings to what Dell has in low and mid-range servers so they are in a position to cut the prices on the low end to make sure the company stays an IBM or Sun or HP shop, he said.

“So Dell’s strategy becomes to go to the big bank or what ever and say forget the high-end stuff, leave it but we can give you a deal on the low end.” Ambrose sees opposite corporate strategies with Dell starting low and working high, while the likes of IBM and Sun starting high and working down.

“Dell does have an opportunity though,” he said.