By Charles King, Pund-IT, Inc. June 4, 2014
In my work as an industry analyst during the past 15+ years, I’ve attended too many IT vendor events to count but it’s difficult to recall one similar to Dell’s Annual Analyst Conference (DAAC) hosted last week in Austin, Texas. That’s partly due to the way it contrasted with the previous event, which took place just months prior to Michael Dell’s eventually successful bid to take the company private.
Due to “quiet period” SEC requirements, company executives at DAAC 2013 weren’t at liberty to engage in open discussions. Plus, the privatization effort was clouded by a melodramatic, yet ultimately unsuccessful effort by investor Carl Icahn to derail the process. With those days fully and firmly behind them (and Icahn currently under investigation by the SEC for insider trading), Michael Dell and other company executives hit the stage at DAAC 2014 with an energy that bordered on giddiness.
Going Private Publicly
That’s where the singularity of this event became fully apparent. While financial performance is common currency when analysts meet with publicly held vendors, sessions with private firms typically address financial issues in only the vaguest of terms. That was the case with Dell, though the company did serve up a few interesting tidbits, including the fact that during its first six months as a private entity, Dell has retired $1B of the nearly $20B in debt required by the privatization.
That was certainly good news, especially considering the controversy the debt plan originally inspired among analysts and industry watchers. But most of the other details and snippets shared about Dell’s business performance were cheery yet largely anecdotal. The optimism was no surprise—vendors hosting a crowd of analysts seldom let pessimism intrude on the proceedings (no matter how appropriate it might be).
But it casts light on a messaging challenge that Dell will continue to face: how to successfully communicate its progress without the financial framework imposed on and followed by its competitors. To Dell’s credit, it leveraged a variety of means to do just that, like detailing efforts in commercial markets, conducting in-depth sessions with analysts (mainly on new/emerging technologies) and eliciting testimonials from partners and customers. I expect this process to continue evolving, but this first effort was mostly successful.
Meetings of Note
During the course of DAAC, I had an opportunity to meet with a number of Dell executives focusing on key product and strategy areas.
- OEM—Dell has long promoted its efforts as an OEM—working with partners to develop/manufacture products and appliances based on Dell IP that do not carry the company’s brand. According to OEM group VP Joyce Mullen, the effort currently supports over 3,000 customers, develops some 1500 projects annually and is growing far faster than traditional IT markets.
- R&D—In October 2012, Jai Menon (an IBM Fellow and Research executive) was hired as CTO of Dell’s Enterprise Systems Group (ESG) to develop a new research division. Though the group is less than a year old, Menon said it is making progress in developing new disruptive products in-house and in collaboration with university labs.
- EMEA—Aongus Hegarty, president of Dell EMEA (Europe, Middle East and Africa) reported that the company is enjoying strong growth across that promising yet often challenging region, partly because of a long overdue PC refresh. In addition, continuing economic woes in much of the Euro Zone have created opportunities for Dell Finance engagements.
- Networking—Group VP Tom Burns detailed Dell’s growing focus on networking solutions and initiatives. The company isn’t known as a networking power, but it has been in the business for over a decade and received a notable boost via the 2011 acquisition of Force10. In January, Dell also announced an open networking initiative with BigSwitch and Cumulus to expand its presence in software-defined networking (SDN).
- Engineered Systems—Steve Stover, VP of strategy for Dell ESG, described his organization’s increasing focus on engineered solutions, including systems and appliances that maximally support big data, analytics, cloud and enterprise applications. Of particular interest is a recently announced alliance with Red Hat that makes Dell the first and only systems vendor to fully support Red Hat’s OpenStack distribution.
It could be argued that Dell couldn’t have picked a better time to go private, especially from a business IT market standpoint since its two main competitors—HP and IBM—are undergoing significant retrenchments:
- The former is in the midst of a continuing reorganization interrupted by spates of serious bad news, like last month’s announcement of 16,000 layoffs (in addition to 34,000 previous HP workforce reductions) reflecting continuing sales declines.
- The latter is selling its System x (Intel-based servers) organization to Lenovo, but the process is talking longer than originally expected. It has also reportedly been impacted by political wrangling between the U.S. and China, including accusations that Chinese officials and military leaders are actively managing corporate espionage against companies in the U.S. and elsewhere.
These challenges won’t last forever for HP and IBM—they seldom do for world class IT vendors. But it is hard to see how either situation will be fully resolved in less than 6 to 12 months. As a result, they provided a respite of sorts for Dell as it pursued and completed its privatization effort, and further breathing room as the company moves ahead on its new path. One can’t count on the rivals to stumble or fall, but Dell appears to be taking full advantage of the current situation and progressing before its key competitors are back to full strength.
My last DAAC meeting was with VP and CIO Adriana (Andi) Karaboutis, who joined Dell four years ago after spending over two decades in the U.S. automobile industry. Karaboutis noted that post-privatization, Dell has a greater sense of assuredness—of knowing what businesses to be in—than ever before. One of the greatest challenges she sees is the decline of traditional “five-year” programs that have been made untenable by the pace of technology change.
As a result, Dell and other vendors are depending more on “visioneering” efforts and strategies which can sometimes engender higher levels of risk. To mitigate that, Karaboutis’ organization supports an Incubation User Experience group that considers, tests, fields and analyzes new technologies and services among Dell employees. The effort has achieved notable successes, including a crowd-sourced mobile app store and customized Google-based search tools for the company’s internal network.
In a very literal way, I believe these efforts reflect an ingrained strength—the ability to conceive and enable individualized IT solutions—that seems to be encoded in Dell’s DNA. It has been apparent since the company’s beginnings, when Michael Dell devised a way for customers to easily and effectively customize desktop PCs. Individualized IT solutions, whether they are newly configured laptops and tablets or complex data center solutions designed to address specific organizational needs continue to be Dell’s hallmark.
That sense of continuity may be why Dell’s progression from publicly held to private company seems to be working so well, which was certainly the overarching message at DAAC 2104. But from what we saw and heard in both the main tent presentations and private meetings, the company appears to be successfully pursuing its vision and delivering on its promises. Those points should offer great comfort to Dell’s customers and partners, and help guarantee that the company will remain a formidable presence in the IT industry and marketplace.
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