By Charles King, Pund-IT, Inc. June 3, 2015
The Dell Annual Analyst Conference (DAAC) last week in Austin, Texas was the fifth the company has hosted. While each has been interesting, this year’s event was particularly revealing and insightful. Why so? Because Dell is coming finally and fully into its own.
The first two DAACs saw the company developing and expressing a vision that was substantially different than what most long-time Dell watchers were used to. That was partly a matter of timing and partly due to fundamental changes in core markets. In 2010, nearly half a decade had passed since Michael Dell had returned to the company’s CEO position. But at the same time, traditional PC makers, including Dell, were coming under siege due to emerging, highly mobile smart phones and tablets.
The “death of the PC” predictions bandied about at that time proved wildly exaggerated and short-lived, but Dell redoubled its efforts to build-out a portfolio of innovative data center solutions and services, and became a full-blown, end-to-end IT vendor in the process. The next two DAACs were largely shaped by Michael Dell’s decision to take the company private. The 2013 event occurred around the time he announced his plan, and the following year’s conference kicked off a few weeks after he succeeded, despite some formidable opposition.
As a result, DAAC 2014 occasionally had the flavor of a milestone celebration with all its attendant giddiness and a bit of bewilderment over what comes next. In marked contrast, DAAC 2015 found Michael Dell and other company executives, along with the Dell customers and partners who were on hand to lend insightful testimonials, fully cognizant of what they have accomplished and fully prepared for whatever comes next.
Building for the long term
So what is that exactly? In both his main tent presentation and a short discussion we had afterward, Michael Dell emphasized the company’s “laser focus” on customers and the benefits of being free from financial markets’ obsession with short term issues. “More and more often we’re hearing customers ask, ‘What do you know about my business?’ As a result, we’re exploring new markets and business opportunities, developing new solutions that are more vertical, based on software and services, and hiring thousands of new expert salespeople.”
How crucial has the company’s private ownership model been to pursuing these deals? “It’s required real change from what we were 5 or 10 years ago and that’s easier to achieve if you don’t have to predict the results every month or every quarter. You think about all the uncertainties in the industry with all its moving parts, then overlay the changes your company is going through. Are the market’s expectations that you can accurately predict what comes next reasonable? No way. So we’re not trying to predict it—we’re just doing it. But in a public company, the market wants predictability.”
The benefits of end-to-end, customer-centric solutions
I asked Dell about the company’s forceful strategic shift toward developing end-to-end business solutions and services – a common article of faith in IT for decades but one being steadily abandoned by once fierce advocates. “If you look at the data center market, the only vendors that do well are those that have volume and scale. If you look at it from just the supply chain—from being able to purchase components like processors, memory, displays, and disc drives in volume—the advantage goes to server companies that are also in the PC business. When I see what our competitors are doing – exiting markets, and so on – it’s like manna from heaven.
Has the new strategy resulted in significant new business? “Along with customer relationships, we’re investing in new resources and new acquisitions. Over time you engage with new clients and new opportunities that accrete to the overall business. By not being focused on the short term, we’ve built relationships with over 25,000 new customers. How many of those would we have today if we hadn’t made the changes? I don’t know but I believe it would not be as many. Now that we have a broader set of solutions, we’re seeing a lot of cross-selling opportunities. You know, a customer might first come to us for PCs but then will call us for servers and storage. Then they’ll need Dell Services to come in and connect everything. We don’t expect to win every opportunity but we’ll win a lot of them.”
I commented on the widespread optimism I was seeing at the analyst event and Dell’s impressive results (the company has already repaid $3.4B of the debt required to finance the privatization effort, and enjoys a sterling rating from three credit agencies), saying that I suspected that other IT vendors wished they had the wherewithal to go private. Dell replied, “I’ve heard from several IT CEOs – not just a few – who’ve said they wish they could do what we have. I think that this focus on short term results is negatively impacting many areas beyond business, including politics. Good things can come from managing short term pressures, but you can’t let them run your life or your business.”
Dell mentioned that the company’s obvious progress is also delivering a beneficial secondary effect: inspiring quality executives to join up. “We’ve hired many high profile execs, like Rory Read (now COO, formerly CEO of AMD and president of Lenovo’s PC division), Jim Ganthier (VP and GM of Dell’s Engineered Solutions and Cloud, who was a longtime executive in HP’s server division), and Paul Perez (now CTO of Dell’s Enterprise Solutions, who previously led Cisco’s UCS organization). But there are many more who haven’t been highlighted, and many more are still joining. What we’re doing is really resonating so people look around and think, ‘My team isn’t doing so well, so maybe I should join Dell’s team.’”
I was also curious about what Dell thought about the situation in China, which has long been a strategic market and partner for the company. I wondered whether recent events, including rising political tensions, U.S. government restrictions on exporting certain Intel technologies to China and HP’s decision to sell a controlling interest of their China business to a government-influenced organization signaled potential problems. “We’re doing some things differently in China than other companies, leading us to have better results. China wants some things and so do we but to succeed, you have to understand the motivations of the other party.”
Like what? “China wants jobs – they want the economic stability that comes from well-employed people, and they want to control their technological destiny. There are really three aspects to our relationship with China. First, we’ve created nearly a million jobs in China, both at our own and at manufacturing partners’ facilities. Second, our supply chain accounts for $25B in purchases in China, the vast majority of which are exported. Third, we’ve worked hard at developing suppliers in China—not just buying stuff but helping those companies grow and succeed.”
I was also curious about something Dell mentioned during his keynote – that the structural changes the company has undertaken were being matched by cultural changes in its workforce. “What we’re doing is reasserting the value of risk and entrepreneurialism among our employees. Risk can be a positive influence – if you want to innovate, you have to take risks. You have to accept that not everything will work. A lot of companies don’t seem to want to do that, so they focus on managing or reducing risk. We want to reassert its value organizationally and among individuals. That’s where you drive innovation.”
In the end, this is a critical issue in terms of shaping both the company and its future. That future seemed remarkably bright at DAAC 2015 but the way forward will be anything but easy. Changes continue to roil many of the traditional and emerging sectors and markets where Dell is focusing its attention. Plus, while the company’s long term strategy and outlook appear strong, many of its competitors are equally ambitious and are rapidly developing innovative new solutions and services.
But Michael Dell is one of the most successful entrepreneurs in a technology industry that prizes entrepreneurship. If he and the rest of his company’s leadership can somehow invest that spirit and its attendant creative risk taking, along with a fundamental respect for customers and partners across Dell’s tens of thousands of global employees, the result could be something largely or entirely new in the IT industry.
Building for the long term never looked so good.
© 2015 Pund-IT, Inc. All rights reserved.