Remaking Dell

Dell has been a company caught up in the whirlwind of change. As a company, it has endured many strategic transformations, with the most recent one being that of going private and run by an entrepreneur, Michael Dell, the man who started it all. Dell calls itself as the ‘world's largest start-up', while many others feel that it is a ‘work-in-progress forever'. In the enterprise space, it is playing a furious game of catch-up through acquisitions. In the consumer space, it is trying hard to hold on to traditional strengths, maybe in newer ways, and the missed out first wave of tablet revolution.

But think of this. While there have been no spectacular successes from Dell in the recent past, there have been no deadly failures as well.
The question is- where is Dell going? Specifically, how does Dell fare in India?

India in Dell

There's a lot of India in Dell; India is at the core of Dell's global strategy. With the second largest footprint in terms of manpower with 20,000 people, Dell India is engaged in global R&D and manufacturing apart from its global support organization, its global IT team, and many other corporate functions based out of India. Dell has sizeable manufacturing facility in Sriperumbudur, near Chennai, occupying over 100 acres. The global analytics team that does market pricing and predictive analytics on customers is based out of India. There is extremely high level of appreciation among Dell's senior leadership team for India and its contribution to the company's overall operations.

In R&D activity, the work done out of India is pretty much grounds up creation of IP. There were 37 invention disclosures from India last year. With the setting up of the storage design center, it is the completion of a full circle with server and networking design activity that were already in place before.

India has been called out as one of the top 10 priority markets for Dell globally. In consumer products, India is one among the Top 4 for Dell. To keep up with these priorities, Dell is planning significant investments into the country. Says Alok Ohrie, President and Managing Director, Dell India, "Dell India has risen to a much higher status. It is very heartening of course, but we also have to take it seriously to meet the expectations the company has from India."

The Challenger

Alok says that Dell is very aggressively challenging a lot of well established incumbents in the market. Dell has been furiously working for the past few years on the strategy of being an enterprise technology provider with products and solutions that extend across the technology stack. The company spent nearly $13 bn in acquiring 18 to 20 companies to fill the gaps in its enterprise portfolio. Dell says that its product portfolio is lining up extremely well and is oriented at transforming existing infrastructure and application space.

The IT market is at the cusp of a technology revolution. Dell is spotting the opportunity of helping customers move from legacy to modern environment. It is an exciting phase for the company. It has gone on the path of privatization to help accelerate our strategies and make systematic investments. Michael Dell owns 75% of the company and the rest is owned by Silverlake Partners. People at Dell are excited about the company going private; it gives them a sense of freedom and latitude to make decisions and the nimbleness it offers. They call it the ‘world's largest start-up' for the new sense of energy that fosters innovation and market agility.

Enterprise-The Core of Dell's Transformation

The epicenter of Dell's transformation is in its enterprise business. The move from PCs to servers was the starting point and it was the easier part. Adding the other pieces of the enterprise stack like storage, networking, and data center solutions completed the enterprise portfolio. Despite having the product portfolio in place for quite some time, Dell was faced with the problem of presenting the products in the form of solutions. As more gaps in product portfolio got filled, mostly through acquisitions, Dell lost precious time in taking these to the market. It is now focused on addressing this issue.

Dell's head of enterprise business, Sridhar S is focused on doing much of the heavy lifting. He mentions about integration, product modernization, and addition of management capabilities leading to massive overhaul of its enterprise products portfolio. At the annual Dell World meet in December 2013, some of the key announcements centered on this. Integrating the networking portfolio comprising data center networking and end-user networking into one, upgrading its storage technology Equalogic to make it flash enabled, providing better of storage management and availability are some examples.

Here too, there have been sustained efforts at continuous upskilling of people. Explains Sridhar, "The nature and quality of conversations are changing. We are now talking about moving from the edge to the core of the data center. This requires varied degrees of knowledge. But it is essential if we have to improve engagement with the customer. And skills transformation is an ongoing process."

The other big change is to align the go-to-market strategy based on customer tiers with the larger ecosystem. The partner ecosystem comprises large global system integrators (SI), mid-size Indian-heritage services companies like NIIT and TechM, and rest of the channel. Dell has doubled the team managing global SIs and mid-size services companies. Engagement with channel partners has increased with the expansion of the channel partner ecosystem, dealer registrations have gone up multifold in the past three to four months. The rest of the ecosystem comprises technology partners such as SAP, SAS, Microsoft, Red Hat and others who are very critical because they are important qualifiers of Dell's business.

Dell's own services business (not the global IT-BPO services business unit) that provides an array of technical services provides a big thrust in driving Dell's enterprise business overall. One of the strongest assets for Dell are the solution centers that act as important enablers for Dell's ability to address complex and high-end opportunities in the market. This has helped Dell get a few complex IT deals at companies like Coffee Day and USHA International. At Coffee Day, Dell completed a migration of the SAP platform along with migration of the OS from Unix to Linux.

Dell has some advantages of being the new kid on the block. Its solutions are modern; it doesn't have the overhead of legacy systems. Dell has the advantage of leapfrogging straight into the new era of software-defined IT and converged infrastructure, while its larger competitors like IBM and HP have loads of legacy architectures to deal with. Says Sridhar, "Our ‘converged' vision is the cleanest. We look at it at three levels. At the hardware level, it is about server, storage, and networking coming together. At the operations and management level, it is about working from a single console. Third is the convergence at the applications and services delivery layer." Dell's products are therefore modern-Dell's storage strategy is centered on flash, its networking range targets 40g (Gbps), its servers are aligned to SUSE Linux, and so on.

Dell has also demonstrated its ability to engineer and bring to market breakthrough products. For example, VRTX which is a convergence product that sort of shrinks data center functions into a box is well-suited for SMEs or branch offices. Dell reports very encouraging sales for the product. Sridhar sums up, "As the convergence story gathers steam, we have a very strong story to tell."

Breaking Old Bastions

Dell's original claim to fame was its PC business and the unique business model of selling directly to the customer. The model has now outlived its term and the PC market is now crushed under the weight of new devices. But the optimism at Dell's PC business unit called End-user Computing is unflagged. Krishna Kumar, Executive Director- EUC, Dell India, points out to low PC penetration rates in India as the proof of market potential. At a mere 7%, India even lags countries like Sri Lanka and Thailand.

The PC is no longer the primary access device for Internet access, it is the smartphone or the tablet. But the PC still matters a lot because it is still the mainstay of content creation, whereas tablets and smartphones are primarily devices for content consumption, says Krishna Kumar. For India, education is an important segment and holds vast potential. Dell is looking at reaching out to 300,000 students in the top 20 cities.

The key to growth lies in extending the availability of the product in tier-2 and tier-3 cities. Dell is pursuing an aggressive plan to expand its points of presence. Starting with 46 retail stores in April 2013, the company plans to end the year with more than 200 stores in 83 cities.

Dell still believes that the business market segment for PCs and devices holds a lot of potential. Says Krishna Kumar, "The workforce coming into companies is very young and are more tech aware. They have a point-of-view about devices they need. Companies look at devices as productivity tools." Dell believes that the value of devices is enhanced by software such as PocketCloud and various security features, so it is not the device alone that matters. The software is therefore the differentiation factor, Krishna Kumar claims.

In terms of the product portfolio, Dell had desktops, various formats of laptops, and newer generation all-in-ones. The excitement at Dell is around the recent launch of its tablet range. With tablets, Dell has some interesting positioning strategies which the company believes will serve as differentiators that would help carve out space for itself in the highly competitive tablet market.

Dell looks at the tablet market in terms of three functional areas: play, work and play, and work. Says Krishna Kumar, "Consumers need to connect, access, and share. Enterprises need security, management, and reliability. The value propositions therefore have to be totally different." The tablets that were launched by Dell are targeted at specific segments and have features relevant to those segments. For example, the consumer tablet has pre-loaded apps PocketCloud, a technology developed by Dell's thin client business called as Dell Wyse that allows one to create a personal cloud that can be accessed through multiple devices. The enterprise tablet has advanced exchange warranty, has IntelVpro management capabilities, is designed to help companies with their mobility and BYOD programs, social media and other requirements like mobile application development.

Tackling the millenials segment is critical and Dell's marketing is oriented towards doing that. Led by Ravi Bharadwaj, Executive Director, End User Computing, APJ & India Marketing, the focus is on using more of digital channels. Dell leveraged social media campaigns like #hintagift and #icandokuchbhi to deepen its customer/partner relationships and engage with target demographic in a relevant and effective manner.

Says Ravi Bharadwaj, "We create solutions with our customers in mind, since what is important is not the technology itself, but what it enables them ‘to do'. Our comprehensive efforts in both brand and business have resulted in Dell being recognized as a trusted technology advisor. We also understand that today, customers are looking for brands which are an extension of their personality. This philosophy is embedded at the center of everything we do, and has formed the basis of our most recent brand campaign that focused on real-life Dell customers and their stories of how technology has enabled growth and achievement."

The India Agenda

There are five strategic initiatives identified for India. The first one is to enhance end-to-end capabilities both in terms of product portfolio and market representation. The second one is to work on a superior relationship model. Next is market expansion beyond the top eight cities to touch 50 cities by 2014. Establishing cloud computing client business (read tablets) is the fourth one. Lastly, improving customer experience has been identified as a thrust area.

In the last eight months, Dell India made some significant changes to its structure and has kicked off real moves on some of the strategic initiatives mentioned above. To sell to enterprise customers, the company realized that a consultative sales approach is needed. There is also the need to improve customer engagement and provide customers access to senior Dell team. The presales team is being strengthened both on technical proficiency and client relationships.

The Dell India organization has been divided into four P&L teams: end-user computing group, enterprise solutions group, software group, and services group. The focus is to create multiple revenue streams with the sales organization as the integration point. Once the units were created it was important to look at the leadership capacity in those units. A few good performers were promoted to fill key leadership positions. Equally, senior talent was brought in externally. For example, Murli Mohan with over 20 years experience in software business was brought in to head the software group. Similarly, Neeraj Mithwani was recruited in a senior role in the storage area.

There is a heavy move towards mass re-skilling of the Dell workforce to move people up the ladder in terms of their performance potential and to place the right talent in the right slots. The HR team at Dell headed by Vijay Bharadwaj, VP-HR, Dell APJ, has been on overdrive with assessments, mapping, and talent development initiatives. A separate training group is equally on the overdrive with both internal and external training resources deployed. The move has been necessitated by changes in market drivers, changes in Dell's own business from being a hardware company to an enterprise solutions company, and changes in technology.

Moving the Needle

A hard look at facts reveal that Dell's PC business has to be played on constant defense, the tablets foray is too recent. Dell is still not a top tier company to reckon with in the enterprise space. The challenges are valid. For one, it has been late to the party. Then, it was late to aggregate its enterprise portfolio as an integrated offering. Meanwhile, its foray into global services business was possibly a distraction for Dell's top management. It is not that its services business did not have a good story to tell, but it entailed opportunity cost for a PC company shifting gears to become an enterprise IT company.

Dell's makeover strategy involved working on a few strategic moves. The moves are all right, but right moves alone do not guarantee success. Dell is making its talent top-rated, but talent alone would not matter. The product categories are being innovated, but that alone won't help make it.

That said, these moves should add up to move the needle in the minds of the customer and in Dell's books. The strategic roadmap of Dell's business has merits; it is not chasing a dead-end. It is very much there in the midst of a few tectonic shifts in technology. Dell's partner ecosystem has taken notice of the changes at Dell, they welcome it. There's a growing set of marquee enterprise customers who endorse Dell's capabilities. The hard part is to keep at it. The guys at Dell need to pursue their strategy with unflinching faith and unwavering focus.