Dell Transition

Question: Critically evaluate the strategies the chosen organisation is using; are they appropriate and sustainable? What challenges is it likely to encounter in its attempt to fulfil and mitigate these responsibilities? Answer: Introduction Dell transitioned to a private company in 2013. One intention of that move was to release the company from quarterly results pressure that are typical of publicly held companies to make required changes to maintain and increase its competitive capabilities, as well as increase its focus on innovating for its customers. Dell has demonstrated a willingness to broaden its product and service offerings, while focusing on information technology-related initiatives (Richard, 2006). Strategy: Positive Dell has outlined an approach that is intended to align with what are regarded as the most-important growth opportunities going forward based on customer imperatives. The four customer imperatives that Dell articulates as part of its strategic solutions approach are "transform, inform, connect and protect." These four imperatives are designed to cover ongoing market evolution in areas like transitions to cloud and more software-defined solutions (transform), leveraging big data management and analytics (inform), mobility (connect) and security (protect). Financial: Promising While now a private company, 1 Dell continues to receive a Promising financial rating as it did in September 2012 reflecting its growth, profitability, cash flow and financial strength during the last four quarters. Gartner's Financial Rating is based on a metric that measures a combination of growth, profitability and liquidity, generally using a company's publicly available financial statements. 2 Dell recorded revenue in its October quarter "in excess of $14 billion," along with "revenue growth and significant debt reduction over the past 12 months." 3 Three debt rating agencies 4 recently upgraded their ratings on Dell's debt, citing "strong liquidity." 3 However, investors and vendors may find it challenging to forecast Dell results, owing to the lack of availability of publicly available financial statements. Marketing: Promising Dell leverages solid business efficiencies to fulfill market demands. With many products and offerings, Dell must maintain a balancing act to avoid potential confusion where overlap may appear to exist. Going forward, Dell will need to shift some of its marketing competencies to demand driving (as opposed to demand fulfillment), particularly as it attempts to bring more innovations to market (Richard, 2006). Organization: Positive Michael Dell remained chairman of the board and CEO as a part of the privatization, and he exerts strong leadership influence on the company. Executive management is divided into four main product/service areas Enterprise Solutions, Client Solutions, Software and Services. Market Offerings Product/Service: Positive Dell has expanded its range of hardware, software and service products that also, in numerous cases, are designed to support each other as integrated solutions, as well as provide potential connected marketing and sales opportunities. Desktops, Notebooks and Tablets(Formerly, PCS): Positive as well as provide potential connected marketing and sales opp Dell is the world's No. 3 PC provider, and a strong enterprise PC supplier. It is one of the few global companies capable of providing PCs anywhere in the world. The year 2014 has been very successful for the company, as Dell grew at above-market average, boosting its market share by nearly 2 percentage points versus a year earlier. In the year since its leveraged buyout, Dell has become a stronger PC provider than before, with solid commitment to the PC market, including the professional space. Dell still views PCs as vital to the company's future, with a significant proportion of its revenue coming from PCs in 2014. In addition, Dell has a solid line of tablets with its current Venue Pro products. (Note that this category was formerly listed as "PCs," and was changed to encompass the breadth of client devices, including desktops, notebooks and tablets.) Servers: Strong Positive Dell remains the world's second-largest provider of x86-based servers. It has a wide and deep server product line that spans from tower servers, to multinode (also known as "skinless") servers. Dell has managed to produce annual server revenue increases for the past five years in the face of significant competition, and competes well on product feature sets and price. Dell uses its servers as the compute elements for a variety of integrated system offerings, including its Dell Active Systems and PowerEdge VRTX, as well as its hyperconverged offerings (see Storage section below). Dell Data Center Solutions has helped Dell drive sales into hyperscale data centers. In late 2014, Dell introduced its PowerEdge FX modular architecture. Storage: Positive To expand market penetration opportunities, Dell has elected to focus its RD investments on strengthening its core external storage platforms, and broadening its portfolio to include hyperconverged integrated system offerings based on Nutanix and VMware EVO:RAIL software. The focus on fortifying its core external storage platforms, in particular the Dell Storage SC Series, is paying off, as reflected by progressive quarterly improvement in year-over-year revenue performance. Dell has made important feature/function and performance enhancements to the Dell Storage SC Series operating system; extended the span of its market reach, with the introduction of the lower-priced SC4020; and in January 2015, announced a low-cost flash-only version of the SC4020 priced at $25,000. While overlapping with the new Dell Storage SC Series, the Dell EqualLogic PS Series still represents approximately one-third of Dell's core external storage revenue, and holds the leading market share position in the iSCSI segment of the external storage market. Although nascent in market penetration, Dell's Fluid File System provides a credible midrange network-attached storage solution that features a single namespace scale-out file system. Networking: Positive Dell has emerged as a top four player in the data center networking space when measured by port shipments. It has also been the most-innovative and most-disruptive mainstream data center networking vendor in the market over the past 12 months. In January 2014, Dell announced support for a disaggregated new switching paradigm allowing organizations to run third-party networking OS software on select Dell hardware. Combined with continued advances in the data center portfolio (high-performance, fixed form factor switches and integrated blade switches), Dell now offers a compelling alternative for many data center use cases. On the campus front, Dell has enhanced its switch offerings, and continues to offer an OEM wireless offering to complete the portfolio. Software: Promising Dell has sold software for many years, primarily tied to hardware such as PCs, servers and printers. In March 2012, and to support the company's transformation away from a purely hardware provider, Dell created a specific software business unit, under the helm of ex-CA Technologies CEO John Swainson. This organization now has approximately 6,000 dedicated employees, including 1,600 in engineering and 2,500 in sales. Dell's software organization spans the security, system management and information management segments. According to Gartner estimates, the share that software as a percentage of total company revenue has increased by 0.5% over the past four years to 5.25%. Relative to the overall software market, Dell's market share of nearly 1% is just less than companies such as CA Technologies, Salesforce and VMware. Dell purchased StatSoft in March 2014, which gives the company stronger presence in business intelligence and analytics. The challenge for Dell will be to continue to evo lve its existing offerings to even more unified software platforms, as well as avoid product fragmentation and isolation resulting from multiple acquisitions. Product Support: Positive Dell's hardware support processes are mature, efficient and consistently delivered. Inclusion of firmware, OS and virtualization layer patching, as well as proactive prevention-focused elements, into Dell's ProSupport Plus offering demonstrate that Dell is a leader in the industry, and is committed to increasing the customer value derived from support contracts. If Dell is to become an even more formidable force within the support industry, it must extrapolate its approach to hardware support across its software support portfolio, which remains traditionally focused on reactive break-fix services at present. Infrastructure Services: Positive Despite still being seen by many as a hardware manufacturer, Dell's infrastructure service business continues to gain traction in the global market. North America, naturally, represents the core of this business in the Data Center Outsourcing (DCO), Infrastructure Utility (IU) and End-User Services (EUS) lines, with EUS making stronger advances in EMEA than DCO or IU. Significant investments in software assets (for example, Quest Software, Scalent Systems, Kace and Enstratius), and Dell's heritage of automated logistics excellence means that it is well-placed to grow further as buyers increasingly look for highly configurable, yet standardized, services at competitive price points. Customers indicate that Dell's operational processes are strong, its support tools and systems are sound, and that it has the technical skills needed to deliver high-quality DCO and IU. Application Services: Promising Dell's 300 or more application service customers are serviced via 13 delivery centers around the globe. Within application services, Dell Services' focus areas of modernization, transformation and digital business services are augmented and extended with software assets (for example, StatSoft, Make Technologies and Unikix), and additional managed services (for example, Boomi and Clerity Solutions). Dell's transition away from traditional labor-arbitrage-based services to IP-enabled composite services is well underway, and it appears to be serving its customers well. While the offerings are strong, Dell needs to avoid trying to be all things, to all people, and focus its portfolio more definitely if it is to truly differentiate itself in the space. Market awareness of Dell's application service competency and capabilities remains low, and Dell must rethink how it markets these services if they are to grow at a rate commensurate with their potential. Managed Security Services: Strong Positive As part of the company's comprehensive portfolio of security technologies and services, Dell continues to focus much of its security business efforts toward its managed security Dell SecureWorks services. This strategy has been paying off during the last year, as the company continues to execute well, and has been ranked as a leader in our recent "Magic Quadrant for Managed Security Services, Worldwide." Dell SecureWorks continues to be top of mind in Gartner customer shortlists for managed security services, and notably winning deals against larger rival managed security service provider offerings. Dell's rapid adoption of advanced threat detection technologies and offerings for its customers, including technologies such as Network Sandboxing, Endpoint Detection and Response, as well as adjacent Incident Response and Security Risk Consulting services, have allowed the company to attain considerable traction in the security market during the last two years. Dell's global security operations centers and breadth of managed security offerings spanning device management, monitoring, threat intelligence and analytics make it a good option for customers desiring full-service managed security and security operation functions. Network Security: Positive Dell entered the network security market with the acquisition of SonicWALL in May 2012. SonicWALL is well-known in the unified threat management market, and is a current market leader in our most-recent iteration of "Magic Quadrant for Unified Threat Management." Dell has continued to invest in its research and development of the SonicWALL technology, with emphasis on intrusion prevention signature development. The company has shifted its emphasis to add enterprise sales to the traditional SonicWALL small or midsize business (SMB) customer base during the last two years, and this has created some challenges with execution. Recent product announcements have been viewed as positive for its network security product lines, and demonstrated that the company is getting back on track after the disruptions caused by the SonicWALL acquisition and business integration process. Business Process Outsourcing: Positive Healthcare and insurance industry services, including policy administration for enrollment, claims processing, member services and billing, often using LifeSys (its own policy administration system), comprise almost all of Dell's business process outsourcing (BPO) activity. These specific industry services move Dell to a positive rating in BPO. Other services include finance and accounting, procurement, and call center BPO. It also services the hospitality sector, with micropayments for hotel billing. The majority of Dell's BPO activity is in North America, with a small amount in the U.K., Ireland and the Middle East. Technology/Methodology: Positive In addition to its commitment to entrepreneurship and strategic partnerships, Dell has two main efforts to fuel technology innovation. The first is Dell Research, which is focused on technology development. The second is Dell Ventures, which examines startup companies to identify good early-investment bets. Both groups are managed by experienced leaders in their respective areas. Pricing Structure: Positive Dell continues to provide competitive pricing across its products and offerings. By maintaining its business discipline and solid supply chain management, Dell can produce bids that keep it viable in the face of stiff competition. Customer Service/Support Sales/Distribution: Positive According to Gartner clients, since Dell has gone private, there has been little to no impact on its direct and indirect sales organizations. The overall rating is Positive. Direct Sales: Strong Positive; Direct Phone/Web Sales: Positive We continue to rate Dell's direct sales efforts as Strong Positive, and its direct phone/Web sales as Positive. Channel Sales: Positive Dell is more than seven years into its investment with its PartnerDirect channel program, which now claims over 167,000 partners worldwide, of which, more than 4,300 are certified (preferred and premier). These partners are driving more than 40% of the total business revenue for Dell. Since going private, Dell has made organizational changes to push its channel programs deeper into its overall go-to-market strategy, and has invested $125 million into channel acceleration investments. Dell has been working on optimizing existing enablement efforts, including creating segment prioritization and engagement methods, to better align with partner activity and reward structures. As Dell pushes further into an end-to-end IT solutions strategy, it has expanded its partner competencies to include software (for example, data protection, information management, system management and security) and advanced competencies (for example, storage and identity, and access management) to help its partners include software into their capabilities. At Dell World 2014, Dell announced the "Dell Cloud Marketplace," which plays nicely into Dell's roots as a large "reseller." Built from its acquisition of Enstratius, as a cloud service brokerage, Dell will be able to offer SMBs and enterprises access to various cloud services (including Microsoft Cloud Platform System, Amazon Web Services, Joyent, Pertino, Delphix, Google, Salesforce, Workday and Digital Nation) in an aggregated commerce platform. Beyond what Dell can do with its own internal professional services division, there is opportunity for Dell to develop programs to recruit, manage, enable and train small, regional professional services firms and independent software vendors. References: Richard Oloruntoba, Richard Gray, (2006) "Humanitarian aid: an agile supply chain?", Supply Chain Management: An International Journal, Vol. 11 Iss: 2, pp.115 120 Chanaka Edirisinghe, Bogdan Bichescu, Xinjie Shi (2012), Optimal Selection of Contracts for Supply Chain Coordination Under Decision Hierarchy, in Kenneth D. Lawrence, Gary Kleinman (ed.)Applications of Management Science (Applications of Management Science, Volume 15), Emerald Group Publishing Limited, pp.151-180 Yi He, Qinglong Gou, Liang Liang, Zhimin Huang, Rakesh Gupta (2012), Cooperative Public Service Advertising Strategies for a Supply Chain System, in Kenneth D. Lawrence, Gary Kleinman (ed.)Applications of Management Science (Applications of Management Science, Volume 15), Emerald Group Publishing Limited, pp.89-107 Frenck Waage (2008), Fully synchronized supply chain forecasting, in Kenneth D. Lawrence, Michael D. Geurts (ed.)5 (Advances in Business and Management Forecasting, Volume 5), Emerald Group Publishing Limited, pp.211-224 Marianna Sigala (2005), COLLABORATIVE SUPPLY CHAIN MANAGEMENT IN THE AIRLINE SECTOR: THE ROLE OF GLOBAL DISTRIBUTION SYSTEMS (GDS), in (ed.)1 (Advances in Hospitality and Leisure, Volume 1), Emerald Group Publishing Limited, pp.103-121 Richard Oloruntoba, Richard Gray, (2006) "Humanitarian aid: an agile supply chain?", Supply Chain Management: An International Journal, Vol. 11 Iss: 2, pp.115 120 Chanaka Edirisinghe, Bogdan Bichescu, Xinjie Shi (2012), Optimal Selection of Contracts for Supply Chain Coordination Under Decision Hierarchy, in Kenneth D. Lawrence, Gary Kleinman (ed.)Applications of Management Science (Applications of Management Science, Volume 15), Emerald Group Publishing Limited, pp.151-180 Yi He, Qinglong Gou, Liang Liang, Zhimin Huang, Rakesh Gupta (2012), Cooperative Public Service Advertising Strategies for a Supply Chain System, in Kenneth D. Lawrence, Gary Kleinman (ed.)Applications of Management Science (Applications of Management Science, Volume 15), Emerald Group Publishing Limited, pp.89-107 Frenck Waage (2008), Fully synchronized supply chain forecasting, in Kenneth D. Lawrence, Michael D. Geurts (ed.)5 (Advances in Business and Management Forecasting, Volume 5), Emerald Group Publishing Limited, pp.211-224 Marianna Sigala (2005), COLLABORATIVE SUPPLY CHAIN MANAGEMENT IN THE AIRLINE SECTOR: THE ROLE OF GLOBAL DISTRIBUTION SYSTEMS (GDS), in (ed.)1 (Advances in Hospitality and Leisure, Volume 1), Emerald Group Publishing Limited, pp.103-121