Dell's Marketing Strategy

Dell’s marketing strategy In the realm of enterprise IT, Dell is often viewed as having a singular strategy-build and sell products cheaper and more efficiently than competitors, and thereby grow both market share and revenue. While that deceptively simple plan lies at the heart of Dell’s approach for customers, its overall enterprise strategy, like its presence in the enterprise market, it maturing, growing stronger and becoming more complex with each passing year.

Dell has crystallized its long-term strategy for business customers in a vision it calls the Scalable Enterprise, which has many similarities with the dynamic computing strategies of its competitors—IBM (On Demand), Hewlett-Packard (Adaptive Enterprise), and so forth. Scalable Enterprise is centered on Dell products, services and alliances—all of which are rooted in industry standards and cloaked in the famous Dell direct model. The company has been promoting and marketing this vision for only a few years, but it has quickly become a focal point for how Dell rationalizes its product and services roadmaps.

And it intersects with Dell’s overall view that the industry will continue to leverage clusters of high-performance, industry-standard servers and operating environments, and move away from larger-scale, proprietary systems. More important, the Scalable Enterprise vision also gives Dell a method for speaking with customers about its overall value proposition, and how it can help customers migrate to the long-term dynamic computing vision.

Dell’s Services employees, in particular professional services, play a critical role in evangelizing the value of the Scalable Enterprise and in engaging customers in discussions as to how to make the vision real in their IT environments. Dell has never aspired to grow its professional services business to rival those of IBM Global Services (IGS) or the global systems integrators (GSIs). However, the company does recognize that services are a linchpin for helping customers use Dell products to address both their IT and their business challenges, and convincing them that Dell’s products and solutions are truly enterprise-class.

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To that end, Dell has refocused its professional services portfolio (and its entire services roster), placing overall customer satisfaction, “lifecycle” services and the Scalable Enterprise at the core. In this report, I am examining how Dell is trying to leverage professional services to drive its Scalable Enterprise vision. We begin with an overview of how customers view Dell’s Scalable Enterprise vision, based on data from a recently completed Summit Strategies survey.

We then briefly review the tenets of the Scalable Enterprise strategy and drill down into Dell’s services portfolio, with a particular focus on professional services and some of Dell’s newer offerings. We conclude with suggestions about steps Dell can take—in particular with enterprise services partners—to further enhance its professional services strategy and spread its Scalable Enterprise vision throughout the market. We first explored Dell’s services strategy two years ago (see our January 2003 report, Can Dell Find Success in Enterprise Services? ).

Then, Dell was still refining its services strategy—particularly, how it would move ahead in enterprise services. At that time, many of Dell’s executives were concerned that customers did not view the company as a strategic enterprise vendor, or thought that Dell lacked enterprise-level expertise for designing and deploying IT environments. What a difference two years can make. We recently asked IT buyers—enterprise and SMB—to identify their most strategic IT vendors, both for overall IT strategy and in a variety of different IT areas, including infrastructure software and implementation and support.

As shown in Figure 1, when we asked all respondents how important various vendors would be to their organizations’ overall IT strategy during the next three years, Dell ranked fourth (19%) among those vendors identified as most strategic—behind Microsoft (36%), IBM (21%) and Cisco (21%). Dell ranked ahead of Hewlett-Packard (HP), Oracle, Sun Microsystems, SAP, and some global integrators and outsourcers. Another 28% named Dell as one of their top two or three most strategic vendors.

In another survey data point, among large enterprise customers (with 1,000 or more employees), Dell ranked as the fifth most strategic vendor (20%), with Oracle moving ahead of Dell. The news was even better for Dell when respondents were asked about strategic vendors for their server and storage strategies during the next three years. Dell came out on top among enterprise customers—ahead of HP, IBM, EMC and Sun (see Figure 2). Dell also outpaced IBM among small and medium businesses (SMBs), a market that both companies view as a strategic priority.

While these two data points do not directly relate to the robustness of Dell’s services capabilities, they do demonstrate that Dell’s profile as a provider of enterprise-caliber solutions has gone up considerably in the past few years. In addition, when we asked our survey audience to select their most strategic vendor for IT support and implementation services in the next three years, Dell placed fourth among total respondents—again behind Microsoft, Cisco and IBM—and fifth among enterprise respondents.

It’s also clear that Dell’s contention that lower-cost, standards based systems can handle IT functions previously reserved for higher-end, proprietary systems is resonating with customers. Also, Dell may benefit from its high-profile consumer business, with familiarity in consumer markets breeding a similar familiarity at the corporate customer level—although there is no conclusive evidence about a linkage. The momentum is helping propel Dell and its Scalable Enterprise strategy into a leadership position in enterprise IT environments (see Figure 3).

Based on an unwavering belief that IT customers want simplicity, optimization and better management, Dell’s Scalable Enterprise vision encompasses Dell’s mission to standardize core elements of IT datacenters to deliver these capabilities. It emphasized de facto standard products, open standards specifications, customer choice, lifecycle services and the advantages of Dell’s direct model. The Scalable Enterprise encompasses some, but not all, of the characteristics of Summit Strategies’ dynamic computing framework.

This framework tightly aligns IT and business goals through the use of new infrastructure components and virtualization capabilities, automated and policy-based service management capabilities, and optimized business processes. Dell is positioning itself to focus on many of the infrastructure hardware elements of dynamic computing—and is bringing in partners to solve the major infrastructure software, management and business process challenges of the dynamic computing equation (although some Dell-developed management capabilities are becoming increasingly strategic for the vendor).

IBM and, to a lesser degree HP, talk to customers about their ability to deliver dynamic computing solutions from either the bottom-up (aiming to make the IT infrastructure more flexible and adaptable) or the top-down (analyzing business processes and then changing the underlying infrastructure to better support them). Dell, however, approaches customers with a more narrowly-focused value proposition that stresses a phased approach to drive standards and scalability within an enterprise datacenter—which will lead to better IT support and adaptability for usiness processes over time. In fact Dell believes that its Scalable Enterprise vision will not come to full fruition until 2008, when the company plans to deliver more automated policy-based capabilities, self-monitoring tools and dynamic resource allocation for heterogeneous systems. Of course IBM, HP and others would say they can provide a greater array of dynamic computing solutions now, and that customers have no need to wait several years to take advantage of them.

However Dell believes customers will be more comfortable with their longer-term, phased-in approach that emphasizes standards—and that by leveraging its direct model; customers will see Dell’s approach as more affordable as well. When we profi led Dell’s services business two years ago questions lingered over whether Dell could sustain its services business and how strategic services would play into the company’s future (Scalable Enterprise had not yet been introduced).

Today, with services as one of the three main pillars for the Scalable Enterprise strategy, there is little doubt about services’ overall importance to Dell. Services currently generate about $4 billion in annual revenue and it is one of the fastest growing parts of the company’s business. In fact professional services revenue has doubled over a two-year period, with significant growth in both the U. S. and overseas markets.

As referenced previously, Dell’s services reflect the company’s overall philosophy that customers want more standard, less custom and more lifecycle IT solutions. Dell’s approach has been to slowly expand beyond traditional support services (which still generate the majority of Dell’s services revenue) with more repeatable, higher value-add professional and managed services, both directly and through partners. To address this Dell is attempting to highlight its business-centric expertise in existing and new professional services offerings.

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