Michael Dell on

Published: June 28th, 2007

Dell has in last 10 years grown from a US$5 billion to a US$60 billion company and the bulk of that was using the direct model. As I described to the team in the memo, which was leaked out, the direct model was a revolutionary model in the industry, but not a religion. We have a significant billion-dollar business with solution providers and retail partnerships. We are going to expand the number of ways people can buy our products. The channel is going to grow. The direct is going to grow. I think it will all grow.I have had a number of discussions with solution providers and I believe the best channel partner now is the one that adds value to the relationship and to the customers they serve that is unique and long-lasting. Make no mistake, we will sell directly to customers and to partners. And, oh, by the way, so do our competitors.

Channel Conflict
We are looking at deal registration in parts of our business. We want to make that broader. I would also say that we are looking for partners who add value beyond the product. I think most resellers and solution providers know it is not a great business marking up product, and that’s not been a fantastic business for many years.

Vista is gaining momentum in the consumer space. We see some early adopters paying more attention to it in the corporate space. There are more Vista migrations being planned out. I think also we have been paying a lot more attention to it. You will see it in the next few product releases from us. We are paying more attention to industrial design to create the kinds of products that people are attracted to. I think Vista, as I said, in the consumer space there is growing demand. We still offer XP and we are seeing more people move over to Vista.

Certainly from a share standpoint Dell is No. 1 in Canada and we are No. 1 in the U.S. and quite a bit bigger than (Apple). There are a number of competitors who are raising the bar. But as the price comes down the PC becomes more of a personal accessory and fashion becomes more important in a device like this. If you think about the merging of the computing and the wireless world, we do see this as a personal accessory that people are carrying around with them. Wait a few weeks to see our new products.

We think wireless is an enormous opportunity. Mobile is a massive trend in the client space. It is no coincidence that the person who is running our consumer business comes from Motorola and (Ron Garriques) ran their handset business. It will be a key part of our product strategy.

About 85 to 90 per cent of our business is with government and corporate institutions and even SMB. One of the things we hear from them is that they are challenged by the complexity of IT. You’ve got a number of major vendors who are promoting complexity and proprietary systems that are overly complicated and require an army to install and make them run. As a result of all this, companies are spending the majority of their IT budgets on just maintaining their old systems. And so they have 70 per cent or more of their budgets on just feeding the dinosaurs. They do not have any money left to do innovation from new business models and the kinds of things that improve their business. So we have taken on the task and we think Dell, as a company, has been instrumental in making the less expensive PC that is easy to use and that is more available. We have taken on the task to do the same thing for IT. How can we make IT easier and less expensive and simpler? We do not know how to do all that, but we think it is a great challenge and one that is relevant to our customers. We think that it involves taking a bunch of this money that is spent in services and support of these large IT systems and actually reducing that dramatically. We have this concept called project Hybrid, which makes it very easy to deploy virtualized servers through our Dell/EMC partnership. When you start to get on a more standardized environment and get off these proprietary systems companies can start to deploy more of their money to innovation and the kind of change initiatives that they want to see.

Dell has about a US$6 billion services business and it is growing quite nicely and includes traditional things you think about in services. But also growing particularly fast is professional services such as Unix to Linux migration, virtualization, Microsoft projects like Exchange, the Oracle 9i rack, back up and recovery and managed services. We are investing heavily into remote managed services not only that we can deploy for our customers, but that solution providers can deploy for customers. You will likely see some acquisitions to grow that part of our business.

Linux has been a part of our business for a long time, mostly on the server side and workstations. In terms of Ubuntu, I think that question will be answered by customers. What is the demand? What is the interest? We started this in the U.S. with three models and we will get a read on what the interest level is. Linux is in an interesting gestation. It has become a very important part of the server business. There is clearly interest in the consumer market. How big it is and how many customers there are we will have to (see) in the next weeks and months. I suspect the Linux community knows what we are doing and we will have a sense of it pretty soon.

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