Rethinking PC, rethinking Dell

So what’s a Dell to do? Business Week surveys a group of armchair CEOs who offer a few suggestions for the beleaguered PC maker: make it easier for customers to upgrade their machines, invest more in R&D, get into retailing, put an emphasis on getting service contracts. All well and good, perhaps, but I’d recommend a more fundamental rethinking of the business: Rather than selling personal computers, Dell should start selling personal computing.

Dell’s a company that succeeds by saving other companies money. It looks for places where businesses are overspending, and it moves in with a commoditization strategy. It wrings the excess spending out of the market and, in effect, splits the savings with its customers, padding their bottom lines as well as its own. But the amount of money it can wring out of business PCs is shrinking. PCs are so cheap at this point – and the entire supply chain has become so lean – that there’s just not a lot of savings left to be had. Combine that with sluggish corproate spending on PCs, and it gets real hard to grow as fast as investors want you to grow.

There is an area, though, where there continues to be a good deal of overspending: the labor-intensive tasks associated with PC maintenance. If Dell tackles the whole system of client computing in businesses – if it goes beyond selling just the box – it could well find a lucrative new opportunity to exert its core cost-cutting strength. What would that business look like? It would probably involve providing an integrated system – servers, PCs and, yes, software – for virtualizing the client desktop, enabling the centralization and automation of most traditional maintenance activities. (The game’s already afoot: Microsoft has displayed its serious interest in this kind of business through its recent acquisition of Softricity, which offers such a virtualization system.) Longer term, Dell might even provide the service remotely to clients, from its own utility plants.

What seems likely is that, in most businesses, the PC will become an ever more peripheral device – a thinner client, if not a thin client – that will be very cheap and upgraded on a slower schedule than was necessary in the past. Where the money will be is in supplying personal computing, not personal computers.

5 thoughts on “Rethinking PC, rethinking Dell

  1. Anthony Cowley

    Such a shift would seriously aggravate Dell’s extant customer service problems. A truly thin computing infrastructure would mean that every customer would have to go to Dell with every problem they encounter while using their computer. That may be the way of the future, but I think it would be extraordinarily painful for Dell. The current non-integrated PC platform (to callback to recent posts here) has the huge benefit of distributing customer service responsibilities even in the face of the support consolidation effects resultant from the direct sales model.

  2. Nick Carr

    Anthony, Good point. Under the full utility model the supplier would take over end-user support, but under the locally deployed “integrated system” model, end-user support could remain under the purview of the customer’s IT department. Also, one of the points of centralizing the deployment of standardized desktops is that it removes many of the causes of end-user problems and renders others much easier to correct (scrub the old desktop and install a new one, automatically). Nick

  3. Morgan Goeller

    As a former math guy, I find that any pressure put on a company because of a third derivative or higher (such as investors wanting higher quarterly sales growth) to be folly.

    If having a large, profitable, stable, efficient, well-run company in a mature sector isn’t good enough for investors then the problem may not be with the company (so much).

    I think something a lot less radical to consider would be taking the company private instead of completely reinventing themselves by the end of the quarter.

  4. Nick Carr

    Morgan, You’re right that investors may have unrealistic expectations about Dell’s business (though it could be argued that Dell hasn’t tried very hard to educate them otherwise). The reinvention I’m suggesting definitely isn’t one you’d pull off in a quarter. It’s a long-term transition, with the new business growing steadily alongside the old one. Nick

  5. Sebastian Muschter

    Couldn’t Dell take this model much further? From my own experience, customers realize that a key savings lever in infrastructure is demand standardization – streamline the host of applications put on a user’s PC across business units, regions, languages etc.

    The ultimate goal here is to accomplish having only one image for all PCs a company runs – because then you can order PCs from your supplier already with that image loaded, which takes a lot of effort away. Apparently HP offers that already.

    The same could be done with servers, of course.

    Dell could take this one step further and deliver servers that are preconfigured and preloaded as mail servers, web servers etc.

    In the long run, I am a little pessimistic for Dell though – could it be they vanish in the Bermuda triangle of increased outsourcing of services (favoring HP), increased utilization of external infrastructure via the utility model (favoring IBM and the new players like amazon’s S3) and the trend towards thin clients (favoring who?)?

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