Texas-headquartered Dell Inc. has orchestrated a coup in the Indian personal computer (PC) market, dethroning long-time leader Hewlett-Packard Co. (HP) from the top spot. It is a significant achievement for a firm that has had to face several challenges in the recent past.
Dell had to move away from the direct selling model it pioneered to include retail channels. Michael Dell had to take over the reins of the firm after it began to lose market share. And in July, Dell agreed to pay the US Securities and Exchange Commission (SEC) $100 million (‘466 crore today) to settle allegations of fraudulent accounting related to payments from Intel Corp., without denying or admitting to the charges.
But Dell, like other technology hardware firms, has gained as enterprises and consumers kick in a hardware replacement cycle buoyed by the successful launch of Windows 7 by Microsoft Corp. Dell’s portfolio includes desktop, notebook and netbook computers, software and services, storage devices, smartphones and consumer electronics.
Steve Felice, president, global consumer, small and medium business, at Dell–who until recently was heading its Asia-Pacific operations–is largely responsible for the firm’s success in India, flying in to oversee strategy almost every second month. Dell India, which employs 23,000 people, earned a revenue of $1 billion last year.
Felice says in an interview that Dell will next focus on strengthening itself in software, services, storage and servers. Edited excerpts:
Is the increase in technology spending sustainable?
We have continued to see good demand in the commercial space, where our predominant revenue comes from. The replacement cycle has good RoIs (returns on investment) for customers, which is why I see that sustaining. Asia is the healthiest part, especially India and China, where demand is very strong. Depending on whether growth sustains (in the broader economy) for the US and Europe, we will have to wait and see. (In) Brazil and certain central European countries, we see good growth.
Dell was till recently seen as a box pusher, a mere hardware vendor. How have you tried to change this perception?
You are really looking at a new Dell, especially over the last few years. We don’t spend much on image advertising; rather, we spend our sales and marketing dollars on our customers in direct relationships to offer solutions. Another proof point is the series of acquisitions we have made, of Equal Logic, Perot Systems, Exanet, 3PAR, Ocarina, Kace (which span networking, storage and services).
We provide a full solution for enterprise architecture. The way we differentiate ourself from companies like IBM, HP and Cisco is that we have created solutions which are open, scalable and affordable, unlike our competitors who try to push expensive, proprietary solutions.
Dell has suffered a mid-life crisis–ceding market share in the PC business, turmoil at the top leading to Michael Dell taking charge again, the SEC rap. Are things more settled now?
Absolutely. Certainly glad to have many of these things behind us. Throughout the period, we have been focused on delivering quality products and services to our customers. You are starting to see the results of that. The latest IDC numbers indicate that, globally, we have moved up to become No. 2 in the PC business again. We are back to growth. In the last couple of quarters, we have exceeded expectation, both in revenues and earnings. So there is positive momentum in the business.
However, we are still in the early stages of a pretty broad and bold transformation of this company. Our enterprise mix (servers, storage, etc.) continues to grow substantially and will become the predominant portion of the business.
India has been a success story for Dell, with the company emerging No. 1 in the PC business. What have you been doing right and is there any key learning that you are extrapolating to your other markets?
We set up a legal entity in the country 10 years ago to focus on the India market. So to become the market leader in a decade is a huge achievement, especially as our competitors have been here longer. Even five years ago, we were No. 5. We purposefully positioned ourselves for leadership. We invested a substantial amount of money to set up (a) manufacturing facility in Chennai to meet delivery requirements and be more cost-effective. We increased our services infrastructure from supporting customers in 25-30 cities five years ago to about 600 cities today. We increased our sales capacity by adding hundreds of sales makers and added offices across India.
Several models like the Dell Vostro (targeted at small businesses) were launched from India. We launched the largest marketing campaign we have done anywhere on pure brand affiliation through our “Take your own path” campaign. All those investments were aimed at demonstrating to the customers that we were committed to India, we invest here, we understand their needs. It also helped us to get into the SMB (small and medium businesses) and consumer side, compared to our traditional strength in large corporations.
We have taken some of these learnings international. For instance, the “Take your own path” campaign now runs in 10 countries.
In spite of Dell India’s revenue of $1 billion, it is less than 2% of your global revenue. So how much is India on Dell’s radar?
It has one of the highest priority in terms of potential for growth. Yes, it is a very competitive, highly fragmented market. While we are No. 1 in (the) PC business, we see vast opportunity in services, servers, storage and other areas where we are present. We intend to be the leader in these segments too. The key thing is that Dell is profitable in India.
When will you start selling Dell smartphones and Streak (its version of tablet PC)?
You will see our smartphones by the end of the year. Streak, we will eventually sell in the India market.
Source:http://www.tradingmarkets.com/news/stock-alert/dell_intc_we-re-a-solutions-provider-not-just-a-hardware-vendor-1120399.html
