Dell To Buy Perot Systems : Too Little Too Late!

Dell plans to acquire Perot systems. The momentum picks up! Dell expects this deal to position itself as a more formidable player parading both its hardware and services expertise given the fast changing nature of the business and the faster adoption of cloud computing. Dell was as always seen as a laggard when it to comes to services and given that its principal competitors – HP & IBM are now very big in services, Dell had to anyway bite the bullet of acquiring some big service player. Perot’s strengths are mostly in Banking, Financial Services, Healthcare & Government and would to a limited extent help Dell directly with its footprint. The capabilities of Perot system may be more useful to Dell compared to its current customer base. Perot systems customers would have to factor in the new reality of Perot systems ownership changing to Dell, though the existing CEO would continue to run the business. Two things struck me:

A. Dell must have acquired a services company at least two - three years back when it confronted serious growth troubles – At around the same time, HP muscled in to acquire EDS. I predicted that HP may buy EDS in years before ithappened.

B. Perot has limited scale compared to the other global service players and India headquartered service players. Perot’s offshore capability also is generally seen to be quite limited compared to other traditional global players. Valuation looks interesting here: 2.8 billion USD revenue gets a valuation of 3.9USD billion after providing a substantial premium to last quoted trade.

I am not too sure if this move by Dell would perturb IBM or HP given the lack of scale of Perot's operations, while this may give some limited upside to Dell. The corporate integration may get accomplished easily given that both companies are headquartered in Texas. I was actually expecting Dell to make a serious move to get into smartphone market - say by acquiring Palm. It may happen in the future - we will have to wait and see. It would be interesting to see how Oracle (which recently acquired Sun) looks at this development. I am very keen to watch what Cisco does now – it has entered into the more competitive server business (big competition to Dell , IBM, HP) and has more ambitions in unified computing. Cisco cash position and appetite for acquisition is well known and in the recent past there had been rumors of Cisco looking at acquiring Accenture.While am not clear about how this acquisition may decisively benefit Dell, I do believe that Dell’s move may trigger a new momentum in Cisco’s next acquisition move as well!

Labels: Dell, Emerging Trends, Mergers And Acquisitions

Michael Dell : Direct Sales Not A Religion

The direct model has been a revolution, but is not a religion, says Michael Dell in an internal memo. He positions this thinking as an improvement to its business model, and go beyond it, to give its customers what they really need. This is done, he claims by making improvements in pricing, product development and fulfillment, and customer experience. (Months back, his predecessor Kevin Rollins defended the direct sales model that Dell had embraced for a long time).
I like this part of the memo where he talks about embarking on a bold, long term initiative to radically simplify IT for our commercial customers. Centered around, what he claims as a set core beliefs of Dell, he outlines it :
• Information Technology shouldn't be as complex as it is.

• You should spend less on maintaining I/T and more on innovation.

• Every IT project should not require an army of consultants.

• Computing should have minimal environmental impact.

• Superior information drives efficiency in your IT environment.

We know our competitors drive complexity and needless cost into customers' environments. These so-called "service divisions" create a never-ending cycle of activity with unclear return on investment. We intend to break this cycle. We will build different kinds of services and offer key technologies that will help customers escape this complexity trap and unlock the true potential of technology.

Can Dell really move from a supply chain winner to that of a services player? Can its research efforts rise wide and fast enough to match those of IBM, HP and Sun? From pricing as a weapon in its armoury, it used to muscle in – a game which players like Acer and HP are getting better at.

Labels: Business Model, Dell, Emerging Ideas

Dell 2.0 : Good Move

I was speaking to a very senior ex-Dell executive few days back and solicited his views about Michael Dell returning at the helm of Dell Inc. My friend, now a colleague used to report to Michael Dell himself in the past,while working at Dell. He told me that things can only get better at Dell – He opined that Micheal would make a huge difference to the fortunes of Dell Inc, for sure.

Just came across this development -Michael unveils two new components of Dell’s digital media strategy: Dell IdeaStorm and a new functionality in StudioDell that will allow users to upload their own video testimonials. Dell IdeaStorm is aimed at allowing users submit their ideas about improving Dell's products and services, and the community votes on the best ideas. Its like a combination between a message board and Digg.com. While it was the case that partner/customer sites and user forums used to host messageboards – they would be normally hidden under authorizations for access. Dell is taking a refreshingly open approach in making it accessible by the public at large. I saw Mr.Dell’s video introducing the new features. It’s a great feeling to see business trying out true community building initiatives like this. By bringing a focus on business related issues while retaining the flavour(as promised by Dell) of user generated content available – Dell Inc is taking such applications to new heights. This is something that other business need to closely watch nay imitate /innovate likewise to reach out to customers.

Labels: Dell, Emerging Ideas, Emerging Trends