Sci-Tech

Privatised Dell aims to reinvent itself

Arthur Goldstuck

It took a bruising battle for Dell to become privatised. Its next quest to reinvent itself may follow a smoother path, writes Arthur Goldstuck.

Dell chief executive Michael Dell. (AFP)

Dell, the world's third biggest PC maker, has a point to prove. Taken off the market in a $24.9-billion deal in September after a bruising battle with shareholders, the newly privatised company revealed a reinvigorated strategy at last week's Dell World customer conference in Austin, Texas.

"This privatisation has created a new sense of excitement at Dell," said founder and chief executive Michael Dell in his opening keynote address. "I feel I'm part of the world's biggest start-up."

Few start-ups can invest a billion dollars a year – and climbing – in research and development, but in one respect it hardly looks like a 30-year-old business; sales revenues this year have increased by double-digits.

"Now, as a private company, we can accelerate our strategy and take a longer term view of innovation," he told the conference.

He formally unveiled two new programmes focused on innovation, namely a Dell research division that will pursue innovation organically, with a five to 10-year focus; and a strategic innovation fund to be run by the Dell Ventures investment division, with a $300-million cheque book, in effect to buy innovation.

At a press conference following the opening, he elaborated on the importance of going private as a means of accelerating strategy: "It's about making the bold moves and having the freedom to invest in the long term and focusing 100% on our customers. We grew up as a company with big ears, listening to our customers, and we are building the business from the customer back."

Core strategy unchanged
Chief financial officer Brian Gladden stressed that the core strategy of the business was not changing: "We'll continue to focus on growing our foundational business, and improve customer reach and customer experience. But there are things we're going to do to accelerate it.

"The changes include long-term commitment, aggressive investments, and expanding presence, speed and edge. We're not changing our customer focus, strategy, or our culture and spirit.

"Having owners who are fully aligned with our strategy is a huge benefit for us, and it takes out time and effort spent focused on multiple shareholders. We are less distracted by the quarterly rhythms that clouded the system in the past."

He outlined five key areas of investment designed to accelerate this strategy: investments in expanding the company's solutions offering through research and development, mergers and acquisitions and new ventures; enhancing and simplifying the customer experience; increase its presence in emerging markets around the globe where growth is a priority; growing its PC, tablets and virtual computing services business; and expanding its sales force and channel relationships to serve and support customers better.

The face of these changes is unlikely to be visible soon, says Don Ferguson, chief technical officer of Dell's software division.

"From an engineering point of view, part of the privatisation is to give us an opportunity to take a longer-term view. It's a good thing for a chief technical officer, because we can spend time thinking about product innovation.

"When we operate in the short term, we tend to focus on features and functions of the next product release in the next six months. We have good products, but it gives us an opportunity to innovative around solutions and not only products."

Challenges
One of the key challenges the company faces is that its software division is so new that, on the surface, its solutions don't appear differentiated from that of competitors. Ferguson believes that the Dell difference will soon become apparent. "We have inherited differentiation through the products and companies we have acquired. You will find innovations in any of our individual software products. Secondly, we can do some unique things in security, for example, by putting products together, which is really innovation through integration.

"The third area of differentiation is a big focus is simplicity. Most large vendors have enterprise grade products they try to simplify for small and medium businesses, and that almost never works. We start from the perspective of simplicity."

In the last financial results delivered by Dell before going private, in mid-August, it reported that overall revenue was flat, at $14.5-billion, but that sales from Enterprise Solutions, Services and Software was up 9% to $5.8-billion, confirming that a high-stakes gamble to move beyond hardware was paying off. – Gadget.co.za

Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter on @art2gee

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