How a private Dell works with customers, and sees its rivals

Dell isn't in search of dramatic innovation, and therein lies the risk for the new version of the company

HOLLYWOOD, Fla. - The Dell user conference was held here last month in a beach hotel against a calm ocean with no threat of storms. There were families and children on the beach and the atmosphere was relaxed. For a company that wants to be known as the strong, almost silent type, the location may have been perfect.

Dell, now privately-held for nearly a year, wants to hold a reputation for innovation -- it has increased R&D investments from 1.6% of annual revenue to 2.1%. Its revenue was $56.9 billion in 2013, its last reported year.

Company executives say that because they are no longer subject to quarterly public reports, they are freer to invest in projects that may take some years to develop.

But Dell remains a deliberately conservative company when it comes to research, particularly when compared to Hewlett-Packard and IBM. Its executives describe an approach focused on pragmatic investments that directly improve its products. It's not aiming to make waves with what it calls "science fair" experiments undertaken by some of its rivals.

Another change since going private, apart from the increase in R&D spending, is how Dell interacts with customers. The sales pitches and incentives that arrived near the end of each quarter are less frequent, if at all.

Jeff Stacey, a senior technical analyst at Richardson International, an agri-business, uses Dell systems and praises the engineering. But he was less pleased with the predictable end-of-quarter, quota driven calls from sales representatives.

That stopped when the company went private, and he welcomes the silence. "If we need anything, we call them," said Stacey.

Forrest Norrod, vice president and general manager of Dell servers, said there is less stress at the end of a quarter and less pressure to close by week 12.

"You got a more relaxed time period, a more relaxed engagement where you can talk more about their problem," he said.

Dell tells its customers allows it to focus on what can best help them over the long-term, as well as to make faster decisions.

This approach is illustrated by Dell's decision to give users a choice of network operating systems, termed disaggregation. Networking systems have traditionally been sold with an OS that can't be swapped out. But users of Dell networking hardware can now run either Dell's Force 10 Operating System or Cumulus Networks, Linux-based networking software.

Gartner praised this decoupling of networking hardware and software, and in a report said it "increases customer choice in networking software, reduces long-term vendor lock-in, and increases the potential for independent hardware and software innovation."

Before the announcement was made in late January, Tom Burns, vice president and general manager Dell Networking, needed to speak to Michael Dell, the CEO and founder. He approached Dell at last year's Dell World in December, shortly after the company went private.

In a hallway at the conference, Burns asked Dell if he could get one or two hours of his time to present his plan. Dell replied, "What do I need an hour or two for?" Burns recalled. He then quickly outlined the plan. "We don't need a meeting - do it," said Dell.

Burns said that if Dell had been a public company, detailed presentations outlining the financial implications, investments and market reactions would have been expected. "Our decision-making is faster, clearer and a bit crisp," said Burns, since going private.

As with any vendor, Dell executives repeatedly emphasize customer focus. But where it differs from rivals is interpreting what customers may need in the long-term, and therein lies a potential risk for Dell.

If Dell is working on technologies that could lead to very new things, it is being quiet about it. Its rivals aren't. IBM, for instance, is heavily invested in cognitive computing, human-like artificial intelligence systems. It also has a research effort in quantum computing.

For its part, Hewlett-Packard just announced it is developing a new computing architecture it has dubbed the "Machine," based on a new nonvolatile memory technology (no electricity is needed, similar to flash), called memristor, that can hold more data and move it much faster. The system also uses silicon photonics as the communications technology, and a new OS. It could bring enormous computing power to a small box, says HP.

A Dell official called the architecture " laughable," shortly after its announcement, and faulted the approach for a number of reasons, including its need for a new OS and problems it could pose for existing business software.

Dell executives say they will do better by concentrating on the more direct needs of their customers.

"We prescribe more to the practical side of the innovation house than try to grab headlines," said Marius Haas, Dell's chief commercial officer, president, Enterprise Solutions for Dell. "We focus more on what's going to deliver value to customers near term, short-term, versus a hypothetical machines that might evolve over 10 years."

Dell emphasizes strong partnerships with the major ISVs, particularly in development of engineered systems or appliances that integrate computing, storage and networking to simplify deployment. New analytics tools that can be broadly used by employees in a firm is also an important product direction, and was one of the reasons Dell acquired StatSoft in March.

"With the acquisition of StatSoft we gained a lot of staff, very qualified staff across the world," Matt Wolken, general manager, information management products in the Dell Software Group.

Charles King, an analyst at Pund-IT, sees potential for Dell to become more creative now that's private. "I wouldn't be surprised to see Dell try new, potentially riskier things that would never pass muster with financial analysts, like making bets on emerging markets, developing offbeat products or exploring unusual service solutions and engagements," he said.

The biggest negative for Dell as a private firm "is probably the lack of transparency customers have into private companies, an issue Dell competitors, including HP have been trying to exploit," said King.

But King said the transparency issue is "more than a little overblown," and notes there many successful private IT firms.

One customer of Dell, Ryan Hayes, IT manager at Park City Mountain Resort, is using Dell blades to run his large, 3,300 acre operation. He says Dell's privatization had no impact on him, or on his Dell account team, which was particularly important.

The only difference, said Hayes, after going private, is he has noticed that the quarters aren't as important as they once were.

Before going you private, "you knew it was the Dell end of quarter, you knew as a customer," said Hayes.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed. His e-mail address is pthibodeau@computerworld.com.

See more by Patrick Thibodeau on Computerworld.com.

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