Dell hurries to ramp up enterprise services

Users can expect Dell Computer to aggressively expand the portfolio and size of its high-end IT services division "in a hurry", as this titan of the PC market accelerates its efforts to diversify into enterprise hardware, a Dell executive said this week.

Dell is aggressively bolstering its high-end services to complement and boost its efforts to sell enterprise hardware, such as servers and storage devices, said Jeffrey Lynn, a vice president at Dell's services division.

"(This aggressive approach will) even further increase the speed with which we're making progress in becoming a stronger enterprise technology player," he said during a conference call with reporters Tuesday.

Dell calls these high-end enterprise services, such as system design, migration and implementation, "professional" to distinguish them from more common support services.

Like many other product-focused vendors, Dell is realizing that the professional services market is lucrative and worth investing in, said Ted Kempf, a Gartner Inc. analyst.

"We're seeing a lot of traditionally product-based companies developing professional-services arms," Kempf said.

He doesn't find Dell's sense of urgency surprising, considering the services strength of enterprise competitors such as IBM Corp. and Hewlett-Packard Co.

"Dell is taking a look around and realizing its competition has strong professional-services portfolios, and saying 'I need to get one as well,' " he said.

Dell regularly meets with enterprise clients to find out which services they need, Lynn said. In addition to customer feedback, Dell's criteria for adding professional services to its portfolio is whether the service complements an enterprise product that Dell sells, Lynn said.

"Our (professional) services are designed to push and pull hardware products, so don't expect to see us getting into service lines and offerings that are perhaps viable, profitable, growth-oriented and can stand on their own, but that don't push or pull hardware," he said.

Areas Dell will avoid include, for example, strategy, management and business-transformation consulting, he said.

"We're focusing on a subset of services that also help the rest of the company and that look like a bundled product-and-services solution to our enterprise customers," he said. "So as we get into other hardware offerings, look for me to wrap services around it."

For example, it's likely that Dell will beef up its networking services as the variety of enterprise networking products it sells increases, he said. "Look to see our product roadmap and services roadmap go hand in hand," he said.

Dell had about US$3.5 billion in services revenue in fiscal year 2002, which ended in February, with most of the money coming from support services. But the professional services division is growing fast -- both in sales and staff -- and expects its revenue to double this year over last year, Lynn said.

"What we're doing is adding a very quickly growing professional services business to an already large, growing and profitable product support services business," he said.

The division will grow "organically" through internal development and small acquisitions, he said. The division will also continue to partner with other service providers such as Electronic Data Systems Corp. and Accenture Ltd., he said.

However, as Dell expands its professional services, it must be careful not to damage its relationships with the partners it has worked with in this space, Gartner's Kempf said. "It certainly can be done (well). ... But partner conflict could be a major issue."

Lynn declined to say how many employees work at the professional services division and how much revenue it generates.

Dell has focused its professional services division into six areas, all of which are growing very fast, Lynn said. They are:

-- server and storage consolidation;

-- storage design and deployment, including disaster recovery, business continuity, data migration and backup;-- migration services;-- high-availability and high-performance computing clusters; -- training, education and certification on Dell products and some third-party products;-- application development, mostly around Microsoft Corp.'s .Net platforms.

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