Dell sticks with Internet model to keep its edge

Dell Computer will continue to ramp up its services business to keep its growth momentum intact, yet the company is convinced it can preserve the competitive advantage of its Internet-based sales model for some time yet.

During a recent visit to Australia, Michael Dell, the direct company's CEO, showed no signs of the paranoia many of his peers often demonstrate.

"What will we do when our competitors learn everything we know?" Dell mused. "I've been answering that question for 15 years and the fact is that our competitors haven't been able to do it so far.

"They've proven they can't copy Dell and go direct," he asserted.

Even the rise of dotcom businesses and e-marketplaces are of little threat, according to Dell.

He claimed a lack of margins and global reach would prevent dotcoms and e-retailers from being a serious concern, while white box manufacturers, which previously had been the only part of the market aside from Dell not losing share, are themselves now on the back foot.

"[Recently], we've been growing rapidly in the small business market worldwide, especially in the US, and the growth has been coming at the expense of the white box," Dell commented.

However, despite the company's apparently gung ho hardware business, Dell did acknowledge it has been cultivating alternative methods of revenue growth.

"We are building an increasing component of services into our business and that services business is now worth a couple of billion dollars," he said. "The services sector is definitely increasing and more and more, products are switching form to become services."

He cited Dell's relationship with storage hosting company StorageNetworks as an example of the trend towards outsourced infrastructure.

"In the future, you'll increasingly plug into your infrastructure as opposed to buying it yourself," Dell said, adding the company is considering extending its hosting business - dellhost.com - to the Asia-Pacific region.

Dell is also increasing its range of e-commerce integration services, both internally and through partners.

"We'd like to see more of that activity, but less at the EDS (Electronic Data Systems) level, which seems to be focused only at about 100 companies in the world, and more at the medium and large companies," Dell said.

As for upcoming technologies, Dell said he was "underwhelmed" by the wireless application protocol (WAP) and said the company has no plans to develop devices based on it.

He also warned that while Intel's IA-64 is a technology that has "massive potential", there was unlikely to be a massive ramp in volume when it first comes out.

"It's going to take a while to be mainstream," Dell said.

Meanwhile, Dell recently named James Schneider as its new chief financial officer.

The previous CFO, Thomas Meredith, has become a managing director of Dell Ventures, a wholly-owned Dell group responsible for the company's strategic investments, which is now widening its range of activities.

Dell Computer also announced that Dell Ventures is to add equity investments and incubation services for privately-owned start-up companies to its list of activities. The incubation services will include helping start-ups develop their business strategy as well as giving them access to professional services, the company said.

Dell set up Dell Ventures in April last year. To date, the investment group has invested more than $US700 million in some 90 companies including Linux distribution specialist Red Hat.

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