As Dell seeks to go private, it makes me ponder if that is another symptom of an organization which has played safe for the last decade, or will the cloak allow it to make larger, riskier bets again?
As I wrote in my book when it comes to its hardware
(Dell) manufactured mostly what was ordered and even paid for in advance. Apple raised the bar by showcasing a new product, guesstimating likely demand, and tuning its supply chain day by day and hour by hour. It broke traditional rules of demand forecasting—because there was little historical data to forecast from for a version 1.0 iPod or iPhone or iPad. It balanced the risk of overproducing or increasing buffer inventory and taking write-offs versus underproducing and losing customers to the next competitive product just a few weeks away. It took that risk, time and again, and made the rest of the industry do the same. And the risks are not small when you are talking 3 million iPads in the first quarter of introduction. The Dell model has been “out-Delled.”
As I blogged a few years ago about its outsourcing
Dell is today much more of a services player but it has not shown the ruthlessness to optimize the service chain. What is the opportunity? To drive traditional outsourcing pricing from $ 3 a gb a month for storage to 20c that cloud computing models are showing. Instead, as Dell points out elsewhere in the interview he is content to sell equipment to cloud providers.
Not just in the data center, there is a huge opportunity to optimize deskside management - it is embarrassing that to some companies BestBuy's GeekSquad can provide a better outsourcing solution than established infrastructure outsourcing players with massively more scale. Ditto with IT help desk, asset management etc - areas where Dell has shown early signs of competence.
My bet is Dell will continue to play it safe. The Microsoft investment will likely continue loyalty with an old partner. With an estimated $ 15 billion in debt in the new configuration, I suspect it will be stymied in the capex game which is increasingly needed for scalable cloud computing.
Would love to hear of scenarios how a private Dell becomes a dominant, differentiated industry player again.