Privatised Dell reinvents itself

It took a bruising battle for Dell to take itself private. Its next quest to reinvent itself as an innovator may well follow a smoother path, writes ARTHUR GOLDSTUCK.

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 CEO 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 5-10 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 per cent 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.‚”

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:

The face of these changes is unlikely to be visible soon, says Don Ferguson, chief technical officer (CTO) 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 CTO, 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.‚”

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 per cent to $5,8-billion, confirming that a high-stakes gamble to move beyond hardware was paying off.