Dell showed the industry a new way to do business in personal computers. It was revolutionary at the time and created a very large, very profitable franchise in computing. A one trick pony is plenty when the trick is good enough. Unfortunately the trick is no longer unique.
There’s no point in rehashing the misfortunes of Dell customer service and the legendary “Dell Hell” that was created for customers and users. When Michael Dell came back to run the company in 2007 it offered hope for a new chapter in Dell innovation. So far though it’s hard not to be disappointed with what the company has done. Dell has made two fairly large acquisitions:
- The purchase of Perot recognizes one clear fact in the enterprise market which is professional services are required. IBM led the way here with IBM Global Services many years ago and even exited the PC business. More recently HP acquired EDS. In contrast Dell professional services were so bad that customers didn’t even use them when they were included at no additional charge. Perot addresses this weakness but merely follows market reality and is a somewhat lesser solution than what is already offered by competition.
- Dell also acquired EqualLogic at the beginning of 2008. Although a very strong player in storage area networking, EqualLogic doesn’t bring unique capabilities or a change in positioning for Dell. Most of the major systems vendors, HP, IBM, even Sun Microsystems, have storage solutions. Any gaps are easily filled with components from vendors like EMC, NetApp or Brocade.
Unfortunately the best case scenario for moves like this is possible parity with other competitors in the market and that looks like quite a stretch given the size of HP/EDS and IBM in the marketplace.
Dell still has a reasonably solid position with enterprise customers who appreciate Dell technology for it’s price/performance and execution on promised delivery. That one bright spot is enough to keep them in the game within the entperprise for some time.
On the consumer side Dell now has to face a new leader in terms of innovation (Apple) and a plethora of very good, very low cost products from firms like ASUS and Acer in addition to behemoth HP. Dell still can win often enough with good prices, online configuration and fast delivery to stay afloat but not enough to really gain share. The growth of good alternative online channels for computers like Newegg and Amazon diminishes the advantage Dell once enjoyed online.
While Dell has been catching up the market has also been moving increasingly toward mobile computing as the new locus of innovation and activity. To be fair Apple is the only computer company that really saw this coming and exploited it fully with the iPhone. Still Dell is nowhere to be found here and although they have made some noises about having their own branded device in this space it doesn’t appear that they are investing heavily in it. Contrast that with Motorola who has basically decided to bet the company on the next generation of Google Android powered phones.
The other major trend towards RealVR and Cloud Computing would also appear to leave Dell in a support role where they may be supplying servers into the racks of some of the service providers. Although it’s good business today it won’t support high margins given the power of the buyers versus the suppliers.
The crux of the matter is that as long as Dell feels they are a channel rather than a creator for great innovation and client solutions they are going to suffer. Why? Because there are channel technologies everywhere and they have been copied and made commonplace.  Dell has also been stuck with the Microsoft OS which hasn’t helped them much in the past two years.  Now with Windows 7 Dell has at least some wind at their back in their loyal enterprise accounts and with consumers who will still respond to Dell price/performance leadership.
The point here isn’t that there is no innovation at Dell; just that there is not nearly enough. The company has done some good things in generating practical online communities, has leveraged social networks like Twitter, built a fairly good all-in-one computer to try and match the iMac and has designed a cool laptop called the Adamo, etc. But these are all changes at the margin rather than being at the level of corporate identity and positioning.
Dell needs to do something deep, daring, daunting and potentially delightful. What is it going to be?
[Author has no position in Dell, HP, IBM at the time of this writing.]