Dell’s mission is to be the most successful IT systems company in the world by delivering the best customer experience in all markets it serves.
Dell is an information technology firm that provides end-to-end solutions. The company divides its offerings into the following four product and service business units:
End-User Computing Group (EUC) – Includes desktop PCs, tablets, notebooks, third-party software, thin client products, and client-related peripherals.
Enterprise Solutions Group (ESG) – Includes storage, servers, converged infrastructure offerings, networking, and ESG-related peripherals.
Dell Services – Consists of business and IT services, including deployment and support services, cloud, security, and infrastructure services, and business process and application services.
Dell Software Group – Includes security, systems management, and information management.
Dell was founded out of a dorm room in 1984. Michael Dell was a freshman at the University of Texas in Austin when he came upon the idea of selling personal computers. His interest was motivated by a belief that selling the systems directly offered a strong value proposition for customers -- better customization and lower costs. Naming his business PC’s Limited, he advertised it in national computer magazines. Consumers would call and place an order, specifying their desired features. Michael would then build parts purchased wholesale into computers resembling IBM models.
The initiative was a great success -- in a short time Michael was netting $80,000 monthly in sales. He successfully solicited $1,000 in capital from his family to expand the operation, then dropped out of school that year, incorporating it as Dell Computer Corporation. In 1985, the company released its first computer with an original design, the Turbo PC, selling it for $795. Within its first full year it saw revenues of $6 million, followed by $40 million the next year. Its success was not limited to the PC market -- Dell quickly became the top brand within the overall mail order industry.
In 1986 Michael realized he needed help to manage Dell’s rapid growth, and to move beyond the direct mail category. He appointed venture capitalist E. Lee Walker as President and Chief Operating Officer. He then recruited marketing executives from Tandy Corp., another low-cost PC manufacturer. The employees established a sales force capable of marketing to large firms as well as a network of value-added resellers, who put together packages of computer parts for sale in specialized markets. In 1988, the company went public, raising $30 million.
In 1990 Walker retired because of health reasons, and Michael hired Morton Meyerson, former President and CEO of EDS, as his replacement. Over the next decade the company expanded globally and saw many notable accomplishments. In 1992 it joined the Fortune 500, making Michael the youngest-ever CEO of such a firm. In the mid-1990s it attained the #1 rating in computer reliability and customer service from Consumer Reports. In 1996, it began to sell computers via its website. Thanks to the Internet’s surging popularity, it gained market share, ultimately overtaking Compaq to become the top PC manufacturer in 1999.
Dell has a segmented business model, with customers who have slightly different needs:
Large Enterprise: Includes large national and global corporate firms. They primarily utilize data center and cloud computing solutions.
Public: Includes government and healthcare entities, as well as educational institutions and law enforcement agencies. They utilize a wide range of information technology solutions.
Small and Medium Business: Includes small and medium-sized businesses. They primarily utilize cloud computing, workforce mobility, and server/storage virtualization solutions.
Consumer: Includes individual customers. They primarily utilize solutions in the areas of entertainment, gaming, design, and mobility.
Dell offers three primary value propositions: customization, price, and brand/status.
The company offers customization by enabling customers to select various features of their computers. These elements include form factor, processor, operating system, memory size, hard drive size, video card, and optical drive. This personalization helps ensure buyers get exactly what they want, a privilege they are not afforded when shopping in retail stores.
The company is able to compete on low prices due to several operational characteristics. It spends little on research and development relative to revenues (differing from HP, IBM, and Apple), and has a lean manufacturing process, allowing it to keep costs low. It also does not maintain any physical retail stores, allowing it to minimize overhead expenses.
The company has built up a strong brand over time. It is well-established, being the first mass producer of mail-order computers. Also, its strong performance eventually led to its status as the top PC manufacturer in the world; while it no longer retains that position, it is the #1 shipper of PC monitors globally. Further, it is the second biggest non-oil company in Texas.
Dell’s main channel is its website, through which it sells its computers and other products. The company also markets its offerings through other channels such as direct sales forces, third-party retail stores, third-party solution providers, third-party resellers, and system integrators.
Further, Dell promotes its solutions through advertising and social media efforts and attendance at conferences.
Dell’s customer relationship with consumers is primarily of a self-service, automated nature. Customers utilize its products while having limited interaction with employees. There is a Customer Service center on its website with detailed answers to numerous potential questions. There is also a community component in the form of site forums and a personal assistance one in the form of phone, e-mail, and chat support.
Dell’s customer relationship with its business and institutional customers is mostly of a personal assistance nature. The company assigns these users dedicated account teams who provide a single point of contact and offer personalized solutions and service. Team members include field-based enterprise solution specialists and global account specialists.
Dell’s business model entails designing and developing its products and services.
It outsources the actual production of its offerings to third-party contract manufacturers with the aim of minimizing costs and delivering products more quickly. The manufacturing facilities are located in Texas, Malaysia, China, Brazil, India, and Poland.
Dell operates the Commercial Partner Program, which provides training, sales, and marketing tools and resources to members. It includes the following six sub-programs:
Dell Partner Direct Program – This involves value-added resellers (VARs) who sell Dell products. One of the partners is Avalon Technologies.
Technology Partner Programs – This involves independent software vendors (ISVs), independent hardware vendors (IHVs), solution providers, and system integrators. Members use Dell platforms to build solutions ranging from tablets to enterprise products. Specific partners include Atlantis Computing, BMC Software, Citrix, Dialog Group, and GameLoft.
OEM Partner Program – This involves firms that assist OEM customers in bringing products to market effectively. OEM Channel Partners configure and resell Dell offerings for OEM customers. OEM Technology Partners offer IP and technology for integration into Dell hardware for OEM customers. Specific partners include Blue Chip Tek, Datatrend, Iron Systems, and NCS Technologies.
Global Alliances – This involves partners who integrate Dell software, hardware, and service capabilities into their planned and existing offerings to create optimized solutions. Specific partners include Intel, Microsoft, Oracle, VMware, and SanDisk.
Service Providers – This involves companies utilizing Dell’s service solutions for their customers. Specific services include systems management, information management, and data protection.
Global System Integrators – This involves companies with whom Dell jointly develops services. Specific partners include Atos, CGI, Deloitte, and Tata Consulting Services.
Dell’s main resource is its research and development staff. The company maintains 17 R&D centers globally, including the Silicon Valley R&D Center.
Another key resource is its intellectual property; it has over 4,000 patents with over 2,000 pending.
Lastly, Dell relies heavily on its sales/marketing and customer service staff, particularly for its business and institutional customers.
Dell has a cost-driven structure, aiming to limit expenses through significant automation and low-price value propositions. Its biggest cost driver is sales/administration expenses, a fixed cost.
Another major driver is research/development/engineering, a fixed cost; the company has increased its investment in these activities as part of its goal of being more of an end-to-end solution provider.
Dell has two revenue streams:
Product Revenues: The company sells hardware and software products.
Service Revenues: The company sells services to assist customers with use of its products; these include software-related support services.
Michael S. Dell,
Chairman and CEO
info: Studied at the University of Texas before dropping out to found his company. He holds several major posts outside the firm, including executive committee member of the International Business Council and Chairman of the Technology CEO Council.
Jeffrey W. Clarke,
Vice Chairman and President, EUC
info: Earned a Bachelor's degree in Electrical Engineering from the University of Texas at San Antonio. He previously served as SVP, Business Product Group at the firm. He oversees manufacturing, supply chain, and procurement activities.
Stephen J. Felice,
President and Chief Commercial Officer
info: Earned a Bachelor's degree in Business Administration from the University of Iowa and an MBA from the University of Houston. He leads Dell’s Commercial customer division and oversees the company‘s overall product portfolio.
Brian T. Gladden,
SVP and Chief Financial Officer
info: Earned a B.S. degree in Business Administration and Finance from Millersville University. He previously served as President and CEO of SABIC Innovative Plastics and spent 20 years at General Electric. He oversees Dell’s finance functions.