Where is Dell Innovation?

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:

1. 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.
2. 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.]

Tagged as: cloud, computers, Dell