Dec 13, 2012 (04:12 AM EST)
Michael Dell: Our Transformation Is Complete

Read the Original Article at InformationWeek

Michael Dell had a narrative ready to go when he sat down this week to talk to InformationWeek one-on-one, on the eve of his company's Dell World conference. That story, as it has for quite some time now, includes the PC only as a supporting player. It leaves the smartphone out.

Dell was in high spirits. Just a few hours earlier, he and other members of the company's executive leadership had asserted to an audience of reporters and analysts that Dell's transformation was complete. Uncertain points remain, to be sure, not the least of which is Dell's sagging PC business. But the panel was mostly persuasive, pointing to success in servers, an increasingly wide business reach and the integration of new software and services into the company's portfolio.

The narrative that Dell is becoming an end-to-end service provider, in other words, is outdated. The company's already there, Dell says.

"When we take on a five year contract with a major hotel chain to run all its IT," Dell said at one point, "we couldn't really have done that five years ago or ten years ago. We didn't have the capabilities to go do that, and now we do."

True enough. Even the company's harshest critics would struggle to deny that the hardware-focused Dell of yesteryear has evolved into a profoundly different animal. But evolution doesn't guarantee success; it's also a process of upheaval, uncertainty and extinction. Some of Dell's chief competitors, for example, have fared less favorably while undergoing changes of their own. Cisco has been criticized by its customers for lacking focus, demonstrating that diversified services can be a liability if they're not accompanied by a concrete roadmap. HP, meanwhile, is still managing the fallout over the Autonomy purchase, showing that growth based on acquisitions, rather than R&D, can sometimes backfire.

With that in mind, Dell discussed how his company can expand through acquisitions while offering its customers a cohesive vision.

"You don't look around and say, 'What's for sale?' or 'What can we buy?'" he said. Instead, Dell attempts to craft "a clear business strategy" by focusing on customers. "I remember seeing customers and saying, 'Hey, here's a new server, and we've got gigabytes and petabytes and terabytes,'" Dell said. "Their reaction was very polite, but they said, 'I don't really care about all that. What do you know about my business? What do you know about the verticals I'm in? Can you help me solve my problems?'"

[ Dell is entering a lot of new markets. Read Intermountain Floats Medical Images On Dell/Siemens Cloud. ]

Echoing moments from the leadership panel earlier in the day, when he said the company was no longer offering mere "ingredients" but rather fully developed solutions, Dell said that "the products may be interesting" but that "it's not about going to a customer and saying, 'Here, I've got a big list of products. Would you like any of these products?' That's definitely not the answer."

Rather, he explained, the answer "necessitated us to build out this broader capability. And it opens up a new set of opportunities."

Even so, a lot of companies talk about solving problems. But if divining and serving customer needs were as simple as forming grand ambitions, fewer businesses would fail. Dell said figuring out what the marketplace is done by having an intimate relationship with millions of customers.

This answer might seem facile coming from other CEOs but Dell's customer-focused attitude is well-established; indeed, it led to the creation of the company's Social Media Command Center, a venture that not only anticipated the importance of social media before many companies had even considered Twitter campaigns but also generated a new Dell consulting and services program.

"We have this heritage of direct conversations with customers, and that's very powerful for us, and that informs a lot of what we do as a company," Dell said. But it's "also important to be clear with the customer," he added. "We have to really represent what we can and will do, and do it extremely well. And if we're not able to do something, we tell them that too."

With this philosophy, why hasn't Dell achieved greater success among investors? Dell said his company "is investing for its future. Some of those investments involve a reduction in our earnings in the short term but we think those are the right investments for the long term." He also defended the company's financial health, pointing out that the company's "cash flow was up 59% over the prior quarter of the same year."

As for PCs, the once-upon-a-time Dell cornerstone has since become one of its shakiest pillars. Like most PC-makers that aren't headquartered in Cupertino, the ability of Dell PCs sales to rebound relies largely on the success of Windows 8, both within the enterprise and among consumers. Gartner analysts have been skeptical of the new OS for months, especially with so many businesses still amortizing Windows 7 investments, and sales feedback has failed to impress.

Despite these uncertainties, Dell is bullish on Windows 8, touting the advantages of touch and the possibility for Dell's PC-tablet hybrids to appeal to both consumers and enterprise IT departments -- an important consideration in the BYOD landscape. Though he didn't say so explicitly, Dell also suggested the company will remain a PC player by building revenue streams that don't rely on Windows or traditional computing. He pointed out, for example, that Dell offers OS-agnostic software and appliances to manage virtually all devices, highlighting Wyse as a particularly successful example, and predicted that "virtual client adoption is going to grow and be an accelerating part of the PC space."

"It'll be devices, it'll be client virtualization and cloud clients, it'll be BYOD. We're gonna cover the landscape there," Dell said.

What about smartphones? "We're in the market of managing those devices," he said, "but on the device side, we're tablets on up."