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Dell Buyout: Good News For SMB Customers?

Sep 17, 2013 (07:09 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=240161392


Michael Dell hailed his victorious bid to take his company private as "a great outcome for our customers." Just saying it, however, doesn't instantly make it so.

A key force behind the theory is that a private Dell can make the decisions it feels are best for its customers -- and ultimately the company -- without worrying about its next quarterly earnings call with investors and financial analysts. That's a luxury most other tech behemoths -- Microsoft comes to mind these days -- don't enjoy.

Techaisle analyst Anurag Agrawal said in an email interview that Dell going private won't have any automatic impacts for customers, good or bad. But he sees a big opportunity for the firm in becoming a one-stop IT shop for a greater number of business customers while simultaneously continuing to invest in its hardware business, PCs included. Agrawal noted that Dell's two-year spree of acquisitions has helped it make inroads as an "end-to-end" IT provider for large enterprises. It faces stiff competition there from entrenched players like IBM and HP, though, at the same time that its consumer PC business has suffered from stagnant sales.

[ Despite the headlines, tablets aren't taking over everywhere. See Are PCs Dead? Not For SMBs. ]

According to Agrawal, a private Dell, one that doesn't deal with the downsides of being a publicly held concern, would do well to extend its end-to-end services strategy to the small and midsize business (SMB) market.

"Although Dell is making good inroads into the enterprise segment, specifically within healthcare, SMBs could be a good target market," Agrawal said. "HP is still strong with SMBs, but there are too many players targeting the market segment. Dell will have a lot to do in this area."

Indeed, it won't be easy. While Dell's PCs have long been a popular choice for U.S. SMBs, the relatively new services side of the business has far less traction. Among other reasons: Plenty of SMBs probably don't know those services even exist.

"We feel Dell's SMB-related end-to-end solutions story has not yet reached the crescendo," Agrawal said. "It almost seems like tepid communication [with SMBs]."

There's a glaring place to start fixing that problem, according to Agrawal: Dell.com. "If one visits Dell's website there is no separate section for SMBs," he said. "And our research shows that SMBs' first point of [IT] knowledge-gathering is through vendor websites. Typing in SMB in their search box brings up a list of servers. That is not enough."

The buyout deal could have negative effects, too, fostering skepticism among certain customers as a result of the decreased transparency inherent in a private corporation. "[Dell will need to] earn [the] trust of the SMB customer through a direct dialogue and conversations through its SMB-focused channel partners," Agrawal said.

The upside for a wide range of SMBs is the virtual CIO scenario, where Dell becomes a one-stop IT shop for SMBs burdened with technology headaches. "Technology pain points have now overtaken business pain points for SMBs, and Dell has to work towards becoming a trusted adviser," Agrawal said. There is a relative smattering of SMBs today with that kind of a relationship with Dell. Agrawal mentioned a research interview with one SMB exec who called Dell her "CIO in a box," and he added that her firm isn't alone. But many SMBs still view Dell mainly as a hardware provider. Agrawal noted eight critical areas where SMBs need help soothing those aforementioned pain points: Cloud, virtualization, managed services, collaboration, analytics, backup and disaster recovery, and security.

"[After] going private, if they really invest in building [those] solution areas that solve [pain] points, then it will be good for Dell and better for the industry. With privatization, Dell has a rare opportunity to build products and solutions from which customers can capture value," Agrawal said. "Right now, the message is not clear."

His primary concern is that the now-private Dell will place too much emphasis on PCs, tablets and other devices. Combined with a lack of communication with SMBs, that could kill the virtual CIO scenario.

"What do SMBs think now? For PCs go to Dell, for solutions go somewhere else," Agrawal said.