Services

• Dell's Services Strategy

  Tue. May. 13, 2008
  by Lynn A. Tyson, VP - Investor Relations

  We have been getting a lot of calls and questions today.  Many are wondering about Dell's services strategy, especially in light of the news in the tech industry today. In fact, many of our customers enjoy the benefits of the partnership between Dell and EDS and we look forward to meeting their needs well into the future.

  Customers value flexibility, value, configurability, access to innovation and control - this deal is likely to reduce all five for affected customers and perpetuate an old model. We believe the Services Industry is at a key inflection point. Dell will lead the transition to Configurable Managed Services, giving customers access to the best innovations in the world through remote infrastructure management and Software-as-a-Service (SaaS) offerings. By doing so, we will Simplify IT and give customers control, choice, flexibility and the best value in systems and services. 

  Dell's strategy was recently discussed by Steve Schuckenbrock over at our Inside IT blog.  He noted "Dell will continue building out our plan to dramatically simplify IT infrastructure services and give companies choice and flexibility in how they purchase and manage services. Our goal is to improve the price/performance of infrastructure services to save companies millions -- potentially billions-- of dollars for IT that will grow business and improve competitiveness." For more information, you can see Steve's Services deck from our Equity Analyst Meeting in April.

  For example, our recent acquisitions of MessageOne,  SilverBack, Everdream and ASAP Software are building a SaaS-enabled services delivery platform to remotely monitor, manage and troubleshoot routine IT infrastructure issues such as patch management, anti-virus, asset tracking and software license management.

  The Dell approach to consulting services is to use innovative tools and automated discovery agents and technology based analysis and profiling-- instead of armies of consultants-- to virtualize and improve data center power consumption, simplify storage and improve end-user computing, systems management and network security.

  Our new ProSupport service is also customizable, letting customers configure their support by speed of response, level of protection and pro-active vs. reactive services that meet their needs. 

  In each of these cases, Dell services break from standard industry practices.  We are building out Dell's services to be configurable and subscription based so customers can start or stop a service or any combination of services at any time, in just one click.

  Delivering services that simplify IT is where businesses today derive more value, choice and flexibility.  That is crucial to how businesses purchase and manage their information technology. 

  Dell is bringing to market a fundamentally different services offering than that which has been offered for the last decade or so.  As a result, we are also delivering a very different value from "outsourcing"  and pure play consulting.  We believe our approach will prevent many of the issues that challenge businesses of all sizes, and in true Dell fashion, offer customizable IT services that meet specific business needs and give customers control, choice, flexibility and the best value in simplifying IT.

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• Dell Completes MessageOne Acquisition

  Thu. Apr. 24, 2008
  by Dell IR

  Dell today announced the completion of its $155 million acquisition of MessageOne.  Steve Schuckenbrock, SVP and President, Global Services and CIO, wrote a blog covering today's close of MessageOne and its context within a broader services strategy.  In the post, Steve discusses our move towards a SaaS-enable services delivery platform, how Dell is simplifying IT infrastructure, and how customers may configure support levels to what they need through ProSupport.  Steve's post can be found on Inside IT, and our original post on MessageOne can be found Dell Shares.

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• Dell Equity Analyst Meeting – Day 1

  Wed. Apr. 02, 2008
  by Robert L. Williams, Director - Investor Relations

  Today, 250 equity analysts and institutional investors joined us in Round Rock for Dell's equity analyst meeting. These meetings, which are available via live webcast, serve two important purposes.  First, they give this audience and all of you an opportunity to hear directly from Dell's senior leadership, and second, it's our chance to help you understand where we're going financially, share our key initiatives and address questions and concerns.

  The meetings and briefings are spread over two days, with the first day being a prerequisite to discussing our growth priorities on day two.  We spent the first day providing a framework by which investors could understand the fundamental changes we're making to Dell's business model - from manufacturing to channels to services.  

  Dell has always been known for its direct model.  With it, we created a direct customer relationship model and build-to-order manufacturing capability like the world had never seen.  Our assets were global and our cycle times were some of the shortest in the industry. 

  But today's PC economics are much different.  Moore's law led to better performance, rapid growth and lower selling prices, ultimately leading to smaller absolute cost advantages.  And growth shifted from desktops to notebooks and from large enterprise customers to consumers and small enterprises.  Our customers are more diverse than ever before.  We now need to serve them in very different ways. 

  Mike Cannon, President of Dell Global Operations, talked about how Dell is optimizing its global manufacturing network to better meet customer needs.  By matching product design to customer segments, we're able to eliminate embedded product costs.  Getting this part right actually enables us to think more broadly about our manufacturing model and enhance the value we provide our customers.

  Many have also questioned how being direct works with channel. The reality is that we have a $10 billion global partner business that we've steadily built for 23 years.  Paul Bell, SVP & President of Dell Americas, spoke to our channel strategy and the investments we're making to better work with VARs and systems integrators. The flexible engagement model we've developed is backed by a compelling value proposition for our partners: our strong brand; a broad portfolio of industry-leading products; and simple, beneficial terms.  It's designed to minimize conflict while building trust and mutually beneficial relationships.  Since we announced this new initiative in Q3, we've worked hard to bring our regional partners onboard to make our solutions available in the geographies that need them most.  

  Steve Schuckenbrock, SVP Global Services & CIO, spoke about how customers spend a massive share of their IT budgets on services and how they face a burning need to shift this spend from maintenance to innovation.  We approach services very differently from our competitors.  We believe services should be customizable, a la carte, and available remotely.  So Dell's new services model combines disruptive technologies with our core strengths to provide customers convenient and affordable enterprise-class support and monitoring services.  Through ProSupport and the assets we acquired through several acquisitions we are building a platform that allows us to remotely manage the client lifecycle.  We let customers choose which services they want and when they want them.  And we provide solutions where consultants are available - but not required.  We have a $6.2 billion global services business today, and there is no reason it can't double over the next 3-4 years.

  These are changes in the way Dell interacts with customer. They set a foundation upon which we'll build our future success.

  If you haven't already seen the webcasts or presentations, I encourage you to watch a replay of them here. 

   

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• Dell’s Planned Acquisition of MessageOne

  Tue. Feb. 12, 2008
  by Lynn A. Tyson, VP - Investor Relations

  E-mail has become one of the most ubiquitous and critical applications in business today; it can impact revenue, productivity, and a company's reputation.  Due to increased regulatory and business requirements, e-mail management--including measures for compliance and disaster recovery--is now more complex than ever.  Our announcement today to acquire MessageOne, an industry leader in Software-as-a-Service (SaaS) enabled e-mail continuity, compliance, archiving, and disaster recovery services is an important step towards simplifying IT and restoring integrity around a vital piece of our customer's IT infrastructure. 

  Dell's customers have been looking for solutions to help them simplify their IT infrastructure.  Legacy services masks IT complexity.  Estimates show that for every 1 dollar spent on hardware and software another 3 dollars gets spent on consultants and integrators.  This is where we believe there is room to fundamentally change the industry's infrastructure services model.  Through the use of technology, Dell's supply chain advantages, remote infrastructure management and SaaS, Dell is pursuing a strategy in the services space that is analogous to the approach taken to simplify the hardware business 23 short years ago.  We have a legacy of driving down the cost of hardware for our customers and they believe we can do this in services as well.

  MessageOne is another key piece in expanding Dell's services, especially in the rapidly growing SaaS enabled managed services market and complements our recent SaaS acquisitions of Silverback Technologies and Everdream we completed late last year.  Silverback provides leadership in event-based monitoring and remote management of different Enterprise assets (servers, storage, printers, routers, etc).  Everdream extends this capability to include lifecycle management of client assets (notebooks and desktops).  These moves also signal Dell's efforts to address the needs of the small and medium business (SMB) market, similar to our purchase of EqualLogic late last year.  EqualLogic is aimed at Dell's drive to Simplify IT and virtualization for mid-sized enterprise customers through Dell's channel partners and direct channel.  EqualLogic has the third largest sales of iSCSI SANs and has patented storage virtualization technology that will give customers the power to cost-effectively install, expand and modify their data storage resources.  We will build upon the portfolio of existing customers and channel partners for all of these offerings and will incorporate the respective technologies into future Dell services, including Dell's new ProSupport offering announced earlier this month.

  We think ProSupport is especially exciting because it is more than another service offering, it is a choice of comprehensive support solutions that offer customers a choice based on who they are, how they use technology and where they want to allocate scarce IT resources.  Dell ProSupport is breaking the "one size fits all, fragmented" support model that is industry standard, by putting choice in the hands of customers.  This global offering spans all areas of hardware and will enable commercial customers, including small and medium business, to obtain world-class service from Dell or our registered solution providers without paying for more or less than they need. 

  Acquisitions for Dell are not a strategy unto themselves - they are a part of an overall strategy to fuel growth in five key areas: Consumer, Emerging Markets, Notebooks, Enterprise and Small Medium Business.  When assessing possible acquisitions we look at several things including strategic fit - or how does it drive growth by scaling through our customer base, give us access to channels or provide new tools.  We also look at how it can fit into our business model, how easily we can integrate the business, and also the track record of the management team.  Via organic growth and acquisitions we will fill key capability gaps, gain access to new channels and leverage key technologies across our broad global customer base.  You will continue to see Dell pursuing opportunities that strengthen our ability to meet the increasingly changing needs and challenges faced by many of our customers and simplify their IT environments.

  One thing unique about this transaction is that it involved related parties.  MessageOne was co-founded by Adam Dell, Michael Dell's brother, and is owned in part by two venture funds managed by Adam Dell--Impact Venture Partners and Impact Entrepreneurs Fund.  Michael Dell, Susan Dell, a trust for the Dell’s minor children, and Mr. Dell’s parents are investors in both funds.  Michael was not involved in the negotiation or decision-making process, and the independent members of Dell's board of directors (excluding Michael and Don Carty) analyzed in detail management's decision process to ensure that management was acting independently and in the best interests of the company and its shareholders.  Additionally, Dell's board received an opinion from Morgan Stanley & Co. Incorporated concluding that, as of the date the deal was signed and based upon and subject to the matters stated in the opinion, the consideration to be paid by Dell pursuant to the acquisition was fair from a financial point of view to the company.  Based on all of that, our independent directors concluded that the transaction was fair to, and in the best interests of, the company and its shareholders and approved the transaction.  Michael and Susan Dell have indicated that the proceeds which they and their children’s trust receive from the acquisition will be donated to charity.
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