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Predictions: Tech Trends – part 1 – 2014

Jan 20, 2014   //   by admin   //   Blog  //  No Comments

RFG Perspective: The global economic headwinds in 2014, which constrain IT budgets, will force IT executives to question certain basic assumptions and reexamine current and target technology solutions. There are new waves of next-generation technologies emerging and maturing that challenge the existing status quo and deserve IT executive attention. These technologies will improve business outcomes as well as spark innovation and drive down the cost of IT services and solutions. IT executives will have to work with business executives fund the next-generation technologies or find self-funding approaches to implementing them. IT executives will also have to provide the leadership needed for properly selecting and implementing cloud solutions or control will be assumed by business executives that usually lack all the appropriate skills for tackling outsourced IT solutions.

As mentioned in the RFG blog “IT and the Global Economy – 2014” the global economic environment may not be as strong as expected, thereby keeping IT budgets contained or shrinking. Therefore, IT executives will need to invest in next-generation technology to contain costs, minimize risks, improve resource utilization, and deliver the desired business outcomes. Below are a few key areas that RFG believes will be the major technology initiatives that will get the most attention.

Tech-driven Business Transformation

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: RFG
Analytics – In 2014, look for analytics service and solution providers to boost usability of their products to encompass the average non-technical knowledge worker by moving closer to a “Google-like” search and inquiry experience in order to broaden opportunities and increase market share.

Big Data – Big Data integration services and solutions will grab the spotlight this year as organizations continue to ratchet up the volume, variety and velocity of data while seeking increased visibility, veracity and insight from their Big Data sources.

Cloud – Infrastructure as a Service (IaaS) will continue to dominate as a cloud solution over Platform as a Service (PaaS), although the latter is expected to gain momentum and market share. Nonetheless, Software as a Service (SaaS) will remain the cloud revenue leader with Salesforce.com the dominant player. Amazon Web Services will retain its overall leadership of IaaS/PaaS providers with Google, IBM, and Microsoft Azure holding onto the next set of slots. Rackspace and Oracle have a struggle ahead to gain market share, even as OpenStack (an open cloud architecture) gains momentum.

Cloud Service Providers (CSPs) – CSPs will face stiffer competition and pricing pressures as larger players acquire or build new capabilities and new, innovative open-source based solutions enter the new year with momentum as large, influential organizations look to build and share their own private and public cloud standards and APIs to lower infrastructure costs.

Consolidation – Data center consolidation will continue as users move applications and services to the cloud and standardized internal platforms that are intended to become cloud-like. Advancements in cloud offerings along with a diminished concern for security (more of a false hope than reality) will lead to more small and mid-sized businesses (SMBs) to shift processing to the cloud and operate fewer internal data center sites. Large enterprises will look to utilize clouds and colocation sites for development/test environments and handling spikes in capacity rather than open or grow in-house sites.

Containerization – Containerization (or modularization) is gaining acceptance by many leading-edge companies, like Google and Microsoft, but overall adoption is slow, as IT executives have yet to figure out how to deal with the technology. It is worth noting that the power usage effectiveness (PUE) of these solutions is excellent and has been known to be as low as 1.05 (whereas the average remains around 1.90).

Data center transformation – In order to achieve the levels of operational efficiency required, IT executives will have to increase their commitment to data center transformation. The productivity improvements will be achieved through the use of the shift from standalone vertical stack management to horizontal layer management, relationship management, and use of cloud technologies. One of the biggest effects of this shift is an actual reduction in operations headcount and reorientation of skills and talents to the new processes. IT executives should look for the transformation to be a minimum of a three year process. However, IT operations executives should not expect clear sailing as development shops will push back to prevent loss of control of their application environments.

3-D printing – 2014 will see the beginning of 3-D printing taking hold. Over time the use of 3-D printing will revolutionize the way companies produce materials and provide support services. Leading-edge companies will be the first to apply the technology this year and thereby gain a competitive advantage.

Energy efficiency/sustainability – While this is not new news in 2014, IT executives should be making it a part of other initiatives and a procurement requirement. RFG studies find that energy savings is just the tip of the iceberg (about 10 percent) that can be achieved when taking advantage of newer technologies. RFG studies show that in many cases the energy savings from removing hardware kept more than 40 months can usually pay for new better utilized equipment. Or, as an Intel study found, servers more than four years old accounted for four percent of the relative performance capacity yet consumed 60 percent of the power.

Hyperscale computing (HPC) – RFG views hyperscale computing as the next wave of computing that will replace the low end of the traditional x86 server market. The space is still in its infancy, with the primary players Advanced Micro Devices (AMD) SeaMicro solutions and Hewlett-Packard’s (HP’s) Moonshot server line. While penetration will be low in 2014, the value proposition for HPC solutions should be come evident.

Integrated systems – Integrated systems is a poorly defined computing technology that encompasses converged architecture, expert systems, and partially integrated systems as well as expert integrated systems. The major players in this space are Cisco, EMC, Dell, HP, IBM, and Oracle. While these systems have been on the market for more than a year now, revenues are still limited (depending upon whom one talks to, revenues may now exceed $1 billion globally) and adoption moving slowly. Truly integrated systems do result in productivity, time and cost savings and IT executives should be piloting them in 2014 to determine the role and value they can play in the corporate data centers.

Internet of things – More and more sensors are being employed and imbedded in appliances and other products, which will automate and improve life in IT and in the physical world. From an data center information management (DCIM), these sensors will enable IT operations staff to better monitor and manage system capacity and utilization. 2014 will see further advancements and inroads made in this area.

Linux/open source – The trend toward Linux and open source technologies continues with both picking up market share as IT shops find the costs are lower and they no longer need to be dependent upon vendor-provided support. Linux and other open technologies are now accepted because they provide agility, choice, and interoperability. According to a recent survey, a majority of users are now running Linux in their server environments, with more than 40 percent using Linux as either their primary server operating system or as one of their top server platforms. (Microsoft still has the advantage in the x86 platform space and will for some time to come.) OpenStack and the KVM hypervisor will continue to acquire supporting vendors and solutions as players look for solutions that do not lock them into proprietary offerings with limited ways forward. A Red Hat survey of 200 U.S. enterprise decision makers found that internal development of private cloud platforms has left organizations with numerous challenges such as application management, IT management, and resource management. To address these issues, organizations are moving or planning a move to OpenStack for private cloud initiatives, respondents claimed. Additionally, a recent OpenStack user survey indicated that 62 percent of OpenStack deployments use KVM as the hypervisor of choice.

Outsourcing – IT executives will be looking for more ways to improve outsourcing transparency and cost control in 2014. Outsourcers will have to step up to the SLA challenge (mentioned in the People and Process Trends 2014 blog) as well as provide better visibility into change management, incident management, projects, and project management. Correspondingly, with better visibility there will be a shift away from fixed priced engagements to ones with fixed and variable funding pools. Additionally, IT executives will be pushing for more contract flexibility, including payment terms. Application hosting displaced application development in 2013 as the most frequently outsourced function and 2014 will see the trend continue. The outsourcing of ecommerce operations and disaster recovery will be seen as having strong value propositions when compared to performing the work in-house. However, one cannot assume outsourcing is less expensive than handling the tasks internally.

Software defined x – Software defined networks, storage, data centers, etc. are all the latest hype. The trouble with all new technologies of this type is that the initial hype will not match reality. The new software defined market is quite immature and all the needed functionality will not be out in the early releases. Therefore, one can expect 2014 to be a year of disappointments for software defined solutions. However, over the next three to five years it will mature and start to become a usable reality.

Storage – Flash SSD et al – Storage is once again going through revolutionary changes. Flash, solid state drives (SSD), thin provisioning, tiering, and virtualization are advancing at a rapid pace as are the densities and power consumption curves. Tier one to tier four storage has been expanded to a number of different tier zero options – from storage inside the computer to PCIe cards to all flash solutions. 2014 will see more of the same with adoption of the newer technologies gaining speed. Most data centers are heavily loaded with hard disk drives (HDDs), a good number of which are short stroked. IT executives need to experiment with the myriad of storage choices and understand the different rationales for each. RFG expects the tighter integration of storage and servers to begin to take hold in a number of organizations as executives find the closer placement of the two will improve performance at a reasonable cost point.

RFG POV: 2014 will likely be a less daunting year for IT executives but keeping pace with technology advances will have to be part of any IT strategy if executives hope to achieve their goals for the year and keep their companies competitive. This will require IT to understand the rate of technology change and adapt a data center transformation plan that incorporates the new technologies at the appropriate pace. Additionally, IT executives will need to invest annually in new technologies to help contain costs, minimize risks, and improve resource utilization. IT executives should consider a turnover plan that upgrades (and transforms) a third of the data center each year. IT executives should collaborate with business and financial executives so that IT budgets and plans are integrated with the business and remain so throughout the year.

Dell: The Privatization Advantage

Sep 30, 2013   //   by admin   //   Blog  //  Comments Off on Dell: The Privatization Advantage

Lead Analyst: Cal Braunstein

RFG Perspective: The privatization of Dell Inc. closes a number of chapters for the company and puts it more firmly on a different course. The Dell of yesterday was primarily a consumer company with a commercial business, both with a transactional model. The new Dell is planned to be a commercial-oriented company with an interest in the consumer space. The commercial side of Dell will attempt to be relationship driven while the consumer side will retain its transactional model. The company has some solid products, channels, market share, and financials that can carry the company through the transition. However, it will take years before the new model is firmly in place and adopted by its employees and channels and competitors will not be sitting idly by. IT executives should expect Dell to pull through this and therefore should take advantage of the Dell business model and transitional opportunities as they arise.

Shareholders of IT giant Dell approved a $24.9bn privatization takeover bid from company founder and CEO Michael Dell, Silver Lake Partners, banks and a loan from Microsoft Corp. It was a hard fought battle with many twists and turns but the ownership uncertainty is now resolved. What remains an open question is was it worth it? Will the company and Michael Dell be able to change the vendor’s business model and succeed in the niche that he has carved out?

Dell’s New Vision

After the buyout Michael Dell spoke to analysts about his five-point plan for the new Dell:

  • Extend Dell’s presence in the enterprise sector through investments in research and development as well as acquisitions. Dell’s enterprise solutions market is already a $25 billion business and it grew nine percent last quarter – at a time competitors struggled. According to the CEO Dell is number one in servers in the Americas and AP, ships more terabytes of storage than any competitor, and completed 1,300 mainframe migrations to Dell servers. (Worldwide IDC says Hewlett-Packard Co. (HP) is still in first place for server shipments by a hair.)
  • Expand sales coverage and push more solutions through the Partner Direct channel. Dell has more than 133,000 channel partners globally, with about 4,000 certified as Preferred or Premier. Partners drive a major share of Dell’s business.
  • Target emerging markets. While Dell does not break out revenue numbers by geography, APJ and BRIC (Brazil, Russia, India and China) saw minor gains over the past quarter year-over-year but China was flat and Russia sales dropped by 33 percent.
  • Invest in the PC market as well as in tablets and virtual computing. The company will not manufacture phones but will sell mobile solutions in other mobility areas. Interestingly, he said Dell is a commercial seller more than in the consumer space now when it comes to end user computing. This is a big shift from the old Dell and puts them in the same camp as HP. The company appears to be structuring a full-service model for commercial enterprises.
  • “Accelerate an enhanced customer experience.” Michael Dell stipulates that Dell will serve its customers with a single-minded purpose and drive innovations that will help them be more productive, grow, and achieve their goals.

Strengths, Weaknesses, Challenges and Competition

With the uncertainty over, Dell can now fully focus on execution of plans that were in place prior to the initial stalled buyout attempt. Financially Dell has sufficient funds to address its business needs and operates with a strong positive cash flow. Brian Gladden, Dell’s CFO, said Dell was able to generate $22 billion in cash flow over the past five years and conceded the new Dell debt load would be under $20 billion. This should give the company plenty of room to maneuver.

In the last five quarters Dell has spent $5 billion in acquisitions and since 2007 when Michael Dell returned as CEO, it has paid more than $13.7 billion on acquisitions. Gladden said Dell will aim to reduce its debt, invest in enhanced and innovative product and services development, and buy other companies. However, the acquisitions will be of a “more complimentary” type rather than some of the expensive, big-bang deals Dell has done in the past.

The challenge for Dell financially will be to grow the enterprise segments faster than the end user computing markets collapse. As can be noted in the chart below, the enterprise offerings are less than 40 percent of the revenues currently and while they are growing nicely, the end user market is losing speed at a more rapid rate in terms of dollars.

Dell P&L1

 

 

 

 

 

 

Source: Dell’s 2Q FY14 Performance Review

Dell also has a strong set of enterprise products and services. The server business does well and the company has positioned itself well in the hyperscale data center solution space where it has a dominant share of custom server sales. Unfortunately, margins are not as robust in that space as other parts of the server market. Moreover, the custom server market is one that fulfills the needs of cloud service providers and Dell will have to contend with “white box” providers and lower prices and shrinking margins going forward. Networking is doing well too but storage remains a soft spot. After dropping out as an EMC Corp. channel partner and betting on its own acquired storage companies, Dell lost ground and still struggles in the non-DAS space to gain the momentum needed. The mid-range EqualLogic and higher-end Compellent solutions, while good, have stiff competition and need to up their game if Dell is to become a full-service provider.

Software is growing but the base is too small at the moment. Nonetheless, this will prove to be an important sector for Dell going forward. With major acquisitions (such as Boomi, KACE, Quest Software and SonicWALL) and the top leadership of John Swainson, who has an excellent record of growing software companies, Dell software is poised to be an integral part of the new enterprise strategy. Meanwhile, its Services Group appears to be making modest gains, although its Infrastructure, Cloud, and Security services are resonating with customers. Overall, though, this needs to change if Dell is to move upstream and build relationship sales. In that the company traditionally has been transaction oriented, moving to a relationship model will be one of its major transformational initiatives. This process could easily take up to a decade before it is fully locked in and units work well together.

Michael Dell also stated “we stand on the cusp of the next technological revolution. The forces of big data, cloud, mobile, and security are changing the way people live, businesses operate, and the world works – just as the PC did almost 30 years ago.” The new strategy addresses that shift but the End User Computing unit still derives most of its revenues from desktops, thin clients, software and peripherals. About 40 percent comes from mobility offerings but Dell has been losing ground here. The company will need to shore that up in order to maintain its growth and margin objectives.

While Dell transforms itself, its competitors will not be sitting still. HP is in the midst of its own makeover, has good products and market share but still suffers from morale and other challenges caused by the upheavals over the last few years. IBM Corp. maintains its version of the full-service business model but will likely take on Dell in selected markets where it can still get decent margins. Cisco Systems Inc. has been taking market share from all the server vendors and will be an aggressive challenger over the next few years as well. Hitachi Data Systems (HDS), EMC, and NetApp Inc. along with a number of smaller players will also test Dell in the non-DAS (direct attached server) market segments. It remains to be seen if Dell can fend them off and grow its revenues and market share.

Summary

Michael Dell and the management team have major challenges ahead as they attempt to change the business model, re-orient people’s mindsets, develop innovative, efficient and affordable solutions, and fend off competitors while they slowly back away from the consumer market. Dell wants to be the infrastructure provider for cloud providers and enterprises of all types – “the BASF inside” in every company. It still intends to do this by becoming the top vendor of choice for end-to-end IT solutions and services. As the company still has much work to do in creating a stronger customer relationship sales process, Dell will have to walk some fine lines while it figures out how to create the best practices for its new model. Privatization enables Dell to deal with these issues more easily without public scrutiny and sniping over margins, profits, revenues and strategies.

RFG POV: Dell will not be fading away in the foreseeable future. It may not be so evident in the consumer space but in the commercial markets privatization will allow it to push harder to remain or be one of the top three providers in each of the segments it plays in. The biggest unknown is its ability to convert to a relationship management model and provide a level of service that keeps clients wanting to spend more of their IT dollars with Dell and not the competition. IT executives should be confident that Dell will remain a reliable, long-term supplier of IT hardware, software and services. Therefore, where appropriate, IT executives should consider Dell for its short list of providers for infrastructure products and services, and increasingly for software solutions related to management of big data, cloud and mobility environments.

 

Disruptive Changes

Apr 25, 2013   //   by admin   //   Blog  //  No Comments

Lead Analyst: Cal Braunstein

Amazon Inc. and Microsoft Corp. lowered their pricing for certain cloud offerings in attempts to maintain leadership and/or preserve customers. Similarly, Hewlett-Packard Co. (HP) launched its next-generation Moonshot hyperscale servers. Meanwhile, IDG Connect, the demand generation division of International Data Group (IDG), released its survey findings that show there may be a skills shortage when it comes to the soft skills required when communicating beyond the IT walls.

Focal Points:

  • Earlier this month Amazon price reduced the prices it charged for its Windows on-demand servers by up to 26 percent. This brought its pricings within pennies of Microsoft’s Windows Azure cloud fees. The price reductions apply across Amazon’s standard (m1), second-generation standard (m3), high-memory (m2), and high-CPU (c1) instance families. CEO Jeff Bezos stated in the Amazon annual report the strategy of cutting prices before the company needs to, and developing technologies before there is a financially motivating factor, is what protects the company from unexpected markets shifts. Microsoft has responded by aggressively cutting its prices by 21 to 33 percent for hosting and processing customer online data. In order for customers to qualify for the cuts they must make monthly commitments to Azure for either six or 12 months. Microsoft also is making its Windows Azure Virtual Network technology (codenamed “Brooklyn”) generally available effective April 16. Windows Azure Virtual Network is designed to allow companies to extend their networks by enabling secure site-to-site VPN connectivity between the enterprise and the Windows Azure cloud.
  • HP launched its initial Moonshot servers, which use Intel Corp. Atom low-cost, low-energy microprocessors, This next-generation of servers is the first wave of hyperscale software defined server computing models to be offered by HP. These particular servers are designed to be used in dedicated hosting and Web front end environments. The company stated that two more “leaps” will be out this year that will be targeted to handle other specific workloads. HP claims its architecture can scale 10:1 over existing offerings while providing eight times the efficiency. The Moonshot 1500 uses Intel Atom S1200 microprocessors, utilizes a 4.3U (7.5 inch tall) chassis that hosts 45 “Gemini” server cartridges, and up to 1800 quad-core servers will fit into a 42U rack. Other x86 chips from Advanced Micro Devices Inc. (AMD), plus ARM processors from Calxeda Inc., Texas Instruments Inc., and Applied Micro Circuits Corp. (AMCC) are also expected to be available in the “Gemini” cartridge form factor. The first Moonshot servers support Linux, but are compatible with Windows, VMware and traditional enterprise applications. Pricing starts at $61,875 for the enclosure, 45 HP ProLiant Moonshot servers and an integrated switch, according to HP officials. (For more on this topic see this week’s Research Note “HP’s Moonshot – the Launch.”)
  • According to a new study by IDG Connect, 83 percent of European respondents believe there is no IT skills shortage while 93 percent of U.S. respondents definitely feel there is a gap between the technical skills IT staff possess and the skills needed by the respondents’ companies. IDG attributes this glaring differentiation to what are loosely defined as “hard” (true technical skills and competencies) and “soft” (business, behavioral, communications, and interpersonal) skills. The European respondents focused on hard skills while their American counterparts were more concerned about the soft skills, which will become more prevalent within IT as it goes through a transformation to support the next-generation data center environments and greater integration with the business. As IT becomes more integrated with the business and operational skill requirements shift, IDG concludes “companies can only be as good as the individuals that work within them. People … are capable of creative leaps of thinking and greatness that surpass all machines. This means that any discussion on IT skills, and any decision on the qualities required for future progression are fundamental to innovation. This is especially true in IT, where the role of the CIO is rapidly expanding within the enterprise and the department as a whole is becoming increasingly important to the entire business. It seems IT is forever teetering on the brink of bigger and better things – and it is up to the people within it to maximize this potential.”

RFG POV: IT always exists in a state of disruptive innovation and the next decade will be no different. Whether it is a shift to the cloud, hyperscale computing, software-defined data center or other technological shifts, IT must be prepared to deal with the business and pricing models that arise. Jeff Bezos is correct by not sitting on his laurels and constantly pushing the envelope in pricing and services. IT executives need to do the same and deliver comparable services at prices that appeal to the business while covering costs. This requires keeping current on technology and having the staff on board that can solve the business problems and deliver innovative solutions that enable the organization to remain competitive. RFG expects the staffing dilemma to emerge over the next few years as data centers transform to meet the next generation of business and IT needs. At that time most IT staff will not need the current skills they use but skills that allow them to work with the business, providers and others to deliver solutions built on logical platforms (rather than physical infrastructure). Only a few staff will need to know the nuts and bolts of the hardware and physical layouts. This paradigm shift in staff capabilities and skills must be anticipated if IT executives do not want to be caught behind the curve and left to struggle with catching up with demand. IT executives should be developing their next-generation IT development and operations strategies, determining skills needed and the gap, and then begin a career planning and weaning-out process so that IT will be able to provide the leadership and skills needed to support the business over the next decade of disruptive innovation. Additionally, IT executives should determine if Moonshot servers are applicable in their current or target environments, and if so, conduct a pilot when the time is right. 

Wither Dell?

Feb 12, 2013   //   by admin   //   Blog  //  No Comments

Lead Analyst: Cal Braunstein

CEO Michael Dell is coordinating a buyout of Dell Inc. for $24.4 billion in the hopes that the company can more effectively go through its transformation if it does not have to deal with reporting results quarterly to fickle investors. Michael Dell’s MSD Capital (his investment firm), has teamed with Silver Lake Partners to take the company private. Microsoft Corp. will be assisting in the buyout in the form of a $2 billion loan. If the buyout is successful – which it should be at some price – what does it portend for IT executives and commercial accounts?

To understand where Dell needs to go, one needs to first see where it is. Dell started as a low-cost PC company in the consumer market. It gradually switched to a bifurcated model – PC for consumers and PC and servers for the commercial space, primarily the public, small and medium business (SMB), and large enterprise markets. Over the past six years the company acquired 22 companies – 10 in 2012 alone – and expanded into other hardware components, software and services, including cloud services. But the company has lost its momentum. It lost PC market share and sales in 2012 faster than most of its competitors, which is disastrous for a company that derives more than half of its revenues from end-user computing solutions.

Smartphones and tablets have curtailed the growth of the traditional PC market and Dell’s commercial business has not made up for the loss in end-user revenues. In fact, in both businesses Dell is considered a low-cost commodity hardware provider and not a market or thought leader. The company has not fully integrated all of its acquisitions and is struggling to reach its strategic goal of becoming a one-stop shop. The buyout gives the company time to re-think and execute a long-term strategy, reorganize and change its culture. As CEO Meg Whitman at Hewlett-Packard Co. (HP) can attest, a turnaround is a multi-year effort and doing so in public when quarterly results can be volatile is not fun. Thus, the desire by Michael Dell to go private.

While there are a number of challenges that Dell must address, there are two that will make or break the success of the new corporate strategy. The vendor must either exit the end-user computing market or once again become a market leader. It is lacking products in the key current and future end-user markets and it cannot regain its position with just PC solutions to hawk. Secondly, Dell has not been able to transition from a culture of transaction selling to one of relationship sales. If the vendor is to become one of the top one-stop providers in the commercial space, it will have to invest in customer relationship management. This is a massive cultural change that goes to the core of the company. HP has struggled with the clash of this cultural divide since it acquired Compaq in 2002. IBM Corp. took more than 10 years to change its culture. The underlying question will be whether or not CEO Dell, by trade a transactional salesman, can lead the culture shift to succeed with its new corporate vision.

In addition to the above challenges, there are a number of other key issues to be resolved. IT executive relationships with Dell depend on how these shake out.

Assets.  Dell will need to decide which assets it has today are worth keeping and which are to be shed. In strong customer relationship management organizations, people are a primary asset. Will Dell address this? Additionally, once it has its strategic vision in place, what additional acquisitions are needed to complete the puzzle? Will the new Dell have the funds to acquire the companies it needs or will the buyout end up choking the firm’s ability to compete effectively? Dell recently moved into the equipment leasing space. Will it have the wherewithal to remain?

Business Model. What will Dell’s new business model be? It will have to compete with HP, IBM and Oracle Corp. – all of whom are innovators, bring more than commodity products and services to the table, and want to own the complete business relationship with their customers. Each has a different business model. Where will the new Dell position itself?

Business Partners and Channels. Dell will have to re-evaluate how it works with business partners and uses various sales and distribution channels. Dell does have a cloud presence but can it leverage it the way Apple Inc. or Google Inc. do? Can it be a full service provider and still utilize business partners and channels effectively? Without strong business partners and channels Dell will not be able to compete effectively.

Microsoft. Microsoft did not become an owner but a lender to Dell. This will cost the company more than just money. Will it restrict the vendor from providing certain products or solutions?

Processes. Dell needs to revamp its development, operations, and sales processes to be fully integrated and customer relationship based. The customer must come first; not the products or services. This will be a long-term change, which may be agonizing at times.

Technology. Today Dell assembles some products and has the intellectual property (IP) for those products and services that the company acquired. Can it leverage the IP and become recognized as an innovator or will the IP assets wither and the talent depart? Over the past year Dell has been bringing on board the resources to take advantage of the assets. Will the new Dell continue down the same path? If Dell stays in the end-user computing space, will it be able to figure out how to do mobility and social (key components to staying competitive)? If not, will it bite the bullet and exit the business?

The company was at one time the leader in the PC arena. Then it became one of the top players. Now it wants to be a leader in the full-service enterprise space where it is not a top player and is losing momentum.

RFG POV: Dell has a long, tough transformation ahead. By going private it will no longer have to worry about the stock market price but will still have to answer to investors. RFG does not expect the company to pull out of any markets in the near term – although the printing and peripherals business is exposed – but a number of the executives and employees whose visions are out of sync with new direction will depart. In the full-service enterprise space Dell will have to be more than a low-cost provider. It must become a hardware, software, and services innovator, determine its positioning vis-à-vis competitors, make additional acquisitions to fill in the gaps, and spend time and resources building relationships that may not yield near-term revenues. Whether or not the stakeholders will allow the company to spend enough money and time to make the conversion is an open question. The fallback position may be to go back to being a low-cost or custom commodity provider to the commercial market.  Moreover, Dell will have to invest in a new end-user computing model, watch its market share shrivel, or quit the space. One thing is for sure – it cannot be all things to all players and must pick its choices carefully. Dell must articulate its strategy to business partners, customers, and employees over the next three to six months or loyalty may falter. In any event, IT executives should expect Dell to provide support and a smooth transition for businesses that are divested, restructured, or sold. IT executives desirous of using Dell as a strategic provider should continue to work closely with Dell, keep abreast of its strategy and roadmaps and factor the knowledge into the corporate decision-making process. Additionally, IT executives should not be surprised or concerned to find the company fails to make the short-list of candidates. There are plenty of options these days.

 

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