Dell - just like a reseller, only bigger

Dell - just like a reseller, only bigger

SYDNEY - Listening to Michael Dell outline how he started his computer company with $US1000 and grew it to a $US10 billion operation in just 13 years, it became obvious that much of his success - and that of his company - can be traced to doing business just like a good reseller.

Sure, a $US10 billion company is one enormous reselling operation. "We focus on minimal inventory averaging 11 days for 33 stock turns in a year," Dell, chairman and CEO of Dell, said last week at a press conference with the Australian media. That sounds like the sort of target a good reseller should be aiming for.

"We've taken over the role of the system integrator and software reseller," he said.

That sounds like a reseller moving further up the food chain.

Price is becoming a smaller component for the reasons people buy from Dell, according to Dell.

"Price is only about a third of the reason people buy from us," he said.

"We have moved from selling good technology to driving our costs down and now our focus is on service."

That also sounds like a good reseller and the analogy is not that crazy.

Dell's build-to-order model relies on having the right components from the right suppliers at the right destination at the right time.

Certainly, Dell is now adding more value to its PCs through developments it has patented. (That is certainly an advanced stage of reselling.) "We had a configuration operation here in Sydney, but we decided to concentrate our manufacturing on fewer locations to reduce our overall inventory," said Dell.

For the Asia-Pacific region that location is in Penang, Malaysia. There, the company builds servers, desktop systems and notebooks, integrates software and ships the finished products to customers across the region.

And in another twist to the reseller analogy, Dell is selling more computers over the Internet.

Recent surveys of the reseller channel in Australia show an increasing awareness of the Internet as a sales medium.

But it is unlikely to generate the $US2.5 million a day that Dell's Web site is generating for the company.

Dell said he would continue to take the company further up market.

"Only about 10 per cent of our sales are in the consumer market," he said.

"Moving further up the market makes sense for us. Servers with eight-way Pentium processors will seriously challenge the mainframe market.

"The problem with the lower end of the PC market is that there are fewer first-time users so we're not focused on that market."

And that sounds like a reseller leaving the mass market to the retail channel.

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