After eight years at the company, Kevin Rollins was appointed president and CEO of the US$41.4 billion computer juggernaut Dell last July. Many still think of Dell as a desktop supplier, but the company has become a powerhouse in server and notebooks as well and is making strong moves in the printer and storage markets.
Rollins sat down recently to speak with InfoWorld News Editor Tom Sullivan, Editor-at-Large Ed Scannell, and Senior Writer Bob Francis. During the conversation, Rollins covered a wide range of subjects, from Dell's rapidly growing professional services business to the addition of Advanced Micro Devices processors to the company's lineup.
Dell services business has been growing at a rapid pace. How aggressively do you want to match IBM's Global Services?
We are not trying to match them at all. Our services business and strategies are really very different (from IBM's). Consequently, we do not bump into them very much on the services front. We are usually selling enhanced services that surround the hardware, versus outsourcing or architecture design engagements.
When we are selling a large installation of servers or storage, we will add a menu of services items in order to facilitate the installation and the management of them. It becomes Dell-centric at that point.
Well can you give us a road map of what your ambitions are for your services and support business for both larger and smaller companies?
It can be an expensive proposition, given it is a human-intensive business.
Our goal is to leverage what is already out in the field in terms of partners, but then hire in project management capability and a bit of technical capability. Just a little of that can go a long way in terms of leveraging field resources. It has been growing at about twice that of our hardware business and is now in the US$4 to US$5 billion range, so it is reasonably good-sized.
We are going to continue to do that, but it will grow in tandem with the hardware and at a multiple, because we are penetrating more and more accounts and are adding more and more menu items to the list whether they are professional services or managed services. They are very much tied to hardware; they are not independent. We rarely go after a services-only deal.
In terms of pursuing opportunities among the larger end-user companies, are you willing to put Dell services and support people inside your customers' sites?
We don't put a lot of people in there on-site, although we will put some there. Most of the services staff is for the larger corporations, not so much for small and medium businesses because they cannot afford an extensive services army.
But in the large corporations where most of our service and staff are, they are doing things like storage or server consolidation, or doing an Exchange migration, or migrating off of Unix to Linux or to Microsoft. We also work with them on that to help port applications to help in the rollout of that globally. We have Dell people involved in managing these processes and partners who help do the arm and leg work. In those cases we might have 10 or 15 Dell folks who are focused inside those companies to help do it. But we don't just start putting revenues generating people on-site.
As the services business grows, do you have any plans to get into the grid-utility game or hosted hardware?
No, generally not. We might get more into the utility area if we are helping them set something up. But we are not looking to outsource that. There may come a time when we will, but it is not even on the map for us now.
Well what would it take? What would be the indicator to you that you should do that?
Frankly (the utility model) is not that profitable. And so it would have to be a lot more profitable than it is today. History would suggest that as more people get into that, the profitability of that type of business will actually go down. There is a lot more profit made on the close-to-the hardware service offerings. In fact we believe that two-thirds of the profitability in the services industry comes from the close-to-the-hardware stuff, and only one third comes from the standalone or highly consultative service areas.
What kind of opportunity is out there for you to pursue in terms of software integration?
Well we are working on that now with Dell Professional Services. But again as it grows, that compared to the profit and revenues on the hardware is very small. So we will grow it as we need to in order to facilitate overall hardware installations, rather than just grow the professional service capabilities independently. We are never going to do that.
But if you were to make a concerted effort to build more of an image as a software integrator, wouldn't that in turn further drive hardware sales?
Well it actually does today. We are not able to do that in a vacuum. So when we go into a large hardware bid, there is usually a services component that is part of that. So as we enter these deals, we tend to talk about the capabilities and what else needs to be done, and from there the bid might expand beyond hardware to the services.
But we do not lead with services and then come back to the hardware like some of our competitors do. You have to look at our growth rate and say, well it must be working -- otherwise you would not be growing at 30 to 35 percent in services on 18 percent hardware growth.
It seems a lot of your competitors have supported AMD. What is your stance on that?
Two things. I am sure there will come a time when we are going to use AMD. The products have been getting better. The acceptance is getting better. But we have not been suffering as a company for either growth or profitability because we haven't had AMD. In fact, frankly, I think just the opposite. The companies that have been using AMD have been doing the worst.
Interesting. So do you see AMD being a viable competitor in the long run?
Yes we do. The technology is better, and in some areas now they are in the lead on Intel. That is what interests us more than anything. But we have not been losing a ton of business because we haven't had AMD. At the end of the day we have to be profitable and grow, and so that is going to be the main indicator of what we might do. But my guess is that we are going to want to add that to our product line in the future.
Are you looking more at the server side of things or the desktop side?
Well, they (AMD) are too small, frankly, to do a whole lot of damage in the desktop arena. If we basically sucked up all of AMD's capacity it still would not be enough. They do not have enough capacity as we speak today. They really would be more interesting for us in the server and workstation and gaming arenas. But that is a fairly small unit volume category of the CPU business.
What is your vision for the role of PCs evolving, especially in the larger IT shops? And based on that evolution, how can Dell best position itself to take advantage of that? Or is the 'vision thing' not just Dell's thing?
No the vision thing is there. We are No. 1 worldwide by quite a margin on the client side and expanding, according to IDC and others, every single quarter. Our expectation is that the industry will consolidate and that more of our competitors will exit.
Our vision is to continue to lead in client-based technologies as well as move up into the datacenter as more companies exit the client business. So we are looking at wireless for mobile computing. There is a huge push there. But there is still a large need and desire for the technology associated with desktops. We have never abandoned that, and we will continue to invest there.
Who do you anticipate will be the first to drop out of that market?
That is hard to say because it is generally not the case where someone just closes their doors. You had Compaq and HP merge, and so you got one company left there. On the consumer side you had Gateway and e-Machines merge. You have a number of Japanese companies who might question how long and how viable they want to be. There will be a few companies in Europe that will question their commitment. IBM is questioning it all the time. They have already outsourced all of their manufacturing capabilities for desktops, so it would not big a big shift for them to let it go.
In terms of growing your desktop sales, do you think you have everything in place internationally?
Over the last several quarters we have been growing faster in Asia and Europe than any other place on the planet. We have 18 percent of the global PC share, about 12 percent in Europe, and 8 percent in Asia.
How do you plan to push desktop Linux, and how much do you expect that to gain in the next year or two?
We don't expect to push it, to be frank. And the reason is we do not make money on it, whether it is Microsoft or Linux. So if a customer wants it and they believe that Linux on the desktop for office productivity is a good thing, we are thrilled to help them do that. But we are agnostic about (operating systems). We do not make any more money whether it is Linux or Microsoft.
With the Compaq-HP merger in place for a while now, can you assess what their newfound strengths and weaknesses are and what your strengths and weaknesses are today?
Prior to the merger, they were very strong in the printing and imaging arenas. And now as the dust has settled it is just about the same.
Compaq historically had been strong in the server front, but they lost US$400 million or so in the enterprise business last quarter. It has failed to achieve profitability in a sustained way. They make less than 1 percent on their client business. So really the money is all made in that combined entity where it was made before the merger.
It does not appear to us that they have really enhanced their capability a whole lot post-merger over what the two entities had separately pre-merger. If you are going to use profitability as any sort of yardstick for how well companies are doing, then the whole game has not changed a heck of a lot.
Given you are doing more and more integration of products and solutions, does Dell have any ambitions to get more into systems integration software?
We have Dell Open Manage, which is our systems management suite used in conjunction with EMC and their systems management capabilities. We will be announcing in about a week a new partnership with Microsoft on a full systems integration deal. It will be our first foray into the next generation of services for systems management. We are looking toward a vision of combining systems, storage, and network management into one console. We are not there yet, but that is what we want to push toward.
Do you have a timeframe for that?
It is quite a ways away because we really don't have good standards yet on storage or network management. But customers are telling us that they are really sick of needing multiple systems to mange hardware and software on each one of those networks.
What are the top five technologies that you plan to focus on in the next five years?
One is the whole area of software management. But we need the software capability to integrate our (management software) with those of others in a common platform. That will take a little while, obviously, to get the standards established. We think Microsoft is a great partner to work on that. Altiris. is another partner we have worked closely with. (They have) done a very nice job for systems management.
We believe there is a lot of hope in VMware virtualization, which seems to be one of the hotter platforms we are working with and helping drive. In terms of technologies, systems management is going to enable most of the standards-based technologies. So we are looking to set up standards rather than proprietary ones. And we have also new thrust in the whole imaging and printing area, which is a new and huge financial opportunity for us.
How effectively do you think you can compete against Hewlett-Packard in imaging and printing?
HP is much, much larger than we are and has a great business with a tremendous annuity stream, and that annuity steam is in ink. They also have this great installed base. Our goal is to establish an installed base of both inkjet and laser printers and then move to the next level of that annuity associated with cartridges and toner.
It is not as mission critical as systems and storage management, but printing and imaging management is becoming a bigger issue for corporations and it is a big expense. How you manage a ton of copiers and laser printers throughout an entire organization is now becoming something they can do from a console. So that is all part of the future wave for us.
What do you see for Dell in the immediate future for storage?
One of the things we have always tried to do is make storage easier for customers to use. With the launch of a number of platforms through the partnership with EMC, we have been able to take storage to new price points and take capabilities up a notch.
We will continue to push the envelope with easier-to-use systems. SATA drives are going to play a large part of that, and eventually iSCSI will too. We will be announcing an iSCSI product this coming quarter along with EMC. Storage is likely to be our key strategic initiative in the coming year.
Do you see any other partners coming in besides EMC?
Right now because each one of the storage suppliers either are competitors of ours or have a unique management system, it is pretty difficult to have multiples. So right now EMC is the partner of choice, and they have been doing real well. We have been taking a ton of share from IBM and HP. So we think it is a probably a good idea to stay with them.