Q1 earnings 4% down from previous year
Company still on track to offer end-to-end solutions, execs say
THE first thing they said to me after I had had my first sip of coffee was, “So, as a technology journalist with his ears close to the ground, tell us -- what comes to mind first when you think of Dell?”
The two men I was meeting were from Dell Asia Pacific and Japan -- Amit Midha (pic), its president, and Phil Davis, vice president of its Enterprise Systems Group. They were in Kuala Lumpur recently to speak at the Dell CIO South Asia Forum.
In a more diplomatic mood than usual – it was already my fifth cup of the day – I tried to hem and haw my way out of this one, but finally had to concede defeat: Yes, I know Dell has been acquiring companies, capabilities and technologies to move beyond hardware and transform itself, but I still think of it primarily as a box-pusher.
“A darn good one,” I hastily added. “I’ve been a customer for years.”
Not a bad bit of criticism, Midha admitted, but with a glint that told me that he and his colleague would be out to convince me otherwise.
It is a conundrum for a company that was once the world’s biggest PC company, now relegated to third spot and seeking to move beyond its hardware origins. Not long after our meeting, the Round Rock, Texas-based company reported first quarter earnings of US$635 million, or 36 US cents a share, on revenue of US$14.42 billion, down 4% percent from a year ago.
This was below Wall Street’s expectations of 46 US cents a share on revenue of US$14.9 billion.
The details were just as devilish: Large enterprise revenue had fallen 3%; consumer revenue was down 12% to US$3 billion; sales in the Americas dropped 7% and were flat in Asia-Pacific and Japan.
However, enterprise solutions and services revenue was up 2% in the first quarter to US$4.5 billion, while services revenue was up 4% to US$2.1 billion.
You’re not the boss of me
No wonder the company was aiming its top regional executives at chief information officers (CIOs) and companies across the spectrum. The Dell South Asia CIO Forum Midha and Davis were attending had gathered 32 customers from 10 countries that morning; the night before, the two had played host to 100 partners from 22 countries across the region, they said.
They were there to talk about emerging technology trends and what CIOs were facing, including the all-consuming “consumerization of IT” or Bring Your Own Device (BYOD) trend.
And of course, to plug how Dell was well-positioned and equipped – with a raft of acquisitions over the past few years – to help them face these challenges.
“There are three things driving the BYOD phenomenon,” said Midha.
“The first is the increasing prevalence of the remote workplace and increasing ‘flexi-hours’ work-styles. For instance, almost 40% of the US population is going to be working remotely in the next three to five years -- that’s almost 62 million people.
“When you have that, you’re not going to put company PCs in everybody’s house,” he said.
The second and third drivers were user preferences and cost concerns, with the latter, in Midha’s personal view, actually being the lowest priority.
Davis concurred, saying, “In my time, when I first used a computer, it was at work where I learned to use a limited number of applications.”
“Today however, people coming into the workplace have had years of interacting with applications. Those applications may be Yahoo, they may be Facebook, or they may be Alibaba in China. These people didn’t have to take a three-week class to learn how to use Facebook.
“So their expectation is that how I interact with corporate IT should be as simple as how I interact with my personal applications. Whether I access Facebook from my phone or my Dell XPS, the experience is the same. Yet when I access my corporate applications, I can’t do it from my phone, or I lose half my data doing so.
“These people don’t stand for this. They are a lot more vocal in demanding the same experience … it’s a little provocative, but I think CIOs have to embrace BYOD. If they don’t, what’s going to happen is that it will happen below ground – it will happen, but you won’t know anything about it.”
An Acorn study commissioned by virtualization specialist VMware found that about 82% of Malaysian employees surveyed brought their own devices to work, and while 91% said their company was aware of this, 69% said their company’s IT department does not provide any support, Digital News Asia reported recently.
Furthermore, 41% of the employees said they would continue to use their choice of software or applications even if they did not receive support or consent for it.
‘We can offer this’
Both Midha and Davis did not find this surprising, with the former adding that CIOs had no choice but to respond.
“This trend is happening, and you have to manage your devices and secure your data. Small and medium businesses (SMBs) tell us that if they lose their data, there’s a 90% chance they will be wiped out as a business,” Midha said.
Customers like the proliferation of devices and the added capabilities this gives their organizations. “They like the different form factors – whether it is a tablet or a smartphone – but what they don’t like is every device being its own island that does not connect to others.”
So it is a challenge in terms of supporting it form a management and security point of view, he added.
Dell has the supporting infrastructure to help customers here through the Pocket Cloud desktop virtualization tool, he claimed, which it acquired by buying Wyse Technology in a deal announced in April.
Acquiring Wyse will enable Dell to greatly expand its desktop virtualization portfolio and cloud-based client capabilities, company officials said then in a conference call with analysts and the media. It would also allow the company to offer greater integration of cloud client and desktop virtualization capabilities into the Dell’s data center server, storage and networking solutions, they added.
“We’re moving away from the PC to multiple devices, and Dell will help you protect your investment,” claimed Midha.
However, he admitted that for companies to move, there’s still a lot of work to be done from the IT infrastructure perspective.
“First of all, if you’re keeping islands of information, porting every one of them to mobility is a nightmare. You have to move your internal enterprise architecture into ‘full buckets’ as we call them -- you are going to need a service-oriented architecture supported by intelligent data centers,” Midha said.
“Then data must be moved to multiple tiers that can be managed much more effectively.
“You would also need a flatter network architecture and intelligent device management – if you lose your device you were accessing corporate email from in a taxi, how is the system administrator going to wipe that device clean, remotely, to protect corporate data?” he added,
Desktop virtualization can help organizations streamline IT management, improve productivity and security, and increase cost efficiency, he claimed.
In 2011, Dell also acquired Atlanta, Georgia-based SecureWorks Inc, which provides managed security services. More recently, it bought advanced network security, secure remote access and data protection specialist SonicWALL Inc.
Not just tech
With all these acquisitions and with Dell re-defining itself, Midha was confident that his company could offer end-to-end solutions to any company moving into the cloud and embracing the BYOD trend.
However, Davis (pic) admitted it’s not just about the technology but that there’s also a “process implication. How much of this can you automate?”
“If a customer comes and tells us, look my boss got himself an iPad and says I have to do this, what are the first steps a CIO should take?
“First, he might want to consider come kind of consultancy. Dell has a methodology called WADI – Workshop Assessment Design and Implementation. We look at your current state and your ‘to-be’ state, where you want to go, even it is two years down the road.
“This is usually a free two- to four-hour needs-based engagement. Only if a customer wants to move forward, then we move into full-blown engagement, where we go into more detail of their specific environment and give them specific recommendations.
“From there, we can design a solution and we can implement it. And the way the process is structured, you can choose to engage or disengage at any point down this road,” he said.
For instance, Davis said, if upon receiving the assessment, the customer decides that his own IT staff can do it, he can do so. Or the customer can do the design and have Dell implement it. Or the customer can have Dell go all the way.
“So the first thing you want to do before you do a lot of things, is to get a broader roadmap of where you are and where you want to get to. That leads to a more concrete set of priorities, like security of data we were talking about earlier,” said Davis.
And how did Dell gain this consultancy repertoire? Well, through an acquisition, how else?
“When Dell itself went down this road, we had 8,000 applications running throughout our company. We rationalized it down to 2,200. We used an independent services company at the time called Perot Systems,” Davis said.
Plano, Texas-based Perot Systems was an IT services provider founded in 1988 by a group of led by investor Ross Perot, and with more than 23,000 employees. Dell acquired it for US$3.9 billion in 2009.
“Yeah,” chuckled Davis, “like Victor Kiam and Remington razors, we liked Perot’s services so much we bought the company.”
The coming of BYOD and its challenges
Welcome to the new world of working