What’s Dell Up To?

Dell has launched a new marketing campaign, “You Can Tell It’s Dell”, a new positioning strategy for their products and services moving forward. What they’re planning is formidable- whether they can do it is the big question. We saw earlier this summer where they went after 3PAR for cloud computing only to be outbid by HP (they have since bought another cloud computing company). In reality, Dell is going for virtually the whole IT eco system, including mobile business. The big question is- can they do it?

There have been concerns raised about Dell's inability to articulate its priorities. Is it smartphones for consumers? Is it one-stop shop products and services for its corporate customers? Is it PCs and laptops for everyone? "I'm not sure if Dell is hedging its bets or if it is uncertain of where it wants to go, or if it wants to be an all-round big player, like an HP that straddles both worlds," says Saikat Chaudhuri, a Wharton management professor. "At present, it looks like it's not sure where it can make much impact."

Dell has a long way to go from where they are today. For example, it’s not clear if they can win the mobile market with what they launched with their 3 Mini smartphones and Streak tablets. It’s a crowded space in both markets. That said, last week’s announcement that Dell was pitching their 25, 000 Blackberries for their own smartphones for their employees certainly caught the market’s attention.

Plus, the recent smartphone launch and the 3PAR tug-of-war make one thing clear. Nothing about Dell's attempts to reinvent itself from a PC and server maker to an all-encompassing IT products and services company has been easy, says Daniel A. Levinthal, another Wharton professor. "[Dell] seems to have lost sight of what it's good at and how to find new opportunities to leverage that. Dell hasn't become any less wonderful at doing that," he notes. "But guess what? The world has changed."

Levinthal and Chaudhuri believe that Dell woke up too late to this changed world, even as competitors like HP snatched away its once enviable market lead by offering sharper products and services. There is a fundamental problem, suggests Chaudhuri- "Dell sees the need for diversification, but does it see the need for transformation? There is a big difference."

PC companies like Dell have increasingly begun looking to mobile devices and other corporate solutions to diversify away from the heavily commoditized personal computer, where net margins can fall to the low single digits. Dell is "trying to be an 'everything' IT business, a diversified company," adds Netessine, a professor of technology and operations management at Insead, France. "The problem is that it's extremely hard to do all things well. It's hard to see how Dell can ... compete with all those powerful companies that have been in the business longer and have much better products in many cases."

Let’s be clear here- it’s not all doom and gloom. Dell is still growing- in fact over 21% year over year. And Dell has been in shifting to higher-margin businesses. Dell wants to focus less on hardware and more on services – whether they can transform AND diversify is the big question. Dell has more than $10 billion in cash and will grow by acquisition as well as introducing new products and services. It will be an interesting 18 months to see if they can execute on their strategy.