Dell gets into Support

Evidence of the shoft to services in the computer industry comes from this article in the Washington Post on Dell:

Traditionally, the computer industry has been divided into two categories: “products,” the boxes of plastic and silicon themselves, and “services,” a loose term encompassing jobs ranging from tech support to consulting. While computer firms generally offer a mixture of the two, the industry has consolidated, with companies moving toward either end of that spectrum. HP and IBM are nearer the services end, with each getting half its revenue from large, multiyear consulting jobs for corporate customers.

Dell, the leading maker of computers in terms of units sold, has always been on the product end of the spectrum. Where other companies have sought high-margin consulting jobs, Dell has stuck to exploiting efficiencies in its assembly lines.

Now Dell wants to be known as a services company, too. Dell founder Michael S. Dell has said he wants to expand his $4 billion services business, which mostly consists of tech support work, into a $10 billion operation.

Unlike the computer hardware industry, the services market is still fragmented. The top 10 companies hold only 25 percent of the worldwide services market. That market is a potentially lucrative one: While a little more than $240 billion was spent on hardware last year, the worldwide services market was worth about $557 billion, according to Forrester Research Inc.

“The services industry has long enjoyed thick margins and heavy growth,” said Eric Rocco, vice president at research firm Gartner Inc. “Dell is trying to take as much mystery out of the process as possible.”

Here’s Dell’s sales pitch: Customers of competitors often purchase their servers and workstations through resellers. Dell, by contrast, sells all its products through its Web site — and is able to keep records of every aspect of the computer or workstation it has sold to each customer.

If a Dell customer is having a problem with a product, the company can look up exactly what components went into it. Dell can even tell which worker assembled it. As a result, Dell said, it is able to resolve 75 percent of customer problems over the phone, compared with an industry rate of 45 percent.

With that sort of success rate, Dell hopes to squeeze more efficiency out of tech support services — and to turn support service into as much of a commodity as a processor or memory chip.

“In some cases, the product is becoming a service,” said Michael Dell. “We have customers tell us ‘We don’t want to manage our computers any more. We want you to do it.’ ”


Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.