Are You Important To Dell?

Challenged in this interview, Kevin Rollins, Dell's CEO, tries to correct the impression that unless you're a large enterprise customer happy with offshored tech support, you're not a significant customer for Dell. Hint: it has to do with the digital home and security services Dell wants to sell you. Read part two.

Kevin Rollins [Dell Computer] | POSTED: 10.19.04 @13:40

At the Wall Street Journal's D conference, Dell's new CEO talks about offshoring, the future of PCs, and security programs for consumers. Mossberg: Let's talk about after-sale service and let's talk about consumers, even though you've now said several times that they're secondary to enterprise in your view. Rollins: True. Mossberg: Good for me to know. Since I write for consumers, it's good to know which companies focus on consumers and which don't. [Laughter.]  Hey, we learn things at the D conferences. One of the ways you've established what you call value, and distinguished Dell from other people selling commodity Windows computers, is that you have had what has generally been perceived to be the best after-sale service. If people have a problem with it, they call up and they tend to be happy with the experience with Dell, happier than the experience they've had with Gateway or somebody else over the years. But I can tell you—and this is not scientific—but I get a sense that there's been some deterioration in that. I don't know whether it has to do with sending those jobs overseas or not, but you measure these things closely. Do you have any sense that there has been any stumble or problem in that area?

Rollins: It happens every time we see large growth spurts. We try to anticipate those growth spurts and manage them effectively. We became number one in the space in Q1, by over a million units. We're number one in the consumer space for the plain non-focused consumer market of all places, we're number one in terms of selling PCs and peripherals around them. So it's clearly a priority for us—to get that little dig back in—in terms of selling the overall volume because it's a large market and it's fairly intact for us.

But I think when we see one of these growth spurts we actually end up stumbling a little bit, and it takes us a while to go back and re-jigger the success, the performance, while not dropping materially compared to our competitive set. We have work to do to continue to take that bar, raise it ever higher and improve our performance. It didn't have as much to do with outsourcing as it did with the growth spurt and getting ahead of the expectations that customers have.

Mossberg: But outsourcing—I know you've had an incident, not on the consumer side but on the enterprise side, where although you didn't announce it, you had to bring some of the outsourcing support for some of your big customers back to the United States because they didn't like dealing with people in India. And whether they were right or wrong about it, they didn't like it and so they complained and you fixed it for them. What was their problem and does that suggest that you should fix that for other customers?

Rollins: I think the issue there was that we frankly expanded too fast in India, we got too far ahead of ourselves. For our corporate customers we were the first and the most sensitive to it, in terms of the service capability. So responding to it as we always do, we had to either shift and change, and so we slowed down that migration—although we're still hiring more folks in India and many other locations around the globe outside the United States, although we're still hiring [here], too—to make sure we bring the best quality service for every customer set that we have. We still do technical support and customer support in India for corporate customers and for small and medium business customers, but we slowed that down until we maintain the level of expertise and capability in India that our customers want.

Mossberg: Does that mean that when you get that level of expertise in India up to where you'd like it to be that you will switch the people who complained back to a service situation where it's based in India?

Rollins: It's never really one or the other, it's global. And so we will have call centers whether they be in China, whether they be in India, in South America, in central Europe, in Africa, wherever they might be, to meet the needs of the customers. And as you know, we organize our business by customer type, so we'll direct our customers to those call centers and areas of capabilities that best meet their needs and the cost to value equation.

For enterprise customers, the most demanding, more technologically advanced [customers], those call centers are still predominantly in the United States, close to our R&D; labs. But over time—because when you go to India and China and other parts of the world, the technology and the knowledge of their workforce is superb—over time we would imagine that we'll be using the global network of call centers to handle all customers.

Mossberg: What kind of PCs do you expect to be selling in a couple of years? In what way might they be different from what you're selling now? Are you going to have a lot more Media Center type PCs, or more tablets, or more laptops versus desktops? Are you going to be selling increasing numbers of PCs that are run on Linux and not Windows?

Rollins: Well, as is typical of all the things that we do, we listen to customers very carefully. We talk to hundreds of thousands of them each day, to hear what they're seeing, what they're wanting, what they don't like about the current technology, our products as well as technology in general. And then we push forward as far as we can push the envelope with our partners. So where is it going to go? Well, we look at the markets in two buckets. Clearly there's the consumer market, which is a very, very hard market to make any money in, as we have seen in numerous leaders in that industry who are out of business today.

Mossberg: Mostly because of you. You make money in it. You've made it hard for everybody else to make money.

Rollins: We make money in it, but we're one in a million in that marketplace—it's hard for us, too. That's a market we gauge very closely. We pull back or push based on the profitability.

But then you have a corporate market, and then you have the small business market. Each one of these customer sets has a little bit different need for technology and will have a different need for products going forward. So how does that approach the PC, the client business? You have in many markets the need for smaller size. So you see us continue to offer smaller, more compact systems—flat panels are smaller.

Mossberg: What is causing the need for smaller size? Less real estate, smaller rooms?

Rollins: You have growth in the Asian markets where they don't have the space, and so there's a need for smaller space there. You have the education environments where they would prefer the systems are smaller, which also lends itself to the notebook, that's smaller. So you see the growth of the notebook as a product of declining space.

Mossberg: What percentage of your sales right now is notebook versus desktop?

Rollins: About 65% of our total sales volume, actually less, about 50 in the desktop, and high 20s or so in our client space in the—I'd say about 30, 50/30, and then odds and ends for the other 20. This is taking enterprise products out of it, but that's growing. The notebook and the mobile market obviously is growing and as more customers find they need that mobility and Wi-Fi and other technologies allow you to be connected [and mobile]. That's the fastest growing.

The notion of the PC being dead is I think a misnomer for a whole host of reasons, as it still is the most efficient form of computing, fixed computing, and most of the corporate world still utilizes fixed computing.

Mossberg: You mean the desktop business.

Rollins: The desktop is not dead. When you get to the home, it's actually reemerging as a fantastic technology, because it is the digital heartbeat of the home, and you can get more capability in that form factor. We believe that for the long term you're going to see bigger, more powerful computers in the home, whereas in the corporate world you might see smaller, lighter, maybe unique functionality systems that are used [there], whether they be handhelds, notebooks, or desktops.

Mossberg: Is there a business opportunity for Dell around security in the part of the world that isn't covered by an IT department? People are confused, [they] have to buy a separate program for spyware, for viruses, a separate firewall and all these programs that give them warnings. I know how much you like to make a profit—and we at the Wall Street Journal  think that's great—but is there an opportunity for you to sell a service to your Dell customers, in particular in small business and in the home, where you would manage their security system remotely? Make sure everything on the computer is automatically up to date so I don't have to have a subscription to Symantec, another one with ZoneAlarm and another one with Webroot, I do it all through Dell, you keep me all patched and up to date. Is that a business that is of any interest?

Rollins: Yes, it actually is. We're pursuing more security bundles that we might load on our system. You've still got the challenge of privacy versus security. We had a number of folks on systems we had available today, and they turned the [bundles] off, where they don't want you to enable them to get updates on a regular basis, because there is an issue of 'Well gosh, when I put some of those filters on they actually filter out things I wanted to get, I'm feeling that I'm losing my privacy if I let in some outside vendor.' They haven't accepted that.

Mossberg: Right. What I'm talking about is a choice situation where you would say 'Look, here's the trade-off: you're going to have to give us a little control over this, but you don't have to worry about it. We at Dell are going to do that.' It would seem to me if you really pulled that off and they didn't have to think about the separate pieces of this, that might be a competitive advantage.

Rollins: It's not only a function of making it work seamlessly, it's also a function of convincing the consumer they actually want this and should buy it. What we find is that, as you imagine, after a virus attack everybody wants all the help. But prior to the virus attack, when we say 'Here's the system, here's the bundle, here's the security features,' they think 'Well, I don't need that now, maybe later.'

There is a challenge associated with the knowledge and awareness of risks and the potential that all of us don't worry about an accident once we've gone a little distance from one. And then when we have one, then we need the protection. So it's a challenge in terms of education, in terms of bundling, pricing and servicing that. And I don't think we've cracked the code yet, but you're right, we should be doing more.


These excerpts are part three in a four-part interview conducted with Dell CEO Kevin Rollins. The session took place at the Wall Street Journal's executive conference "D: all things digital," produced by Walt Mossberg and Kara Swisher. Part one covered innovation vs. value and Rollins's new role, part two explored Dell's focus on profit and extension into non-core products.

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Ohhhh please..... Dell VARs tell me that you need to be a certain "class" of customer in order to get meaningful support (special 800#), as in support that will actually solve your problems. What happened to the Dell value proposition that they could assemble any technology more cost effectively than the next guy?