Dell Watch: Services Grows, Printer Pricing Shrinks


Dell's services business is now on a $4 billion-a-year run rate, and the latest news from Round Rock, Texas, seems to show they're building momentum:

Dell has been awarded a three-year, multimillion dollar contract by Honeywell to provide managed services throughout its information technology network in the United States.

Last year, Dell won a contract for a similar project for Honeywell operations in 16 European countries. This new agreement covers 57,000 systems across all Honeywell divisions in the United States. The transition to Dell is currently under way in multiple sites.

Honeywell will use Dell's Managed Services to provide its service desk capability for support questions around operating systems and more common software applications.

Honeywell may be investing much of its IT future in Dell services, but it has already invested much of its present IT in pure Dell hardware, with a previous leasing deal already in place.

While a $4 billion annual run rate is significant and makes Dell a true player in the services segment, it's still a far cry from the $10 billion annual services business that Michael Dell promised the market his company would become. What's unclear is whether Dell will do in the services arena what it now appears to be doing in the printer space. This item from Gartner hints at what's going on behind the scenes:

To squeeze its competitors in the printer market, Dell forgoes profit on printers, minimizes R&D, sells directly to customers and bundles printers with PCs. Profits from consumables, such as ink cartridges, subsidize printer sales.

Some solution providers this week, responding to Lexmark's disappointing earnings, said Lexmark and the channel appear to be feeling the Dell squeeze in the printer space.

There may be limits to how far Dell can compete on price--before it starts competing with itself. Take, for example, this story by blogger Holly, about a Dell monitor pricing issue. And that may not be the only time Dell has competed with itself on price--as evidenced, some system builders have said, by its decision earlier this year to pull the plug on its white-box business.