New program has solution providers reselling Dell PCs
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After posting strong second-quarter sales that it attributed to "the unique advantages of its efficient, customer-focused business model," Dell has augmented that business model and embraced the very companies it has sold against: solution providers. Dell wants to sell unbranded PCs through white-box builders whose own PC products often undercut Dell's higher-priced systems. Below, Frank Muehleman, Dell's senior vice president and general manager of the small-business unit, explains the company's plans to go after what it believes is a $3 billion opportunity.
VB: Why the change in direction?
Muehleman: What we are doing is focusing on the small end of small business. These are customers that tend to buy through solution providers and use those solution providers as their IT departments. They do everything from hardware recommendations and specifications, to pricing to installation and maintenance, training, network management, etc. They provide a full range of service for these small customers. What we are looking to do is sell directly to the decision-maker...We think we can provide a unit to these solution providers that will be lower-priced than what they are [using today. The quality will be higher,with a toolless chassis design,and it will be very convenient, too. They'll get custom, online premier pages with their purchase histories, financing options, etc.
VB: Who is Dell hoping to reach by offering unbranded PCs through computer resellers and white-box builders?
Muehleman: The majority are companies with fewer than 20 employees. There will be ones with up to 100 employees. But that's almost the breaking point where you find an internal IT department.
VB: What are the characteristics or demographics of the typical company that will avail itself of your new initiative?
Muehleman: They are regional in nature and provide services to surrounding businesses and small municipalities. They typically have fewer than 20 employees, and less than $5 million in annual revenue. They provide a full set of solutions. They also tend to be very strongly affiliated within their communities.
VB: What kind of systems will qualify for this program? Fully configured systems? Bare-bones systems? AMD or Intel?
Muehleman: The unit is a desktop PC with an Intel Celeron, all the way up to a P4 processor. They will be fully configurable. The reseller can specify [several aspects. It is eligible for what we call CFI, which will allow solution providers to have custom software installed or custom images or even specific wireless cards, for example.
VB: What are the margins on the PCs?
Muehleman: I don't know. Dell is going to provide a piece of hardware below what the market is today for comparable white boxes. How [solution providers bundle, wrap in services, etc., is really that solution provider's role. All I know is that they are selling a large number, and we can provide a product at a better price and with more convenience than what they are getting today.
VB: What makes you confident that the companies it has tried to effectively put out of business will partner with Dell?
Muehleman: I think there are a couple of different types of solution providers. We're not looking to partner with manufacturers. What we're offering is an alternative...My experience is that whether people are end users or solution providers, they are incredibly savvy and understand the economics and will migrate to a better solution [if offered.