Dell: Lowering Services Prices Is On Company's Agenda

Claiming that his company has driven down the cost of services it offers by an average of 40 percent to 50 percent, Dell pledged that services is one of the areas in which his company will press forward with innovative offerings over the next year.

"We are creating a new kind of services model, one that is based on semi-custom services, one that is really focused on value and driving costs out," he said.

Dell made the comments in a question-and-answer session before about 5,000 IT executives here at the Gartner Symposium/ITxpo 2002.

The vast majority of services growth will be organic, Dell said, noting that the company may look at acquiring "selected small organizations that have key talents we would love to add into our organization to help it grow faster."

Earlier this year, Dell bought Plural, a Microsoft solution provider, and rolled the company into its services organization.

Dell said his company's $3.5 billion professional services organization has about 8,000 employees and did 2,000 engagements last year and is one of the fastest growing parts of the company.

He said the company is selling prepackaged fixed price services at rates from $15,000 to $50,000 for complex enterprise work that involves everything from Microsoft Exchange to Oracle 9i clustering.

"We don't want to see customers charged exorbitant rates for these things," Dell said. "And we know how to drive the costs down. There is no reason why these things have to cost huge sums of money. I fundamentally believe every part of the market over time will find its way to dramatic declines in cost."

He said the prices for SAN implementation before Dell got into the business were out of control. "I am not sure how they were set, but it just didn't seem right to us," he said. "We kind of looked at what does it really cost us to do this, how repeatable is it, [and what can we do in the factory vs. the field. In many cases, you can preconfigure things so when it does actually get in the field the amount of work required is quite minimized."

Dell said he is employing some of the same efficiencies in the services business that the company used to drive down server and PC prices.

Dell conceded there aren't the same kind of costs that can be driven out of the supply chain as in building a PC, but he said there are cost improvements that can be made to deliver more value to customers.

"What we are seeing often times is the semi-custom services can be redeployed time and time again, so there is actually some intellectual property that gets created and it is a repeatable process," he said. "It's been a very good business for us."

Dell boasted that his company is the only vendor in its class to achieve an expense-to-sales ratio of under 10 percent, while many competitors have an expense to sales ratio of over 20 percent.