Dell Not Ready To Mount Small-Biz Services Offensive

"We figure the opportunity for us is to move into the higher end of the medium-[size] business [space] and then drive it down over time, as opposed to go and compete with a pretty well-entrenched VAR channel at this point in time," said Dell Senior Vice President of Americas Joe Marengi in a conference call with analysts. "It doesn&'t make any sense to us. Even though there are revenue opportunities there, we are going to wait in our life cycle as a company to really try to penetrate that."

Dell's enterprise and midmarket services offensive is only in its infancy, Marengi said. His comments come as Dell has boasted that services now represent its fastest-growing business, amounting to a $5 billion annual run rate or 9 percent of total sales. Dell said its services business is up 36 percent this year and has grown more than 30 percent for the last six quarters.

The Round Rock, Texas-based hardware giant also reiterated its plans to build a strong partner network to deliver its services and to expand its Dell-badged services employee base. The company, however, refused to specify how many of its 52,000 services professionals are Dell-badged employees vs. Dell services partners.

"We have and will continue to have very strong partner elements of our service delivery capability," said Dell Vice President Gary Cotshott. "We have a very strong ecosystem of partners whom, in many cases, we would be their largest customer in the world. It is more than just a partnership with them. In addition to that, we always have sufficient Dell-badged capacity and are growing that capacity very aggressively in all areas to be able to effectively manage the execution on an end-to-end basis for all our contracts, regardless of whether it is a support contract, managed services contract or special services contract."

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Marengi said Dell is primarily focused on IT infrastructure services, although the company plans to offer data center services down the road. "Dell does not aspire to do everything and to be all things to all people," Marengi said. "We are not in broad IT consulting such as application development, and we are not in business process outsourcing. Our services portfolio is squarely focused on IT infrastructure services."

Among the infrastructure areas, Dell is focused on planning, implementation and maintenance of systems and server and storage consolidation. Marengi said the company also has services business focused on life-cycle management of desktop and notebook systems.

Still, VARs said they continue to see shortcomings in Dell's desktop repair and help-desk businesses, which is driving more customers to solution providers and system builders.

"Attorneys, doctors and businesses don&'t have time to stay on the phone for 45 minutes to an hour to get an answer," said Steve Plotz, president of Computer Systems, a systems builder in Tampa, Fla., adding that he hasn&'t seen any Dell services penetration into his accounts. "That is why they are willing to spend more with a system builder."

And Dell is feeling the impact of its services shortcomings in the SMB space, said Jay Tipton, vice president of Technology Specialists, a Fort Wayne, Ind.-based solution provider. "Dell is getting their head handed to them in small to medium business," he said. "People are tired of Dell's poor service. It's easier to compete against Dell now because they are not providing the level of service that customers thought they once did. Dell's services have gone downhill over the last couple of years."