Dell Touts Standards in Fresh SAP Pact

UPDATED NEW YORK — Trumpeting a combination of completely standardized systems, professional services and its famous low-cost delivery model, Dell enlarged its eight-year pact with SAP to
bring servers and applications to the enterprise.

Dell is battling rivals IBM and HP, both
of which are also gunning for more considerable market share in the SMB market. For Germany’s SAP, the upgraded agreement gives the company, known for its clout among large enterprises, an open window into a smaller but no less lucrative market.

CEO Michael Dell made the announcement Wednesday during a press event at the Nasdaq Marketsite building, with SAP CEO Henning Kagermann joining Dell on stage for the first time ever, in a deal aimed at shoring up Dell and SAP’s reach into the small- and
medium-sized business market.

“We do see right now that the technology spending is increasing and
companies are becoming more confident in their businesses,” Dell said. “We
see a pretty remarkable shift going on in the enterprise market to the use
of standards-based hardware.”

Dell promised to accelerate the growth of standards-based
computing in the enterprise through partnerships, such as those with SAP,
Oracle and EMC, while stressing that his outfit’s direct model has provided “unparalleled value” to customers.

“Recent IDC research shows that approximately one half of SAP’s 70,000
installations are in transition in one form or another to standards-based
platforms,” Dell said. “That represents a huge opportunity for Dell. More
and more companies are recognizing the cost and the lock-in associated with
proprietary technology.”

Dell also predicted the increase in demand for low-cost 2- and 4-way Linux
and Windows-based systems will continue to cannibalize UNIX market share
from its competitors.

Using this infrastructure, Dell said customers will be able to take
advantage of Dell’s “scalable infrastructure,” which is essentially the
company’s equivalent of a utility computing strategy. In this plan,
customers can procure computing power at a rate that is commensurate with
the growth of their businesses. Dell said he expects the deal with SAP to help drive this.

The Round Rock, Texas-based Dell has optimized its PowerEdge servers with
SAP’s host of applications for some time; the companies currently count over
5,000 enterprise installations together.

The latest agreement is largely an
expansion of professional services, with UNIX to Linux and Unix to Windows
migration now offered to SAP customers, according to Linda York, vice
president of alliances for Dell.

York told that the difference between the
professional services from Dell/SAP is that while the companies previously
did some customized services for customers, Dell and SAP have decided to
make it a standard offering open to all clients — existing and new.

“We’ll customize those larger installations for customers that need
something special, but the first line of support for SAP through Dell is
new,” York said. “The migration services, in terms of planning and
assessing, sizing, and installation and the care thereafter of the SAP
solution are new.”

York also said Dell and SAP are collaborating on Dell/SAP “competency
centers,” where the companies will help customers improve the deployment of
SAP software with performance engineering for applications and networking;
support services, including planning, training, and problem-solving; product
testing for consistency and reliability; and proof-of-concept testing and

The Dell SAP Competency Centers are located near SAP’s worldwide
headquarters in Walldorf, Germany, and at Dell’s SAP Center of Expertise
(COE) in Austin, Texas, and in Kawasaki, Japan.

York also said the very nature of the deal will help SAP gain traction in
the SMB space, where Dell is already entrenched. Forrester Research said in
a recent survey that SMBs plan to increase their IT spending for 2004 by 6.6
percent over 2003, compared with a 1.7 percent increase among larger
companies. Roughly 79 percent of SMBs prefer to buy PCs from Dell, and it is
also on the shortlist for SMBs’ server and storage purchases, according to
the research firm.

York also explained how Dell’s focus on lowering total cost of ownership by
employing only standards-based technologies helps them stand out in a market
where vendors such as HP, IBM and others still maintain proprietary systems.

“If you look at Dell, we are a pure-play in that sense,” York explained.
“We’re all about standards, we only sell standards and we have no legacy to
protect, no proprietary systems with large margins and therefore we can
partner with someone like SAP, which has a similar approach, we can go full
steam ahead in that market and expanding market. Our competitors obviously
don’t have that capability.”

Dell has been busy lately, bolstering partnerships with companies such as
Oracle and inking new deals, such as one with
Intel server virtualization(define) provider VMware to use the
company’s software in new configurations of its servers.

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