Dell: A Dot-Com With a Business Model

Growth in today’s economy stems from execution and a great strategy.
Simple, huh? Well, not many companies have a clear strategy — especially in
the Net world.

Then there is Dell (DELL)
. It has been a fast-charging company over the years — primarily
because it knows how to morph its strategy. Then again, it was the genius
of Michael Dell to build a company that is, in essence, modular. This has
sprung forth from Dell’s mission to sell direct to the customer. This means
cutting out intermediaries and designing direct links between customers and
manufacturers.

Yet again, Dell has reached a new juncture. The PC market is competitive
and slowing. So, this week, Dell announced it is redirecting energies to
Web servers, business consulting services, venture funding and business
incubation. Think of the company as, in a way, a new-style CMGI.

Dell’s new Internet Partner Division intends on providing value-added
services for e-commerce and personalized content. This is the company’s
first step in sharing their critical expertise in e-commerce. After all,
www.dell.com is the world’s largest e-commerce Web site, which generates
$35 million a day in revenue.

In February, Dell announced its new service of Web site hosting for
small-to-medium sized businesses, offered at www.dellhost.com. The service
will be full-featured, offering Web site design and server configuration
(dedicated or shared). It is, of course, the so-called ASP (Application
Service Provider) approach. Customers like this because it means
getting-to-market quicker, as well as more efficient and timely updates.

There is also a new line of PowerApp appliance servers for Web site
management, such as for directing traffic flow. The appliance servers
handle specific tasks like e-mail management. What’s more, bundled with the
technology are such things as Web-hosting software from Microsoft and
solutions from Linux providers.

As Dell moves towards more complex technology solutions, there is a need
for professional consulting services. To this end, Dell has partnered with
such firms as Arthur Anderson Consulting and Gen3.

Finally, Dell has a venture fund, focused on providing funding and
incubation services to early-stage private companies. This not only
provides upside in terms of rate of return from the portfolio companies,
but also access to new technologies to help Dell grow its core business.

This new redirected strategy does not mean Dell has given up on the desktop
PC market. The desktop market still has growth left but margins are
thinning and are not enough to sustain Dell’s historical growth rate. With
their brand name and customer relationships, though, Dell can leverage its
huge PC customer base into a myriad of new revenue streams, keeping the
growth coming.


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