Dell Chief Sees 'Evolutionary' Strategy

By Richard McCaffery, Staff Writer



Powerhouse Dell Computer Corp.'s federal focus for 1999 is keyed to four areas: the Internet, services, enterprise products and DellWare, or products made by other vendors that Dell sells on its GSA schedule, top executives said.

The Round Rock, Texas, computer maker's Internet push is a program that offers government clients their own Dell Web pages. It will complement new maintenance and installation services just added to the General Services Administration schedule.

"It's taking advantage of Dell's direct business model," said Thomas Buchsbaum, Dell Federal's new vice president and general manager. The former head of Dell's education division was picked in February to replace Robert McFarland, who moved on to oversee Dell's largest global accounts on the commercial side.

Buchsbaum described the company's near-term strategy as evolutionary, not revolutionary. "My objective is not to set a new course, but to focus on the elements of the strategy that created this enormous success," he said.

The company's Premier Pages program will continue to be a primary Internet focus. Dell has set up thousands of customized Web sites for commercial companies, which allows them to search for products, place orders and even configure products online. Now it's escalating efforts to push the program with federal customers, Buchsbaum said.

Dell introduced the program to federal customers in 1997 but didn't promote it until 1998, said Jodi Weinbrandt, Dell's director of federal marketing. The company now operates about 35 Premier Pages for federal agencies, like the one used by the Air Force's Standard Systems Group.

"The Web site is user friendly and provides many options to select specific products, pricing information and payment options, including a credit card," said Maj. Glenn Bright, chief of the SSG's commercial information technology division. SSG has been using the Web site since July 1998.

Other vendors, such as Micron Electronics Inc. of Nampa, Idaho, Government Technology Services Inc. of Chantilly, Va., and International Data Products of Gaithersburg, Md., also have Web sites that allow Air Force customers to search for products and place orders.

But few have had the kind of online success Dell has experienced. The company has parlayed its online strategy into a $14 million-a-day business. "Our Internet business alone is a Fortune 500 company," Buchsbaum said.

The Web site has garnered Dell more than $73 million worth of Air Force business since last June, Bright said.

Weinbrandt said this year Dell will step up its efforts. "We're being more proactive, and customers are beginning to see the value," she said. "Based on the demand ... we expect to add several hundred [Premier Pages] this year."

Bob Dornan, senior vice president at Federal Sources Inc., a McLean, Va., market research firm, called it "a beautiful strategy. A lot of companies offer either instant gratification or custom solutions, but not both. Doing them together is a real challenge."

But Dell has defied expectations for a long time. It made a name for itself selling custom-built computer products directly to end users. The build-to-order model, which keeps Dell's inventory low, changed the way the industry builds and sells computers.

Dell reported income of $1.5 billion last year, up 55 percent from the year before. Revenue soared to $18.2 billion, up 48 percent from the year before. But investors used to stellar figures punished the stock recently when year-end figures revealed sales growth had slipped below 50 percent.

But Dell's model certainly played well in the federal government last year. The company came in No. 1 on GSA schedule sales in 1998, raking in $427 million, up from $270 million the year before, according to Dornan.Dell's GSA schedule sales more than doubled those of its biggest rival, Gateway Inc. of North Sioux City, S.D., which had sales of $214 million, down from sales of $230 million in 1997.

Dell officials declined to break out total government revenue or forecast growth. But Buchsbaum, who said the company has been aggressively growing its sales force and plans to continue hiring through the second quarter, expects strong growth in 1999.

As general manager of Dell's education division, Buchsbaum helped triple the number of computer products shipped annually to schools and universities. He wouldn't provide specifics, but did say the division grew so large Dell decided to split it into two parts, one handling schools and the other higher education.

"It was as a result of enormous growth that all this happened," Buchsbaum said of his move to federal and McFarland's move to commercial.

Other federal initiatives include adding four-hour repair services and installation services to its GSA schedule. The company rolled out the initiative in February, and major integrator partners Wang Global of Billerica, Mass., and Unisys Corp. of Blue Bell, Pa., continue working with Dell to fulfill them.

"We'll be a very big part of it," said James Hogan, president of Wang Government Services Inc. Hogan said services Wang provides Dell's customers are growing more sophisticated as Dell expands into the server and storage marketplace. "Now, more and more, we're moving up the food chain," he said.

But major systems integrators don't need to worry about Dell yet, said Bill Loomis, managing director of the technology research group at Legg Mason Inc. in Baltimore. The services Dell offers government clients are mostly maintenance and installation work, not major IT projects, Loomis said.