Dell's path to transformation
The PC-maker looks to new tech markets for growth
- By Nick Wakeman
- Jun 11, 2012
As much as any government contractor, Dell Inc. has been on a transformation path the last few years.
Its acquisition strategy is focused on picking up players in growing segments of the market to become known as more than a PC and server maker.
In the government market that translates into Dell being an alternative choice in areas such as security, storage and mobile technologies, according to Joe Ayers, vice president and general manager of Dell Federal.
The changes have helped the company maintain its strong position in the market and put it in place for more growth when the market turns in the coming years, he said.
For the 2012 Top 100, Dell is ranked No. 19 with $1.9 billion in prime contracts during the government’s fiscal 2011.
“It was a good year, not a great year,” Ayers said. “We experienced challenges like everyone else.”
With customers looking to weather reduced budgets and doing more with fewer resources, Ayers said Dell’s focus has been on value.
“It really fits with Michael [Dell’s] manta to provide the solutions our customers are looking for,” he said.
One example is Dell’s acquisition of Force10 Networks last August, which brought Dell more networking capabilities for data centers and cloud networks.
“There are certain companies that dominate that market, but now we can bring a competitive price to performance ratio, and federal customers are looking for alternatives,” Ayers said.
At the same time, Dell faces challengers of its own in its traditional PC and server markets.
“We certainly get attacked on clients and servers,” Ayers said. “In hardware, you have to win net new business every year, but that’s a good thing for the government and I’m not afraid of competing on value and price.”
On both its hardware and services sides, Dell is focusing on opportunities around IT efficiency, mobile computing, cloud computing and security.
For example, it’s working on projects with Veterans Affairs and the Army Corps of Engineers to virtualize client systems.
“We are using our solutions and services to move them into the virtualization era,” he said. “It is not just about selling client systems to them.”
The recent acquisition of Wyse Technology will help as Wyse brings Dell more thin client technologies, Ayers said.
Two current competitions that Dell is deeply involved in are the Navy’s Next Generation Enterprise Networks and the Air Force NetCents contracts. Dell is part of the Computer Sciences Corp.-Harris Corp. team that is taking on incumbent Hewlett-Packard Co. for NGEN. For NetCents, Dell is a prime on the hardware contract and subcontracting on the services portion.
Whatever contract Dell pursues it has to contend with the larger role that price plays in procurement decisions today, Ayers said.
“My fear is that it is going to be a price-only shootout,” he said. “More scrutiny on pricing is good, but if it is just low price, you don’t get the value.”
Dell tries to emphasize the importance of total cost of ownership. “We like to see that baked into procurements from the start,” he said.
Security is another area that needs to be considered upfront in developing and awarding contracts, Ayers said. “If you don’t weigh TCO and security, it can cost you more in the long run.”
Budget pressure are expected to increase. “Nothing has really been cut yet, so when that happens, it is just going to be tougher on our customers,” Ayers said.
The result for contractors will be more competition for fewer dollars. “We have to be aggressive and make sure we are providing a great solution at a good price,” Ayers said. “And we have to execute well.”
Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.