Techaisle Analyst Insights

End-to-End Solutions Company
Convincing conference, unified messaging from all executives, substantial customer success stories including SMBs, considerable partner alliance conversations, convergence showcase, expanding geographic footprint, emerging technologies, mid-market design point, and end-to-end solutions story. What can I say?

At the recently held Dell Annual Analyst Conference, in Austin, the centerpiece of messaging was Dell’s relentless pursuit to be an end-to-end IT solutions provider and a trusted partner. Michael Dell in his conversation with the analysts proved that Dell has changed the conversation from product to services.

“Many new change vectors are going on - Data centers are becoming server centric/compute centric, networking is being combined with computing and storage and security are becoming one – Dell has the ability to understand where the puck is going”, said Michael Dell. To that extent Dell is busy building products and solutions from which customers can capture value.

Dell has made 20 acquisitions since 2008 to build a solutions delivery capability. Its R&D, which is increasingly being focused on storage, server, security and networking convergence went up by 40 percent in the last year alone.  A key aspect of the strategy is to develop converged solutions that include storage, security, servers and wrapping it all together with services and deliver end user solutions that help customers compute in environments with pervasive data access.



 

 

 

 

 

 

 

 

Since his return as CEO, Michael Dell has steadily moved Dell into new areas for higher growth and profitability. Although Dell’s revenue has remained within a narrow margin, growing by only 1.5% from 2008 to 2012, its net income after taxes has grown by 18.5% within the same time period. Dell today has greater diversity in its solution offerings and broader geographic footprint. Both storage and security are higher margin products and with the acquisition of EqualLogic, Compellent and recently SonicWall, Dell’s margin story continues to improve.

Dell’s end-to-end solutions story is also beginning to look complete with portfolio having evolved from PCs and servers to services. Dell’s software portfolio is not where it should be but Dell is building out its capabilities for on premise software, cloud applications and software embedded in hardware. Consistent with the overall theme it wants to offer software solutions that are easier to buy, easier to use and easier to extract value.



 

 

Even the channels organization is perfectly aligned and focused on continuing to grow its PartnerDirect program that was started five years ago and is now approximately US$14 billion business for Dell. The channel’s organization headed by Greg Davis is continuing to make its rules of engagement very partner friendly and empowering and training its channels to provide value to their customers. Greg is ensuring that there is consistent
channel engagement across both mature and emerging markets with deal registration, compensation neutrality and executive priority. With over 135,000 training modules delivered in the last year alone it aims to provide simplicity, enablement and a strategy to win datacenters together. To take advantage of new social media networking platforms, Dell has also launched a new social media training program for its channel partners. The training program, developed based on Dell’s own experiences, provides its channel partners access to a number of useful social media tools and tips, including links to all of PartnerDirect’s social media platforms, a Q&A forum, registrations for both a live virtual training session and on-demand refresher courses.

Executing on its vision
Dell’s vision is being driven by five key market dynamics:

1. Emerging markets growth


2. Consumerization of IT


3. Explosion of data


4. Alternative computing platforms


5. Corporate IT complexity

Dell has not only been able to integrate the businesses it has acquired but also has successfully scaled them. Dell Boomi, a middleware for cloud, originally acquired for its ability to bring cloud integration to SMBs, is equally at home in large enterprises. A  recent example is OneWorld Alliance which has implemented a new information technology (IT) hub based on Dell Boomi AtomSphere cloud integration, designed to substantially reduce complexity, cost and time involved in linking new member airlines into the alliance.

SMBs' "CIO in a box"
Whenever an IT vendor presents customer stories I look for sincerity in the customer’s dialog and contribution of the IT vendor to customer’s success. Current Motor, an Ann Arbor, Michigan based SMB stole the show and my heart. With only 12 employees it uses full end-to-end solutions from Dell in the most interesting yet fundamental ways. Remember that it is only a small business; nevertheless Dell put a team together to bring to fruition integration with salesforce.com and digital dashboard enablement of Electric Scooters six months sooner than expected. Solutions used – mobility, cloud, hardware, software, services. As Laura Flanagan, Executive Chairman, Current Motor put it, “Dell is her CIO in a box.” And it all started with Laura approaching Dell with a business pain point. The result -- sincerity in dialog and value-add by Dell.

As Dave Johnson, SVP, Corporate Strategy said in his presentation, the “heart of the customer is the CIO.” No worries, SMBs, if you do not have a CIO, Dell can play that role for you.

Next Steps for Dell

• The entire Dell team has to work harder to get its messaging and capabilities heard by its current and potential customers because I feel Dell’s end-to-end
  solutions story has not yet reached the crescendo it deserves


• By focusing on mid-market design point Dell should not forget that small businesses have different needs and the last thing they want is a scaled-down version of product meant for mid-market businesses. Other IT vendors have tried in the past with zero to limited success


• Dell should formulate and articulate its mobile strategy beyond its planned introduction of tablets and smartphones, especially for the SMB segment that are adopting mobility solutions faster than enterprises


• Technology pain points have now overtaken business pain points for SMBs. Dell can be that unique IT Vendor that helps SMBs sort out and identify relevant technology options (cloud, mobility, infrastructure, managed services, virtualization, social media, business intelligence, marketing automation) by becoming a trusted advisor and business consultant

Anurag Agrawal
Techaisle

On March 29^th, 2012, Dell announced a new Cloud Services and Solutions Certification program for its channel partners that want to transition to cloud-based business model. This program specifies additional sales and technical training required for the new certification and is initially directed at channel partners who already have a certain level of infrastructure-related skills and sell Dell’s enterprise products.

Dell’s Cloud Services & Solutions Certification is comprised of three primary pillars in providing cloud services and solutions:

• Cloud Builder – for channel partners that can provide services to design and develop a cloud infrastructure for their customers. This is typically suitable for VARs.


• Cloud Provider – for channels that have the capabilities or want to acquire skill-sets to operate a cloud networking operating center (NOC) enabled with Dell technology to provide cloud services. These include:  Infrastructure as a Service (IaaS), Platform as a Service (PaaS) or Software as a Service (SaaS).  This is typically suitable for SaaS ISVs, Service providers.


• Cloud Service Enabler – for those channel partners that want to act as aggregators or brokers identifying, securing and integrating the appropriate set of cloud technologies and services from multiple sources and operating the resulting cloud for their customers through a set of managed services. This is typically suitable for MSPs & Systems Integrators.

Techaisle believes that Dell’s new channel program is a step in the right direction. Techaisle’s research has shown that businesses are looking for advice and guidance from their channel partners on the use of cloud services & solutions. In addition, Techaisle’s channel research has also shown that many channel partners who want to offer cloud-based offerings to their business clients, themselves need help and support from their vendors. The new training requirements will ensure that channel partners have the required cloud-related skills to be the best in business. Dell is also making it easy
for partners to demonstrate their infrastructure-related skills by accepting their membership in channel programs of recognized vendors in technology areas of security, networking and virtualization. In addition to getting preferred pricing, Dell’s Cloud Partners will also have access to financing from Dell as well as support engagement from Dell Direct Sales and Services.

A key feature of Dell’s program is the recognition that channel partners vary greatly in their size, skills and resources. The program allows partners to transition to the cloud computing model in a manner they feel is best suited for them – be it as a cloud builder, cloud provider or as an cloud service enabler (aggregator). The program also allows partners to supplement Dell’s technology with their own technology services, giving them significant flexibility to offer Dell-based cloud offerings without having to write-off up their investment in their existing services.

Dell has steadily evolved its channel strategy over the last five years and this new certification represents an important step in that evolution. Given this steady evolution, Dell’s channel partners can expect Dell to further fine-tune channel’s role in the cloud, develop additional support programs and also expand its cloud-based offerings for the channel.

Anurag Agrawal
Techaisle

The World is Flat (© Thomas L. Friedman) and so has become IT, especially for SMBs. With a Flat world, rises an opportunity for SMBs to employ workers who are globally distributed, travel and telecommute. With a Flat world comes Flat IT. And the IT vendors are missing the dialogue with their SMB customers- some vendors more than others. They are also missing a new understanding of SMB IT adoption cycle.

But we are getting ahead of ourselves. Let us first understand the world of Flat IT.

Waves have Evaporated to Form Clouds

Analyst firms typically use words such as IT waves or eras in describing SMB IT adoption - client/server wave, networking wave, Internet wave, etc. There is nothing wrong with this wave theory except now that there are no more waves left, all water is evaporating to form clouds. But some analysts still continue with that philosophy and call the coming wave as mobility wave. These do not do any good to either a vendor or the end-customer. Mobility started with notebooks & Wi-Fi. An SMB does not buy IT considering the wave, it does not even think whether the wave is waxing or waning. A typical SMB buys IT because it needs IT and the SMB with the help of channel partners becomes smart enough to understand what IT to buy to make itself more efficient, productive and profitable.

Waves were relevant more than a decade ago when technology products were evolving in piecemeal basis. Today all technologies are available at the same time and its adoption among SMBs is dependent upon the business plan.

Building Block IT

Enter the building blocks. SMBs started off their journey into IT by unknowingly using simple building block concepts. Their first purchase was always a PC which served as the foundational block. When they added employees and file sharing became important, they built a network and added a server – the next block stacked up on the foundational block. When they reached a certain size they added more servers, the third and subsequent blocks became applications such as CRM, ERP and Line of business. All of these blocks could not be added without the existence of the previous block. Very soon when an SMB reached a mid-market level of operation, the blocks were neatly stacked one on top of another. And when the blocks became vertically unstable, they brought in external experts such as consulting organizations to help manage these blocks and possibly break them into small chunks that could be easily maintained. SMBs looked for Enablement.

IT vendors thrived. Dell concentrated on the foundational block, Cisco connected the blocks, HP played with all block layers while IBM refocused to the top layers. Vendors like Microsoft, SAP and Oracle provided the layers that enabled the blocks.

The process of an SMB growth and its relative steps to absorb IT were steady and predictable. Some SMBs stacked the blocks faster than others but steps to get to the top of the block were always same. It was also dependent upon the financial capacity of an SMB to the extent that those with large dollars available for investment built the blocks faster not necessarily having the same end-results as SMBs with limited investment capabilities and which moved slower. Call it cutting edge versus laggards, but such nomenclature also never proved that the cutting edge SMBs were more efficient or profitable than the laggards. IT vendors and channels made money as they exploited the IT imbalance among various SMBs creating a race to reach the top of building blocks as fast as possible.

Flat IT

Enter Flat IT. Cloud, mobility, virtualization, and managed services have effectively toppled the blocks down in one fell sweep and have laid everything flat on the table. SMBs are now automatically empowered but they do not know it yet, because nobody has told them so directly. The concept of cutting edge and laggard has been torn apart because
it carries little meaning as SMBs now have a rich menu of solutions available that can be plugged into in a very short time. Now it is not a race to the top, but how can an SMB reach its full potential in the shortest period of time.

In a Flat world, with Flat IT, similar technology is now available across all countries and gap between developing and developed worlds is narrowing. In some of the emerging markets, IT is not only Flat but leapfrogging technologies as building blocks are not fully present. Where converged infrastructure is becoming a possibility, Cloud services will
be delivered via wireless.

Next week we will discuss how SMB IT has become Time & Size Agnostic and how the SMBs of today are transforming themselves.

Anurag Agrawal
Techaisle

In India the Netbooks were launched about 16-18 months ago, however, growth in terms of sales has been seen only in the last couple of months. One of the major reasons for the growth has been product promotions by the respective vendors by introducing a low-cost “cousin” of the notebook during the economic crisis period. Though the ratio of notebooks to Netbooks remains low the channels see the growth as a positive trend. Netbook volumes are being driven by businesses.

While the Netbook market is still in its nascent phase in India, the channels in India feel that there is a latent market opportunity within three different segments driven by either usage or price-points.

First Segment: Mobile Segment
Initially the netbooks are being purchased by “new-age customers who have a desire to stay connected at all times”. These are:

• Students,


• Frequent travelers,


• Sales and marketing professionals

The market is seeing its usage in the corporate segment as businesses “are placing orders for Netbooks for those employees who were non-users of computing products earlier or for employees who are traveling. We are starting to see orders in batches of 10 netbooks to 25 netbooks for internal teams within SMBs and other businesses”. The low-cost is not the only factor for this segment driving sales, but portability, small size, internet connectivity and smooth functioning of Office applications are other reasons. The channel partners feel that netbooks successfully address an entry level price-point for the segment.

Second Segment: Second PC Household Segment
There are essentially two different types of consumer segments that are either purchasing netbooks or are currently investigating purchasing netbooks. The first type consists of students and children within households:

“Netbooks are essentially being purchased as a second PC by consumers in India. Netbooks may never become the choice for most Indian consumers, who are yet to buy their first PC, however parents are buying Netbooks for their younger children/toddlers for their educational needs or in lieu of video gaming products. This shift from notebook to Netbook preference is due reasonable price, low risk and easy maintenance.”

They see its usefulness in day to day activities like simple office applications or for music, entertainment, instant connectivity to social networking websites, video chatting, video streaming, E-mailing.

The second type of consumer segment is also buying Netbook as a second PC but who require and have a pressing need to segregate work units such as specifically for accounting or for side-business such as real estate or life insurance. They view that the basic applications for which a Netbook are web based applications, simple office applications like Word, Excel and PowerPoint presentations. They see its usefulness in day to day activities like financial transactions and E-mailing.

Third Segment: “White Goods” Segment
Currently a Netbook is “tagged” as a computer/computing device and its price point is in the INR15,000 – INR20,000 (US$330 – US$450) range. Once the price point comes below INR10,000 (US$220) the market will likely explode. And that time the vendors should sell Netbooks as “white good gadget” and not as a computer. It will establish itself as an essential item to purchase by females within households, a “must-have” gadget/device/appliance. “We have seen many women of the household buying a Netbook but hesitatingly”.

Why hesitatingly? Channels feel that Intel should bring in some concrete marketing and promotional activities to create awareness for its Atom Processor as many consumers are more processor conscious. If consumers are buying a PC it is because they have the money to buy one and therefore they try to go for a notebook. This trend has been witnessed in the non-metro cities like Nashik, Cochin, Chandigarh, Lucknow, Allahabad , Ranchi to name a few where many consumers are buying their first PCs. With no space constraints and no travel needs, the consumers in Tier 3 and beyond cities follow the mantra of “Bigger the Better”.

Consumers buy cell phones based on price, plan and usage requirements. They do not know and do not care about the processor inside a cell phone. Netbooks although fitting a space between mobile phones and notebooks due to its inherent initial marketing is forcing the consumer to inquire about processors. “It is perceived as an advanced version of a PDA and a far better alternative to high end mobiles”. Channels themselves are selling PCs based on type of processor. Many channels in India believe that either Intel should create more awareness of its processor or take the discussion of processor completely out of the equation and lower the price points.

All major vendors such as Dell, HP, Acer, HCL and Lenovo have launched their Netbook models in India. Brands like MSI, Simmtronics Asus, Benq, Samsung, LG and Sony also have a presence in the Indian market. Many channel partners are of the opinion that if the respective vendors bring the price somewhere below INR10,000 with restructured margins there is no second thought that the demand for Netbooks will grow by leaps and bounds as it aims to provide mobility solution for users including traveling salesmen, housewives, teenagers and consumers who require a stylish internet-surfing device. Then it would not be used as a computing product but also be able to penetrate the market as a “white good gadget” fulfilling needs like video streaming, audio communication & entertainment and gaming. It would clearly become a single product substituting the mobile, MP3, MP4 players, DVD Players and PSP consoles.

A planned intelligent marketing strategy for netbooks is required.

Gitika Bajaj
Techaisle