As Dell embarks on an ambitious software journey, it must map out a plan to overcome early obstacles. Here are some key issues Dell must address.
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Dell Software last week held what it promised was the first of many media days intended to describe to analysts and the press how the erstwhile PC and server vendor plans to become a software powerhouse. Breaking the historical mold is a common theme these days, with software companies like Oracle and Microsoft looking for redemption in the hardware market, enterprise apps vendors like SAP moving into the database market, companies like Dell and Hewlett-Packard trying their hands at enterprise software, and Yahoo attempting to move beyond search.
While the what--what new products, what new services, what new markets--is important in these gender-bending strategic shifts, the real issue on the table is always how: How can such a massive cultural change be undertaken without destroying the core business? How can new sales methods and channels be nurtured and maintained? How can new markets defined and conquered? And most importantly, how can these aspirations, which are invariably about attacking an established market already replete with existing and not always thriving vendors, come with enough unique value-add to rise above the noise?
With Dell's aspirational foray into the enterprise software market, the what is clear--a set of midmarket products and services focused around cloud integration (Dell's Boomi acquisition), systems management and security (Quest, Sonicwall, among others), and business intelligence (insert unannounced acquisition or internally developed product here) to start, with more unspecified but hopefully value-added enterprise applications to come. But the how remains to be seen, and whether Dell succeeds in enterprise software will depend on a broad set of how to capabilities that the company has only just begun to build out.
Number one on the how-to list is how to sell high-value software and application services from a company not well known for either of these capabilities. While Dell Software CEO John Swainson bravely offered up 20,000 existing direct sales people as the vanguard of this effort, the truth is Dell will need much more than desktop and server sales folks to up the software ante with the customer.
To Swainson's credit, this field sales force has the relationships needed in the SMB market to get the ball rolling, and that's saying a lot. But someone else will have to show up in the buyer's office to pitch Dell's business analytics and other software offerings, especially as Microsoft and other competitors will have their relatively able channel partners outside waiting for their chance.
Where that software sales force will come from is unclear. Swainson wants 70% of the business to come from direct sales, and that's going to mean hiring and training a boatload of new people. And those people must live and work in some interesting places since Swainson also wants to tackle emerging markets: the BRIC (Brazil, Russia, India, China) gang, among others. To do that means competing with already established local companies and the many global software companies now carpet bagging in the BRIC market. Not easy.
How to number two comes in the form of the need for verticalized, high-value products, particularly in the oversaturated BI market. While it's hard to build great horizontal BI apps, building high-value vertical apps is bloody difficult. But horizontal BI is very 20th century in terms of strategic value, and Dell will have to go for the bloody difficult route and still face an uphill battle overcoming a broad base of established--and, in many cases, enormous--BI vendors as well as a constant churn of venture funded BI companies all heading for the so-called low-hanging fruit of big data BI.
Dell wants to start slowly, with more of a horizontal play that provides end-user tools (a la Qliktech) to do cloud-based analysis (a la Gooddata). But it's going to have to up the ante pretty quickly or hope that the Dell brand carries more value in the BI market than I think it does. Right now, Dell has a data warehouse appliance and some vertical products built by its consulting services, but the company's going to have to do a lot more to get moving in BI. A lot more.
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