February 18, 2002

Dell services - not quite

Computer Reseler Magazine reports that Dell is not selling as many services as it claims to.

The article reads, in part: When asked about the strength of Dell's services business during a conference call with reporters late last year, Chairman and CEO Michael Dell gushed. "The services business has actually grown quite considerably. It's on roughly a $3 billion run rate," Dell said. He later added that services "is increasing as a percentage of our revenue and profit."

But just how does Dell define "services"?

For most of the channel, services means solution-building,a value-added business that relies more on fostering customer relationships than moving product.

The article quotes Dell CFO James Schneider as saying that about all of Dell's services revenue is tied to it selling PCs and servers. Most of Dell's services are customer hardware configurations and software installtations. Many VARs would not count this as services when compared to networking installation and other heavier integration efforts.

When customers do need or want a technician to come on site, Dell routinely outsources any on site work to 3rd parties. True to Dell's business model of outsourcing as much as possible, Dell sees no need to keep on board an army of Dell shirt branded techies but calls on 3rd party integrators and VARs as needed.

Dell is definitely a PC sales power hourse - but for full scale integration, a VAR it is at the end of the day and not DELL.

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