El - I think this actually puts CPQ in the driver's seat, if their real intention is to own the "edge of the web" architecture. DELL is clearly saying that they are going back to the "fast follower" mode to the virtual exclusion of any architectural leadership. If CPQ sets the standard, they can count on DELL following.
This makes DELL almost like a CPQ subsidiary in driving CPQ's architectural standards. After all, the client systems sell the "sizzle" - that's what people see. But it is the things on that client device - the content, the context of the user experience, the ability to DO things - that makes the back end infrastructure important.
CPQ gets 90% of its profit from the sale of that infrastructure. So in a way it hardly matters whether CPQ or DELL sells the client box - the more of those clients sold, the more infrastructure is needed to drive them, with 10 to 1 leverage for CPQ.
I don't think CPQ could have wished for a better shift in strategic direction from DELL. It decreases the competitive impact on CPQ, drives CPQ's real profit engine, and consolidates the client market direction with DELL paying the way. DELL gets to eat the 18% GM and tough market, which they are well equipped to do, while CPQ collects the big margin for their infrastructure sales. DELL has no choice in the matter - their business model and management direction won't let them do anything else.
The new game is not inventory turns but technology turns. If the way the industry looks at itself, and the architecture driving infrastructure, is changing every 3 to 6 months, then CPQ, as a technology leader, will always understand where the next turn in the road will be. DELL, who has to wait until those trends are validated in the market, and the engineering is readily available as standard components, will be 3 to 6 months behind. So while DELL will surely be able to maintain a successful client business, they will continue to have no ability to challenge CPQ for leadership in defining the 3rd generation internet, or in reaping the rewards of that leadership position in the higher margin product lines.
Sure, CPQ needs to take a leaf out of DELL's book on excellence of execution in the client space, and needs to remain a significant player in that market, so that they can continue to drive standards which move their overall vision forward. But whether they are #1 or #2 in that business hardly matters. Increasingly, from an architectural perspective, I will be looking at the combined impact of CPQ and DELL in the client space to drive CPQ's growth engine. |
