Scott -
Assuming we are talking about the consumer PC business, I have posted extensively on why this business will be a hard one for DELL to penetrate without disrupting their current business model. It is frankly hard for me to imagine a way for DELL to "do it differently" which would make it a natural expansion. They may have reasons to go into this space because of the need to drive unit growth or parts volume which would move them in that direction, but let's just take a minute to look at the issues.
1 - Well established patterns in consumer buying trends going back years say that most buyers in this category (more than 80%) would rather get a "package" which meets most of their needs than "roll their own", especially if they get a better price by taking the deal. Unlike corporations which purchase volumes of machines and can amortize the configuration costs over many units (or roll up the savings from having DELL do that configuration), most consumers are buying only one or at most 2 machines. A package which includes most of the features and software which these users expect, and has a good "out of box" experience, will win if the price is right.
2 - These same customers want a "hands-on" experience. CPQ does this by selling through stocking retailers. GTW does it by providing a "hands-on" experience with remote fulfillment. How does DELL satisfy this requirement?
3 - Production of fixed configurations is done most efficiently by a single run of identical assembly - this enables even more precise management of the supply chain and internal inventory than DELL's current production methods. GTW does this by working from Intel's base components, as DELL does in the Dimension line,. This is slightly less efficient than CPQ's integrated designs, since GTW and DELL are taking whatever production efficiency Intel delivers, and paying Intel something for the sub-assembly work.
There is more but those are the highlights. I believe that even if DELL did an excellent job in this space, these units would go out at substantially less Gross Margin than the current desktop line, which is already putting margin pressure on DELL's financials. |
