PART 4 - END of ARTICLE
What process is unfolding in the server computer business, where Dell is gaining ground. But how far and how fast Dell can go depends crucially on how quickly the standard technologies of the PC industry — Intel's processors and Microsoft's Windows operating system — become powerful enough to replace computers running the Unix operating system and mainframes in corporate data centers. Dell also faces plenty of competition from the likes of I.B.M. and H-P, which make servers powered by Microsoft and Intel technology, as well as their other large computers.
Yet both the market-share figures and the anecdotal evidence point to Dell making solid gains in servers, especially for machines priced below $25,000. A few months ago, Rackspace Managed Hosting of San Antonio decided to buy several hundred server computers. Rackspace runs data-processing and Web sites for companies from data centers in Texas and London, where it has 6,000 server machines.
Rackspace wanted the computers for a new service that ran on the data-center version of Microsoft's Windows operating system. Its technical people initially leaned toward Compaq, part of H-P, as the preferred supplier of larger Windows-based servers because of its track record in data-center computing.
But after a close evaluation of Dell's new machines and service offerings, Rackspace went with Dell instead of H-P. "Dell had a hard battle to overcome, but they did," said Morris Miller, managing director of Rackspace, who added that the decision was not based on price.
Such gains, Mr. Dell said, are proof that his company's tightfisted approach to research and development is shrewdly tailored for an industry that is increasingly adopting standardized technology. He bridles at the notion that Dell does no technical innovation. The company, he notes, employs 3,200 engineers and spends $500 million a year on R and D, and both numbers are rising.
Dell's investments, he added, tend to build on the foundation laid by the $8 billion that Microsoft and Intel spend on R & D, delivering tangible benefits to customers. By contrast, he said, much of the R & D spending by Dell's rivals is to develop their home-grown technologies and lock customers into their proprietary products. "I think the idea that our competitors have an advantage because they spend more on R & D is complete nonsense," Mr. Dell said.
Dell is likely to face a tougher time, though, in markets where it is not riding on the familiar coattails of Microsoft and Intel. In storage systems, for example, those two are not the dominant technology suppliers, and standardization is just getting under way. And computer services is labor-intensive, with skilled people being the vital assets.
ELL says it is taking a focused approach to services, building capability where service offerings will assist hardware sales. Yet it is also fielding a team to provide "professional" services, which includes training, planning and specialized software development.
"Professional services are where Dell is going to run into trouble," said Julie Giera, an analyst at Giga Information Group, a research firm. "It is a very different model for Dell, not like a product market at all, a very different business. And I.B.M., E.D.S. and H-P are already fighting over that business."
As it becomes stronger and expands further, Dell has more power over rivals and more independence from partners. In 1998, Mr. Dell, testifying before a Senate committee before the government filed its antitrust suit against Microsoft, said that Dell's business practices were determined by what its customers wanted and what was good for its shareholders.
Under questioning, he conceded that his company did not offer Netscape Communications' browsing software on its home PC's because it was not in the best interests of Dell's shareholders to do so. His answer gave many people the impression that Dell was firmly under Microsoft's control.
Things are different today. The browser wars are over, and Microsoft has won. Dell computers run mainly Windows, but the company is also aggressively promoting server computers running GNU Linux, a variant of the Unix operating system that is distributed free. Linux represents a direct competitive threat to Microsoft. And last week, Dell said it was loading Corel's WordPerfect Office on some of its PC lines, an offering that is a direct competitor to Microsoft Office software.
"Sure, our relationship with Microsoft has evolved," Mr. Dell said. "We like Microsoft. But we do things for the benefit of our customers and our shareholders. If Microsoft doesn't like some of those things, they can go jump in the Pacific Ocean." |
