"By the end of the year, India will have the largest number of Dell employees outside the US"

He is the ultimate non-geeky chief executive. In an industry dominated by larger than life, charismatic and nerdy leaders like Bill Gates and Steve Jobs and, well, ahem, his own partner Michael Dell (note: not boss; we'll come to that in a moment), Kevin Rollins is in a class of his own.

As President and CEO of the $49.2-billion (Rs 2,16,400 crore) Dell Inc., Rollins, 52, has his hands full running a market leader whose direct selling business model "The Dell Way" has been talked and written about, analysed, and envied, but rarely successfully emulated.

Rollins, who's an Alpine skier and trained classical violinist, manages to squeeze in time for a couple of concerts every year and plays regularly at the Church of Jesus Christ of Latter Day Saints in his hometown in Texas. In India on a 24-hour whirlwind visit to review operations and meet employees, he took time off to talk to Business Today's Venkatesha Babu about the global tech scene, about Dell's own unique place in it and about his company's plans for and in India. Excerpts:

Michael Dell was here just last month (to open Dell's latest contact centre in Mohali) and now you are here. India seems to be blipping furiously on Dell's radar screen. Why?

Well, this is actually my fifth visit to India (and the first after taking over as CEO nine months back), but it has been a while since I came here last and things... well, they have changed significantly. All the earlier visits were focussed on setting up things and getting them going. Now we are ready to talk to the outside world about our India story.

Some of that (silence) happened because of political developments (the cry against outsourcing) in the US and some because we were concentrating on establishing ourselves here and growing. Dell India has now attained critical mass; we have taken this business from zero employees (in 2001) to about 10,000 employees by the end of the year. That is huge growth. By the end of the year, India will have the largest number of Dell employees outside the US.

Earlier this month, you revised your sales target to $80 billion (Rs 3,52,000 crore) over the next three years...

(Interrupts) Three to four years.

Yes, but you are already a $50-billion company; you have an 18 per cent market share in the PC segment globally. Does that leave much room for growth, considering that there has been talk of a slowdown in the hardware replacement cycle?

According to IDC, the PC market will grow 10 per cent this quarter. Any industry growing at this rate is considered a high growth one. And though we are the market leader in the US, we have only 6 per cent market share in the rest of the world. So there's a huge market waiting to be tapped.

Did the IBM-Lenovo deal influence the sales target revision?

The industry is going through a phase of consolidation-Compaq and hp merged; Gateway and e-Machines were amalgamated; and now comes the IBM-Lenovo deal. But it's very, very difficult to buy market share in this industry. Companies have tried that and failed. At Dell, we welcome this consolidation as a very positive thing.

The tech sector has been sending out mixed signals. What is the feedback you are getting from customers? Is there a fear of slowdown?

Oh no! I don't think so. The market is definitely slower than last year, but not enough to worry about. The winners are standing apart from the losers. So, instead of a broad brush approach covering the entire sector, what is emerging is a more nuanced scenario.

"Dell's entry into the printing and imaging segment is already changing it. But we still have a long way to go"

Dell has been trying to move from being a so-called "box shifter" to an IT solutions provider. How long have you come down this road?

I think we have succeeded amazingly well in moving from the earlier image, but sections of the market have not understood this transformation well. We get 40 per cent of our revenues from the desktop PC segment, 20 per cent from mobility solutions (read: notebooks and handhelds), 10 per cent from servers, 8 per cent from services, 15 per cent from software and peripherals, and rest from storage and other segments.

What we are trying to say is that 60 per cent of revenues now come from these new diversified it categories (read: non-PC business) and that is proof that the company has changed. Mind you, this is not a forecast. Our non-PC revenues are already larger than our revenues from PCs.

But analysts point out that this is not a true picture as the PC is still the driver of a lot of the services, storage and other stuff you sell...

The PC will remain the core of the company. We are not going to throw away the core. Most analysts say the PC industry is bad and that is why this strategy is bad. We disagree. It's just that it has bad players... which is good for us (laughs). If you look at the profitability of the industry... it will double if Dell's market share doubles; it'll triple if our market share triples. Our strategy has been to build on our core strength, which is the PC segment, and grow it into new categories. Unlike some players who had to exit this segment because they could not make money (read: IBM), we believe that we have been very successful.

Will we ever see a Dell machine shipped with an AMD processor?

We are constantly evaluating and reviewing that. Right now, we feel that Intel has got its roadmap right. But we always consider all other possibilities as well.

You've been eyeing HP's printer market (margins are really juicy here; volume to volume, HP's inks are more expensive than Dom Perignon). But HP has ring fenced its advantage with investments in R&D. What's your strategy here?

Dell's entry into the printing and imaging segment is already changing the industry. We have sold more than five million printers in the last one year. Some of our competitors are already feeling the heat in the marketplace. But we still have a long way to go. It will take several years before the full impact of Dell's presence in this segment is fully appreciated.

The printer market is not very price elastic. Usage will not rise dramatically if I cut ink and toner prices, though there might be some growth. The key is in having an installed base. That's what we are working towards: growing our base and eroding that of our competitor. Then the profits will flow to us.

One hardware product that has created a global buzz in the past few quarters is the Apple iPod... which you have dismissed as a 'fad'. Apple is perceived as a company that is strong on innovation. Dell's suite, on the other hand, has been execution. (Dell spends less than 1 per cent of its revenues on R&D). Which is more crucial: innovation or execution?

That's not true. Dell does innovate. If you have to name one company that has done most to change the contours of the industry, it's Dell. Apple has done a great job and when I called it a fad, it was not meant to be disparaging. Let me put it this way... How many popular musicians stay popular forever? They come and go. Apple hit a sweet spot with an attractive product, but I believe they come and go. Success depends on: 'Can you do it repeatedly, day in and out?' Apple has not demonstrated that it can. Give me a list of successful and, more importantly, profitable innovations from Apple. iPod is its first real success. Hats off to it, wonderful job. But don't mistake a one-product hit as a sign of success. Apple has only a 2-3 per cent market share in the PC business. Despite its so-called innovations, it is still very small.

"I believe that the time is not far off when India will become an important market for us. But we are making a profit here"

Dell's services business has been growing rapidly at around 8 per cent per annum. How different is your business model from that of IBM or HP?

It's massively different. For them, the box is a bad thing. So they are chasing business process outsourcing, network outsourcing... and a whole series of major initiatives. Our strategy is simple: sell the hardware, and sell services around that hardware. We continue to put a wrapper around the box that gets thicker and bigger. We know better than anybody else how to do that.

If you look at the services industry, two-thirds of the profits come from services close to the hardware; only a third is in services outside the hardware. So we looked at which strategy to choose and obviously went with the former. We are selling more hardware than anybody else. We are sticking to the knitting. IBM and hp want to run other businesses. That's fine. That's their game. Our game is hardware and the services surrounding it.

Will you get into the hosted hardware space that some players have been talking of... things like on-demand business, and grid and utility computing?

No, I don't think so. Hosting and on-demand are actually code words for a financing fee. We see that a number of customers are rejecting the on-demand model. They are looking at in-house sourcing. J.P. Morgan Chase recently cancelled IBM's contract and decided to do everything IBM was doing in-house. There are many more such examples. IBM's model offers lower entry price but higher service or financing fees for the hardware. It's a financing job. We found that most companies have enough scale; they don't need to be hosted. A majority of our customers are rejecting the on-demand model. They are selectively outsourcing some-not all-functions in order to retain control. Companies are realising that full outsourcing is a big mistake.

How is your servers and storage business doing?

This segment is going to be the chief strategic focus for Dell from a product standpoint. We just launched a completely new line of servers, including blade servers, only last fall and winter. Our server line is second to none on price and technology.

Dell has started selling flat panel televisions. How does this fit in? Worldwide, none of the consumer electronics majors, including iconic brands like Sony, is making any money?

We are already present in the consumer electronics space with our PCs. It's a market that we know very well. Our printing and imaging products, which address the same market, are very profitable. We are now moving into televisions. But we have been very selective about our product space here precisely for the reasons you mentioned. It is not a very profitable space. Most of the Japanese and Korean majors don't make money. That is why you will not see a Dell DVD. We are in a space where we think we can add value and make a profit.

How happy are you with the progress made by Dell in the Indian marketplace?

We are happy with the market but not with the trade. We believe that as India opens up more it will become more attractive. There are barriers even now. We do not love or hate a marketplace. We have a responsibility towards our shareholders to make profits. I am satisfied with the progress made but I am looking for more growth. As tariff barriers come down, we will grow faster. I told my India team that as the tariff wall comes down, we will set up a large factory here and become a major player in this market.

Right now, the strategy is to use the tremendous talent pool available here for call centres, software development activities and other back-office work. There will come a time when India will be our "prioritised strategic country" for sales. But that's not the case today. For the present, we are more focussed on the European and Chinese markets. But I believe that the time is not far off when India will also become an important market for us. We are making a profit in India. But is it the number one market? Not yet.

There were some concerns when some call centre business was shifted out of India because of some issues. Are those settled now?

Yes, all the issues have been settled. There was some shuffling. There is a larger picture than what appeared in the media at that time. It was obviously a political issue. Secondly, we ramped up our size too fast. We did not pull back, but we shifted. We are dedicated to India. But we are shifting to a different category of users: consumers, small and medium businesses and some others. Our headcount has consistently gone up even through these shifts. The facts are different from what was reported at that time. We opened one more call centre in India only last month and there will be more. We have a great team. We are thrilled with India and we love it.

How does it feel to work with a man who is an industry legend and whose name features on the buildings, the products and on literally everything in the company?

I am often asked about this. Michael and I share a wonderful relationship. His marketing value for the company is unmatchable. I love that. I took the CEO title nine months back but the job I am doing is no different from what I have been doing for the past five years. He and I run the company together. Titles have meant little but Michael's star power has meant a lot. He is still a major influence in the company and that is how we want it. We run it as partners-not as a boss-and-subordinate team. It is good to have two leaders. With two leaders we can be here twice as often (laughs).