Business Today Net Special

Dell On Competition

BT: The sub-$800 PC is the fastest growing segment in the world. But Dell has chosen not to go for that market and concentrate on the business sales. Could you explain the logic for not addressing the home segment?

Dell: Customisation as a business model works best with large orders that address all the requirements of an enterprise. Only when there are sufficient volumes in this segment does it make sense to go in for retail level orders.

Dell's strategy is to focus on meeting the needs of large institutional customers, the corporates, the government, and educational institutions.

Having said that, let us add that focus on one segment does not necessarily imply ignoring other segments. Dell has a range of products for the SMEs and SOHO segments, and we plan to bring these into India to cater to the requirements of the segments.

BT: Compaq, IBM, and HP now have assembling facilities in India. These companies say that penetrating deep into the Indian market requires local assembly. What kinds of volumes would Dell need to have before it can start assembly operations in India? Do you see India becoming a manufacturing hub for regional sales in the near future?

Dell: Assembly in India is not a pre-requisite for penetration. Efficient delivery systems reduce the lag between placement of order and its fulfillment. As of now, our focus is to ensure that our deliveries are as per the international benchmark we have set, with a little customisation to fit the local environment. Manufacturing will obviously be dependent on regional volumes.

The Direct Model works as much on local sourcing as on marrying customisation with volumes. Consequently, the consolidation of production for the Asian market results in volume-led cost advantages. Further, the time lag is marginal and additional costs of freight are less than the fixed costs that would be incurred in setting up manufacturing with low unit base.

Incidentally, Dell maintains sales offices in 34 countries around the world and sells its products and services in more than 170 countries and territories, and has a manufacturing base in six locations---Austin, Texas; Nashville, Tennessee; Eldorado do Sul, Brazil (for the Americas); Limerick, Ireland (for Europe, Middle East and Africa); Penang, Malaysia (for Asia Pacific and Japan), and Xiamen, China (for China).

BT: While India is a promising market, its infrastructure is nothing to rave about. What the kind of investment is Dell having to make in infrastructure to ensure that its global standards of timely delivery are met consistently?

Dell: We heard the same thing when we were going into China. Our experience has been different. The infrastructure in India is present---as in China. And we partner the infrastructure and delivery systems at each point.

BT: What kind of partnerships has Dell entered into in India? What other partnerships can be expected in the near future?

Dell: We will be managing service and coverage through service partners. Currently, Tata Infotech, as part of Dell's agreement with Unisys worldwide, is the incumbent service provider for Dell customers in India. At present, there are 11 service centers of Tata Infotech in Delhi, Mumbai, Bangalore, Chennai, Calcutta, Hyderabad, Chandigarh, Ahmedabad, Cochin, Coimbatore, and Pune. Dell will offer four hour response, 24 hours a day, 7 days a week for customers mission critical applications. Dell will also augment service support by extending global contract with IGS into India.

Dell is setting up a separate structure for logistics movement through the roll out of the DELL Logistics Provider Program for spare parts. Our distributors will continue to play an important role. Currently, we have 11 distributors across five cities: Chennai, Bangalore, Hyderabad, Delhi, and Mumbai. Dell will also have specialised sales and support teams for specific customer segments.

BT: Dell has been selling its products in India for over five years now. Did you need to require any modifications in your products for selling in India?

Dell: Customisation is integral to the Dell model and the requirements of every customer tends to differ. However, there is no per se modification which needs to be worked in because we are selling in India. The Indian customer is as varied and as exacting in his requirements as any customer the world over.

BT: Which are the five fastest growing markets for Dell in Asia in revenue and volume terms?

Dell: According to IDC Q2 2000, we are in the top five rankings by revenue in the following countries:

# 4 in Australia, #5 in China, #4 in Hong Kong, #5 in India, #2 in Malaysia, #3 in New Zealand, #3 in Singapore, and #4 in Thailand.

Australia, China, Malaysia, Hong Kong, and India are our fastest growing markets. We do not divulge revenue and volume by country as a matter of policy.

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