Business Today Net Special

Dell On The Dell Business Model

BT: You surely have heard this question at least 170 times before---each time you entered a new country. But, as a small business, why should a company buy from Dell directly? I ask that since for the SMEs in India, cost is sometimes the critical deciding factor. More so, with prices of infotech products going down by the day, if not by the hour, investing in a premium product today may not be the best decision.

Dell: As you are aware, Dell maintains very short lead times---as little as six days of inventory. Consequently, the benefit of price fluctuations, if that is a consideration, comes most from Dell.

Through our manufacture-to-order model, we maintain close partnerships with component suppliers who ensure that Dell gets all components on a "just-in-time" basis. This allows us to pass along the latest component savings to our partners, and in turn allows them to pass them to the market immediately, thereby yielding competitive pricing for the latest technology.

BT: Typically, what percentage of the cost of a product is accounted for by the logistics that Dell has? Does it vary from one country to another? What are the extreme figures for the highest and the lowest?

Dell: I hope you appreciate the fact that we do not break down our figures in this direction for public commentary.

BT: A lot of companies visit the Dell headquarters to learn how the company has perfected selling through the Internet. Is Dell going to institutionalise this and make money by telling people how to make money? If this is indeed going to happen, when is the "Dell school" going to start?

Dell: Our customer is central to everything we do at Dell. We do share our Internet knowledge with our customers, and as you may already know we have moved into web-hosting in the US. This allows our customers to work with us closely and use our expertise to run their businesses. There are no plans to start a "Dell school", as you put it, at this juncture.

BT: What is the fundamental thing about Dell's direct selling model which companies have "failed" to replicate? When did Dell first sell a product through the Internet?

Dell: Our close connection to our customers is one of the things we have become best known for at Dell. When I first started the company, that "direct link" distinguished us from our competition; helped us to determine where to best allocate our resources and allowed us to provide the latest technology, a high quality product, and great value. To some degree, it still does. However, this was not enough. To win as a customer focused company, we needed to forge a seamless and strategic partnership. The whole concept behind virtual integration is to use direct connections, enhanced by technologies like the internet to bring customers virtually inside your business so you can meet their needs faster and more efficiently than anyone else.

BT: Was the direct model of selling a huge business advantage when Dell moved to the internet?

Dell: We like to say that the only communication medium that would be more effective than the internet is mental telepathy. And the combination of our direct business model and the internet allows us to take even greater advantage of our relationship with customers.

The Premier Pages are a tool we have developed for more than 46,000 corporate customers to provide them with a direct link into our own technical support and diagnostic databases. They can, of course, order products with a paperless purchase order, but we are going far beyond e-Commerce. We have taken our internally developed support tools and made them available in a customised way to all of our customers over the internet. The internet has provided us the key to shrink time and resources it takes to meet customers' needs as seamlessly as possible.

On the manufacturing side, it has helped us gain velocity throughout the supply chain. Just as the internet increases customer intimacy, it can also be used to enhance supplier intimacy. The idea is to connect with suppliers in much the same way as you connect with your customers. We use our supplier connections to share inventory data, quality data, and technology plans; to give our partners immediate visibility to the field and to serve as a central repository for information we all need which we access simultaneously in real time.

The internet is the most effective and pervasive change agent in the connected economy. We have used the internet to break down traditional boundaries---it has helped us connect more directly with our people, customers, and suppliers; it has also enabled us to ride the waves of change.

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