The IT Nerd

An interesting thing happened to me when I posted this story about HP buying EDS. You’ll recall that I basically said that Dell was DOA because of this deal. Then I got a couple of comments from Dell employees. First up was someone calling himself David@Dell who said

“Just a small, but I think important, clarification from a Dell employee. We don’t compete with traditional outsourcers and don’t desire to enter the traditional IT services market that this type of deal represents.

We don’t believe large multi-year outsourcing contracts are the way customers will want to manage their infrastructure in the future.

We have been focusing on managed services related to IT infrastructure which is a different part of the market.”

Next up was Lynn A. Tyson who is the V.P. of Investor Relations for Dell. In fact she posted two comments. Here’s the first one:

“Hi There IT Nerd, glad David@Dell was already here. Just wanted you to know we actually think your perspective has merit if you look at the old yardsticks of this business. Today customers look at the IT business in a very different way. Its not about outsourcing and consulting, it is about delivering flexible, highly configurable, affordable services enabled through remote infrastructure management and software as a service. Its where the business is going based on customer demand and where Dell is and will be in a big way. You can read more about our strategy at http://www.dell.com/dellshares“

Here’s what I posted in response:

“I appreciate your viewpoints. Thanks for posting them. I still think that Dell has an uphill challenge as HP with EDS is going to be hard to compete against. True, EDS has had some challenges recently, but I still think they’re a player in the outsourcing market. If Dell can make itself different from HP/EDS and IBM then maybe they can compete. From what I’ve read on the Dell Shares website, that’s what they’re trying to do. The question is if they can execute. That remains to be seen.

BTW, I’ve never had a VP of a Fortune 500 company post a message on my blog. I’m flattered! “

Her response:

“Thanks for the follow up itnerd and for coming by Dellshares. Hope we will see you often.

I guess we will see how this all plays out. However, Dell has always been very strong on the execution front. For some additional information about how the market is changing and how this is HP buying into the past, you might find this post of some interest:

http://seekingalpha.com/article/77227-hp-s-acquisition-of-eds-misses-real-market-opportunity?source=d_email

I had a look at both of the sites that Ms. Tyson pasted. I have to admit that there’s some interesting viewpoints there. It’s made me revisit my view of the EDS buyout.

Here’s why I think Dell has an uphill battle:

• When I think of services, Dell is not at the top of the list. That’s likely a mindshare issue. I think that they have to address that if they want to compete.
• I think that HP has learned from the circus that then CEO Carly Fiorina created by purchasing Compaq back in 2001. That purchase created enough turmoil that it allowed Dell to grab a ton of marketshare at their expense. I don’t expect that current HP CEO Mark Hurd will make that mistake this time around, and the HP/EDS transition will be smooth (or at least smoother).
• Dell has bought some services expertise, but I don’t get the impression that their current offering is a coherent services proposition. For that reason I still think they need a bigger player like an EDS type of company to make it a coherent offering to customers.

On the flipside, here’s why Dell may be able to compete:

• HP has a huge problem with EDS in terms of vendor independence. One of the good things about EDS is that they chose the best solution for you regardless of who the vendor was. HP is going to have to talk their way out of that apparent conflict, and that may create opportunities for Dell.
• Dell has a “non-traditional” services arm that does make it different than HP/EDS and IBM. That does allow them to go after areas that the other two guys wouldn’t even touch.

I guess we’ll watch to see how this play out. It will be interesting IMHO. My personal opinion is that Dell is going to have a tough time of it. But what do I know? I’d love to know what your thoughts are on this topic. Post your thoughts and let’s keep the discussion going.

This entry was posted on May 18, 2008 at 4:28 pm and is filed under Commentary with tags Dell, EDS, HP. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.