Four key areas in enterprise space to drive growth

Friday, December 16, 2011

Say the name Dell (Nasdaq: DELL) and people will invariably think of online purchases of custom assembled laptops. But, like executives from other hardware firms, company founder and CEO Michael Dell is making the move to turn the company into an end-to-end player.

And he's putting his money where his mouth is, with the company making a US$1bn organic investment in building its own private cloud and in scooping up companies at a clip of about eight firms a year.

Dell executives were visiting in Chile with both current and perspective clients, and BNamericas took the opportunity to catch up with Matt Sedlacek, executive director for large enterprise solutions, to learn about the IT firm's strategy. Keeping it within a regional focus, Mauricio Chacón, Dell's general manager for Chile and Bolivia, also joined us.

BNamericas: What type of feedback have you been getting with customers in Chile?

Sedlacek: I think they're very encouraged with the progression of Dell. Customers have asked us to become more relevant to them as it relates to a solutions provider in the data center, and we have a level of trust with the customers that we have the ability to expand upon. When they hear about the additional capacity of technical resources that are being brought into the market, and we talk about the various solutions and partnerships that we have, my sense is that the reaction has been very positive and they're encouraged that we'll be able to deliver.

BNamericas: So the focus is on data center solutions and expanding from that?

Sedlacek: Correct, and cloud is definitely a part of that. The way we segment the enterprise space, the data center space, is in four key areas. We're specifically focused on what we call next-gen compute solutions, which essentially is anything to do with what happens in the data center, leveraging virtualization technologies, the convergence that's happening in data centers today. That's an area where we're specifically focused: data center virtualization compute solutions.

The second area is data management - anything to do with how we help customers manage the explosive growth of data and manage it in a more cost-effective way.

BNamericas: Are you talking about big data?

Sedlacek: Big data is another, so we can come back later and talk about that.

Networking is the other domain. You've noticed the moves we've made with the acquisition of a company called Force 10.

And then we have this concentration area we call end-user computing, which is all around mobile device management - all the end-point devices: smartphones, tablets and those types of devices which really are data center play. That's where we're investing solutions and resources.

Cloud is an area that is overreaching; it encompasses all of those.

Big data, since you brought it up, is an area that we've been intimately involved in for some time. We have a relationship with Cloudera [an enterprise software company that provides Apache Hadoop-based software and services], which allows customers to really manage Hadoop and support it and have it deployed in their environments. It's growing faster than really any of us expected; it's no longer reserved for those large, Silicon Valley, web 2.0 companies. We're starting to have conversations with customers with small employee sizes. Companies with 10,000 employees are also interested in big data.

BNamericas: You work with large enterprise solutions. What types of companies are you meeting with in Latin America, and what are some of the sectors that have expressed the most interest in your offering?

Sedlacek: So far, it's banks and telcos, as well as healthcare. That [has to do with] how Dell organizes the solutions that we bring to market as well. It's around specific verticals, like banking, securities, retail, healthcare, manufacturing. It's no longer just about providing infrastructure in an efficient way and at a competitive price. It's about engaging customers, understanding their business, understanding their vertical and, in some cases, developing solutions specific just for that vertical. In healthcare, for example, hospitals can get access to patient records or images anytime, anyplace in the healthcare system; it's all stored in the cloud.

You can even look at some of the devices we're bringing to market. The tablet device we just launched, the Latitude ST, is a 10-inch, Windows-based tablet that was primarily designed for healthcare coalitions to use, where they can interact with a stylus pen while still having the functionality you get in a tablet, which is important for healthcare-specific applications.

BNamericas: Are there any specific regional needs that you've identified in Latin America which may differ from what you see in the US?

Sedlacek: I think what we've developed and what we're bringing to market is always done with a global scale and view. The timing in which these various solutions enter the market is obviously different, as we make sure we have the right infrastructure and language support. But all of the solutions developed would be accessible across the globe. So the needs are the same; it's just a matter of timing.

Latin American markets - particularly Brazil, Argentina and Chile - are considered strong growth markets for us with tremendous upside opportunity.

BNamericas: Going into 2012, what are some of the specific plans you have for Latin America?

Chacón: We're focusing to develop our ESO - enterprise solution organization - in the same way we've been doing around the world. Our focus in Latin America is to develop this market with our customers, to give them the complete end-to-end solution. So we're completing our sales team with specialized people that know the technologies that our customers need to improve their business.

Sedlacek: Just to elaborate on that, anything that we bring to market has a very simple goal - that's optimizing efficiency in the data center for our customers, in a cost effective way. So you ask what specific solutions are you bringing to market: some of the things we talked about in the issue with data management, which all our customers share, the issue of how to create private clouds or get access to public cloud infrastructure. We bring solutions to market that are very open, standards-based technologies. They have to be capable and affordable. Our solutions are all around solving those customers problems, making them as efficient as possible and helping them to take their IT spend and move it from dollars spent on keeping the lights on at the data center and maintaining infrastructure, to how to give them money back so that they can be more strategic and drive more strategic dollars into the IT organization that helps the company become more efficient.

BNamericas: There are plans to build a Dell data center in Brazil, correct?

Sedlacek: That's right. I don't have the specific dates, but we've already talked about cloud for example, and last year we announced this US$1bn investment to provide solutions to customers. A large part of that US$1bn is the data center build-out, and São Paulo was identified as one of the areas for the data centers so that we can provide some of the cloud-based capacity right here in Latin America.

Chacón: We'll have to review what of the offer in Brazil will be made available to other countries in Latin America.

BNamericas: There's been a big focus on bringing Dell to the next step in providing end-to-end solutions. What percentage of sales is broken down between services and enterprise versus overall hardware?

Sedlacek: About 31% of our business mix is enterprise solutions and services today, and it actually contributes to about half of our company's profit as well. So it's a very important part of the business, and it's growing in the double digits year-over-year as well.

I'm thinking of the latest targets 2-3 years out, and we'd love to see that mix get closer to 50%.

BNamericas: You also mentioned some acquisitions. Dell's been on the M&A path with about eight acquisitions a year. Will the company continue along this path, or focus on consolidating what it now has?

Sedlacek: The plan is for both. Clearly you want to be efficient and effective with what you've acquired so far. We have a great track record of what we've acquired, in terms of growing those businesses and doubling them year-over-year. We've seen that with EqualLogic and Compellent, and we plan to do the same with Force 10.

But remember, it's not just about acquiring these companies to get access to their sales revenue. It's all about acquiring their specific IP that's unique and maybe not as well understood by customers, or as well known as it should be. We believe we have a great ability to bring new technologies to market, building on the trust levels we have with our customers. And to maintain that entrepreneurial spirit that some of these companies bring to Dell, to always be developing breakthrough, disruptive technologies.

So the plan is to continue with the acquisition strategy. And where do we plan on doing that? I mentioned the domain areas where we have focus. Just like any company, we have gaps and we will continue to strengthen our position in the marketplace, either through strategic partnerships or by acquiring technologies that help us round out those areas of focus that I mentioned.

BNamericas: So I have to ask, what are the gaps?

Sedlacek: [laughs] Well if I told you the specific areas, acquiring those companies would get much more expensive! It's about making our progress in those areas more robust. We made a specific entrance into the networking portfolio, and our ability to finally bring that infrastructure forward with services around that is something that we'll either develop internally or we'll have to acquire.

It's a discussion that is very difficult to get into specifics about, but think of it as anything that we can do to make those four areas I mentioned much more effective in our ability to own that IP, so that we can control and develop it to create a solution that our customers are telling us that we want. That's where you'll see some activity.

About Matt Sedlacek, Mauricio Chacón

Matt Sedlacek has been with Dell for 11 years and has held several sales and management positions during this time. Before becoming executive director for large enterprise solutions - which focuses on go-to-market field readiness for Dell's server, storage and networking solutions in the Americas - he was the country manager for the company's commercial business in Canada.

Mauricio Chacón has 15 years of experience in the technology field. Before coming on board with Dell, he worked in executive positions in companies such as Sixbell Nekotec Solutions, Ingram Micro Chile and HP. Chacón has a degree in civil engineering from Universidad Católica de Valparaíso, as well as an MBA from Universidad Adolfo Ibáñez.

About the company

Texas-based Dell was founded by Michael Dell in 1984 as a PC manufacturer. The company made its first acquisition in 1999, with the purchase of ConvergeNet Technologies, and in the last few years it has continued down the M&A route to expand into services.

In its last fiscal quarter, ended October 28, Dell posted a US$893mn net profit, up 9% year-on-year. Revenues remained basically flat at US$15.4bn in the quarter, as did operating income, which stood at US$1.14bn.

Given the uncertain macroeconomic environment, Dell said it is trending to the lower end of its 1-5% revenue outlook for full fiscal year growth, but expects to exceed its guidance of 17-23% for full fiscal year operating income growth.