Hardware as a service: the future of Dell is intertwined with the internet

18 Dec 2008

Dell’s formidable transformation from a direct PC seller is almost complete.

At the start of November, the people of Limerick got the bad news they didn’t want to hear. Some 700 workers were to be let go from Dell’s manufacturing operation at Raheen.

At the time, a spokesperson for Dell put the news down to a routine, seasonal rotation of temporary workers. While there is much debate surrounding the future of Dell’s 2,500-strong workforce in Limerick, and indeed the company’s total workforce of 4,400 in Ireland, the long wait for answers is anticipated to end in January.

Dell’s official line on the matter is: “Dell is currently undertaking a global review of manufacturing operations, which is still underway, and it is business as usual in Limerick.”

The one true thing that can be said is the Dell that came to Ireland in the early Nineties to establish its first overseas operation is a far different beast from the company it is today.

This fact was evident at a crowded event at Leopardstown Racecourse in recent weeks, where Dell’s evolution from a direct seller of desktop PCs to a major provider of retail consumer PCs, as well as high-end corporate systems and servers, came full circle.

“People think of Dell as a consumer PC provider, but the consumer segment is only 15pc of our business globally,” says country manager Dermot O’Connell (pictured). “When Dell started out, it sold its computers to small businesses only. Today, it is in 96pc of Fortune 500 companies. We were a direct computer seller for 23 years, now we sell computers in Best Buy, Wal-Mart and PC World – over 10,000 outlets from zero two years ago.”

O’Connell says Dell is undergoing the biggest transformation in its history. This turnaround occurred when founder Michael Dell returned to the helm two years ago to arrest a major slide in the company’s costs and market position. Since then, he has instigated a move into retail and spearheaded enterprise IT acquisitions.

The transformation is still underway and, in September, The Wall Street Journal reported that Dell has plans to sell its factories worldwide to contract electronic manufacturers.

Looking into the future, O’Connell explains that Dell is focusing on services for what it terms the ‘connected era’, where alongside selling and making commodity and bespoke equipment, the company is planning to embark on selling software as a service (SaaS) and hardware as a service (HaaS) via the internet.

“There are over 500,000 people a day coming on the internet for the first time. That’s staggering. The biggest area for growth will be the mobile internet, where today one-sixth of the world’s population, one billion people, access the internet by mobile. We are already selling netbooks via Vodafone and see major growth in markets such as Africa.

“We will begin selling services to SMEs via the internet cloud, whereby people who buy Dell hardware will be able to get managed services. In this way, if there is a problem with a computer, we will know about it via the internet before the customer does, and fix it for them.”

O’Connell acknowledges there is a lot of concern over the future of the company’s manufacturing operations, and while he cannot comment on that specifically, says Dell has located key services in Ireland that are long-term investments.

“Dell has located its Global Product Development for Wireless in Limerick, where all wireless intellectual property and R&D is conducted.

“Another key investment has been the Global Solutions Innovation Centre in Limerick. This allows us to simulate major IT deployments for corporate customers. For example, we can simulate, via a fibre link to EMC in Cork, how a website would perform if two million people accessed the site simultaneously. We can also demonstrate how a big Oracle database would perform. We do this for some of our biggest customers in the world, and people fly in from Tel Aviv and Moscow to use the facility.”

Dell, he says, has also established its Global Services Command Centre at Raheen, where, via a gigantic global map, engineers can track and ensure parts reach customers or facilities that need them most. Another group, Custom Factory Integration, handles specific applications such as asset tagging and putting security asset-tracking software into computers destined for corporate use.

The Industrial Systems Group here in Ireland provides corporates such as Aer Lingus with devices like check-in kiosks, and Google with its own branded servers. “That’s no trivial task,” O’Connell explains. “Google gives us the designs and the logistics, and we ensure that it happens on time.”

The growing demand for servers and the evolution of cloud computing has resulted in Dell establishing what it calls its Solutions Factory in Raheen. This factory als­­o produces design-specific technologies for big data centres run by companies such as Amazon and Microsoft.

“Microsoft is currently in the process of adding 10,000 servers a month to its infrastructure, and it has just added a new data centre in Ireland. If it is deploying a quantity of those servers, and it requires an extra USB-port, it could cost $1m. Actually, we are now building entire shipping containers full of servers that can be stacked up next to a data centre and switched on.”

Other operations, such as a new Expert Centre and Dell’s EMEA iSCSI team, which grew out of the acquisition of Equalogic, are based at Cherrywood in Dublin.

“There is an enormous amount of things happening in Dell that have nothing to do with manufacturing.

“Going forward, we have our eyes on the growing field of end-customer specification and special services such as SaaS and HaaS. We will sell 600,000 servers in EMEA this year, big numbers for a company known for selling PCs to consumers,” O’Connell concludes.

By John Kennedy

Pictured: Dermot O’Connell, Dell country manager, says the future of the firm’s Irish operations could pivot on high-value, value-add services

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years