Wall Street & Markets

It’s just that simple: Dell now wants to be like IBM

By Justin Fox | September 21, 2009 | +

You probably know the bare-bones history of the personal computer: The business was IBM’s to dominate, but it decided to outsource the guts of the machine—the microprocessor and the operating system—to Intel and Microsoft. Those two companies sucked up most of the profits of the 1990s PC boom, while Dell became the dominant PC manufacturer by outsourcing just about everything but final assembly. IBM eventually got out of the PC business entirely, reinventing itself as a giant business consulting firm that happened to sell some software and hardware. (Or, as it says on IBM’s website, “helping clients succeed in delivering business value by becoming more innovative, efficient and competitive through the use of business insight and information technology (IT) solutions.”)

Well, things haven’t been going so well for Dell over the past decade. And now, with the decision to buy IT consultants Perot Systems, it has decided it’s time to become more like IBM—that is, a vendor of solutions rather than just products. Perot systems was of course founded by H. Ross Perot. His previous company, EDS, is now part of HP, another tech product maker that has migrated to provider of solutions.

For me the deal raises two big questions:

1) Isn’t Dell kinda late to the game here?

2) With all these companies making all this money providing IT solutions, why hasn’t IT been solved yet?

Related Topics: Dell, EDS, IBM, Perot Systems, Companies & Industries, Technology & Media, Wall Street & Markets

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  • curmudgeon57

    You posted this for me, didn’t you, Justin?

    1) Isn’t Dell kinda late to the game here?

    Not really, unless they had to pay a richer premium for Perot than HP had to pay for EDS.

    2) With all these companies making all this money providing IT solutions, why hasn’t IT been solved yet?

    I assume that’s a rhetorical question. IT was solved long ago, but the customers could never make it work in their unique situations.

    The fair question is whether Dell (yes, and HP) have the culture to be solution players. IBM, which had a far more customer service culture than either Dell or HP, still had to fire 100K people in the early 1990s to make it work. I don’t see that happening here. You can call yourself a solution provider, but if all you’re doing is bundling products and sending out consultants to flog bundles, you will fail. Been there, done that.

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    [...] Dell (DELL) is betting big on Obamacare by buying Perot Systems (PER).  (Deal Journal also 24/7 Wall St., Curious Capitalist) [...]

  • sneezoriffic

    My guess? It won’t work very well. Dell is a one-trick pony. They revolutionized PC manufacturing with their just-in-time, build-to-order system but nearly everything else they’ve tried to do has failed. They’ve never even been able to dent the consumer market much. They made a mint while cutting the margins on commodity PCs from thin to razor-thin, but that was signing their own eventaul death warrant.

    They don’t have anything like the breadth of skills and experience with disparate large systems that IBM and HP do, which means they can’t be consultants to the largest companies and there are thousands of small consultancies serving the SMB market over which they have no particular advantage. They do have the disadvantage of thicker bureaucracy and greater overhead, though.

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