Selling Enterprise Computing Support Services is all About Commodities and Having a Very Low Cost of Delivery

On September 13, 2012, the All Things Digital web site published an interview, conducted by Mr. Arik Hesseldahl, with Mr. Stephen Schuckenbrock, Head of Services for Dell. The points of this interview that were most meaningful for us where:

  1. Mr. Schuckenbrock’s evident deep grasp of Michael Porter’s Five Forces of Competition
  2. and his understanding of selling realities of 2012 and the need to pick and choose opportunities carefully instead of legacy styles that called for an “anything you want” posture for customer facing sales in enterprise markets

When Mr. Schuckenbrock speaks of ” . . . put[ting] everything in services together as one team, and then we globalized everything, so when you a buy a notebook in the U.S. and you happen to be in India, we know where you are, and we can fix the machine. We couldn’t do that in the past.” (quoted from Mr. Hesseldahl’s article, for which a link has been provided, above) he’s actually talking about building a support system that is inherently less expensive for Dell to run, which makes them much more formidable as a competitor if one follows Porter’s prescriptions.

Looking further, when he goes on to note that the enterprise services and support businesses are actually rather similar, but points out that ” . . .customization worked in the old way, when margins were at 30 to 35 percent. When you start pushing margins into the teens and add in the capital intensity and then the risk profile of those contracts, it only takes a few bad deals to fundamentally break a good company. As x86 (systems based on chips from Intel and AMD) has become the dominant compute platform, services can start looking more like the machine that we have in the support business. Not identical, but more like.” (ibid) we can’t help concluding that Mr. Schuckenbrock understands, very well the fact that customizing solutions will result in a much higher cost of delivery, which, in 2012, will prove to be a fatal flaw. Once again, he’s keeping his attention fixed on maintaining the lowest cost of delivery that he can manage, to protect a highly competitive advantage.

In fact, the positive comments that he makes in this article about cloud computing, as well as about a set of forward-thinking set of customers who recently chose Dell over the competition, can be looked at the same way — in other words, that cloud delivery affords Dell a very low cost of provisioning services to customers. After all, with cloud, there is no on premise component, etc.

As regards his mastery of selling products to enterprise IT buyers, we detected his expertise in this area when he noted that ” . . . [c]ustomers who just want me to do it their way, but cheaper, I’m not so interested in.” (ibid). Here is a manager who is prepared to walk away from a deal — a breathe of fresh air.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved

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