HP Takes a Dig at Dell's Private Foray; Analysts Caution CIOs

 

One of Dell's arch rival-HP, post the Dell private deal with Silver Lake and other investors, had issued a rather blunt statement.

The company said, "Dell has a very tough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell's ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb. We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity."

Clearly, the industry is keenly watching Dell's new course and whatever strategy it need to ink it on the ground with quick turnaround times. We believe Dell needs path-breaking PC form factors and innovations that will set the ball rolling to face the intense competition in the computing products space.

However Carter Lusher, chief IT analyst at Ovum says, "Dell is on its way to open a new chapter in the IT industry by taking the company private. A move which according to us makes strategic sense."

Lusher says that Dell is in the midst of a wrenching transition from a supplier of commodity hardware, mainly traditional PCs, to being a supplier of enterprise-grade IT infrastructure. Dell's ambition is nothing less than offering the entire IT stack with supporting services. A significant risk likely to face Dell during this transition is that enterprises and public sector organizations cut back on their purchases until the dust settles. The implication of going private is that Dell is planning radical changes to its strategy and product roadmap. "While the company might come out of this transition stronger with a product lineup that better meets the needs of businesses and public sector organizations, there will be uncertainty as to what products and services stay, get strengthen, or get eliminated," adds Lusher.

According to Ovum, it sees effective communication to prospects and customers about its strategy and product roadmap as a, if not the, critical success factor to get through the transition.

However it cautions that while this might sound simple it is not. Compounding Dell's challenge is the deep seated brand identity as a ‘PC company'. Another communications challenge will be how Dell Services (built on the Perot acquisition) shares its financials for the due diligence phase on large, multi-year IT services deals.

Ovum recommends that "CIOs need to asset the risk to their infrastructure and put into place plans should Dell's radical hardware, software, and services shifts require changes to procurement plans."

SHRIKANTH G
(srikanthg@cybermedia.co.in)