Dell Servers: Too Generic?

By Baselinemag  |  Posted 2004-09-01 Print this article Print

Dell servers are an easy-to-manage and inexpensive standard, customers say. Some, though, wish the company offered more power in its boxes.

Corporate buyers know Dell's deal: The company, they say, sells inexpensive, standard servers that don't exactly push the technology envelope. But that approach has left some big customers wanting more.

Michael Koval, chief information officer at Long & Foster Cos., a real-estate services firm in Fairfax, Va., says that "for 90% of what I do, a commodity Dell server is just fine. They're cheap, they have enough horsepower to get the job done and they're easy to manage."

However, a few of Long & Foster's applications, including its homegrown commission- calculation system, are starting to require more juice than Dell's most powerful server, the four-processor PowerEdge 6650, can deliver. "If I were looking for something bigger, I wouldn't look at Dell," Koval says. (Both HP and IBM offer eight-processor systems.)

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Dell introduced an eight-processor system in 1999, the PowerEdge 8450, but discontinued it last year. Why? Because "more customers are looking for the best bang for their buck, not just a big box," says Bruce Kornfeld, Dell's director of worldwide enterprise marketing. He says a pair of clustered four-processor servers is more cost-effective than an eight-processor server.

But that omission is a "sore spot" for Aaron Branham, vice president of global operations and networking for Monster Worldwide. The job-search site runs about 1,000 servers, most of which are from Dell, in its three data centers. For its more performance-intensive servers, he says, "We've looked at moving away from Dell. We're kind of at the edge with our four-processor servers."

Other customers, though, say Dell's position as a technology follower is part of its appeal. "My rhetorical question is, 'How much do you want to pay to be on the bleeding edge?'" says Damien Bean, Hilton Hotels' vice president of corporate systems.

However, Dell's claim as the price leader on Intel-based servers has weakened. Glenn Gies, director of information technology at ElkCorp, a building products manufacturer in Dallas, switched to Dell servers in 2001 because "we were paying too much for hardware from Compaq." But while Dell once undercut competitors by upward of 50%, today the price differential is about 3%, according to Gies: "It's pretty much an even playing field now."

1 Dell Way,
Round Rock, TX 78682
(512) 338-4400


Employees: 46,000

Jeff Clark
Senior VP & General Manager, Product Group Oversees development, manufacturing and marketing of all products, including the PowerEdge family of servers. Before joining Dell in 1987, he was a reliability and product engineer at Motorola.

Paul Gottsegen
VP, Enterprise Marketing
Handles planning and marketing for enterprise products, including servers. Formerly at Compaq as vice president of servers for North America.

Neil Hand
Dir., Enterprise Systems Marketing & Product Management
Shares responsibility with Gottsegen for enterprise products. Previously managed Seiko-Epson's laser printer business in the U.K.

PowerEdge servers range from the single-processor 400SC to the four-processor, rack-mountable 6600 series. OpenManage software remotely monitors servers and diagnoses hardware problems.

Reference Checks

Hilton Hotels
Damien Bean
VP, Corporate Systems
(310) 278-4321
Project: Hotel chain rolled out PeopleSoft financials a year ago on 22 PowerEdge Windows servers; it has about 80 other Dell servers running Web servers and its payroll system.

Monster Worldwide
Aaron Branham
VP, Global Operations and Networking
Project: Its 20 regional job-search sites, which have 18 million monthly visitors, run on about 1,000 servers, mostly Dell systems with Windows 2000.

Boston University
Matt Kramer
Senior Analyst Consultant
Project: Runs Microsoft's Active Directory on 12 Dell servers to provide network authentication and other services for 55,000 users.

Glenn Gies
Dir., I.T.
(972) 851-0500
Project: Building products maker has 60 PowerEdges running Microsoft SQL Server, PeopleSoft and other applications.

Beacon City School District
Charlie Symon
Dir., Technology
Project: Six-school district in upstate New York has 34 Dell servers hosting Citrix Systems' remote-access software, e-mail and Web servers, and a student-attendance application.

Long & Foster
Michael Koval
Project: Real-estate services firm has PowerEdge servers in 211 sales offices. In its data center, 200 Dell systems run Microsoft SQL Server, PeopleSoft's customer relationship management system and other applications.

Executives listed here are all users of Dell's products. Their willingness to talk has been confirmed by Baseline.

Dell Operating Results*

2005FYTD 2004FY 2003FY
Revenue $23.25B $41.44B $35.40B
Gross margin 18.1% 18.2% 17.9%
Operating income $1.97B $3.54B $2.84B
Net income $1.53B $2.65B $2.12B
Net margin 6.6% 6.4% 6.0%
Earnings per share $0.59 $1.01 $0.80
R&D expenditure $236M $464M $455M

* Fiscal year ends in late January; FYTD reflects first six months Source: company reports

Other Financials**

Total assets - $19.93B Stockholders' equity - $6.21B Cash and equivalents - $4.03B Long-term debt - $505M Shares outstanding - 2.58B Market value as of 8/25 - $89.16B **As of July 30, 2004, except as noted


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