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.)
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.”
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Dell Operating Results*
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* 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
