Dell Computers (A) : Field Service for Corporate Clients S.Vijay
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Dell Computers (A) : Field Service for Corporate Clients
S.Vijay
Dell Strategy ?• Dell Direct
Customer Data &
Product ChoiceDell
Personalized Product
Customer Service & Support
Component Suppliers/
Distributors
Advantage :
1) Eliminating Intermediateries & Retailers
2) Production/Assy based on Orders , hence no Inventory
3) Amount Receivable < 5 Days
4) Amount Payable > 58 Days ( less Working Capital & Liquidity Requirement)
5) Focused more on Service & delivering Solution.
6) Integrated Supply chain
7) Value Chain Ensure Customer Demand Driven System
8) No need of Forecasting
9) Easy Understanding customer Preference & Emerging Technologies
10) Huge Customer Data Base & Happy Customers
Outsourced Field service
CustomerPremier Pages
E-Product CatalogProduct Selection &
Pricing
Online Purchase Order to dell
ProductionCustomized ProductLogistic -Delivery through Couriers
Performance of Product
Customer
Tailored Service & Support ( Online &
Onsite)
Ending with Customer
Starting with Customer
E- Interface with Dell
Variety of Product
Paperless DocNo Manual Error
Customer Driven Production
Customer NeedEmerging Trends
No RetailOn Time “ Ship to
Target”
E- problem ReportCustomer
Satisfaction Monitoring
Tailored /Own Pricing
On Time & First Time Fix
Happy Customer
Initial Field Incident Rate
End to End Solution?
Critical Success Factor for dell a) Low Cost Product
b) Logistic & Superior Service
Supplier
What is dell Corporate Philosophy ?
• Dell Direct
- Premier Pages for Largest Global Customers
- 90% Corporate Customers
• Low Inventory
-Reduced from 13days in 1997 to 5 days in 2001
• Low Cost product & Superior Service
- Operating Expense Reduced from $340 in 1997 to 243 in 2001 (28.5%)
- Account Payable Increased from 54 days in 1997 to 58 days in 2001
- Profit/Employee Increased from $50048 in 1997 to $54000 in 2001
- Outsourced Field Service & Continuous Monitoring of Customer Experience
Dell Direct
Low Cost product
Logistic
Service & Support
High Customer satisfaction
Highly recognized for Service & Support
Outsourced Field Support ( critical for Large
Server business)
Need to Depend on Suppliers
Less Inventory ( Hardware Support is required
during Issue)
Technology Competency
Current Approach on Service & Support through
FAQ, Self Service, Online may not Adequate.
Desktop PC Sales is declining
Market Capitalization is in downward Trend
Heavy Competition in Large Server Business
Huge Potential segment Still Untapped ( IBM :
35.9 % Market Share).
Small Server Business is growing ( 4% in 1997 to
19% in 2001)
Existing Corporate Customers May Prefer Dell
Large Server
SWOT Analysis
Making a Decision
Outsource to Whom ? & Why ?
Shall Rely on Dell Support ?
Why Should Prefer Dell Product?
Critical Success factor for Large Server Business is Field Support
Option 1 : Outsourced to IBM Pros
1) Experience & Skilled Employees
2) More Technician / Customer ( 11 Nos Per Customers)
3) Market leader in Larger Server Business & Proven Service records
Cons
1) Direct Competitor
2) Efficiency of Dell will depend on IBM
3) Need to Share the core Competency with Competitor IBM
4) IBM will more Expose to Huge customer Base of Dell
Critical Success factor for Large Server Business is Field Support Option 2: Decision One
Pros
1) Experience & Skilled Employees
2) Based in 150 Location in USA and Canada
Cons
1) May not Honor Dell’s Extraordinary Commitment
2) Efficiency of Dell will depend on Decision One
3) May not Accept the Dell Corporate Philosophy.
Details 1997 1998 1999 2000 2001 2002
RemarksExisting Existing Existing Existing Existing Existing
New Server
BusinessTotal
Net Revenue 7759 12327 18243 25265 31888 25132 1453.95 265865% of Total Medium & Large
Server
Cost of Revenue 6093 9605 14137 20047 25445 19876 1163.16 21039.5
Gross Margin 1666 2722 4106 5218 6443 5256 290.79 5546.46
Operating Exp 952 1406 2060 2955 3780 2932 329.61047 3261.28
Operating Exp ( % of Net Rev) 12.27% 11.41% 11.29% 11.70% 11.85% 11.67% 22.67% 0.34335Due to Inefficiency,
Operating Exp Doubled
Net Income 518 944 1460 1666 2177 1768 -38.82047 1728.85
Net Revenue by Small Server 310.36 1109.4 2371.6 4295.1 6058.7 4242 -
Day of Supply in Invenory 13 7 6 6 5 6 6.8
Existing Business Mov.Avg (6
days)+20% Increase of
Inventory due to Large Server
Business
Days of Sales in Account
Receivable37 36 36 34 32 34 40.8
Account Receivable/Day 209.7 342.42 506.75 743.09 996.5 739.18 35.64 774.81
Days in Account Payable 54 51 54 58 58 57 45.33
Account Payable/Day 112.83 188.33 261.8 345.64 438.71 350.76 25.66 376.42
Avg Total Revenue per Unit 2700 2600 2350 2250 2050 2217 764736.84Expected Customer Base is
1900 Nos
(12000*1453/9145)
Net receivable/day 96.869 154.08 244.95 397.45 557.79 388.42 9.9780882 398.396
No of Customer in Million 2.9 4.7 7.8 11.2 15.6 11.3 0.0019
Operating Exp/ Unit in $ 331 297 265 263 243 259 173479.192
Financial Statement Analysis
Details IBM
No Of customer 12000 (0.012 Million)
Market Share 31%
Net Revenue Mid & large Server 9145 Million $
Cost Revenue 5487 ( 60% of Net revenue)
Gross Margin ( Net-cost Rev) 3658
Operating Exp (80% of Gross Margin) 2194.4
Employee Expense (80% of Opr.Exp) 1865.24 (assumption)
Total Emp Expense/ Customer 155436.6667
Total no of Employee 135000
No of Employees 11 Empl/Customer
Expense/Employee 14130.60606
Outsource Expense Analysis
To Provide the Service equivalent to IBM or Inline with Dell Other Product, Dell has to spend
14130$*20900= 295 Million $.
Due to Inefficiency & Training , Operating Expense will Increase from 11 % to 22% (Expected). Hence Total Expense will be
+295*22%+295= 329 Million $
• Decision one Supplier is technical ly sound. Hence Dell Will Outsource the Field Service to Decision one ( for other
advantages as well).
• Presently Dell Existing Customers ( Including PC + Small Server) are being Handled by Outsourced Services. They have
Proven service records & Good Customer Satisfaction Index. Hence Handling the Outsourced field Service wouldn’t be
Complicated.
• Based on Financial Calculation, Large Server will have Loss of 38 Million $ (Expected). But Net Income (1728 Mil $) will
be more than 2000 Financial Year.
• Net Receivable /day (398 Mil $) will be more than Expected 2002 result or More than 2000 Result.
• Loss from Larger Server Business (38 Mil $) is Negligible (1.75% of 2001 Net Income).
• Product Diversification will Improve the Declining Market Capitalization & Improve the Revenue in upcoming Financial
Year.
• Inventory, Payable & receivable are reasonable par with Dell Philosophy. This Approach will not have any substantial
Impact on Dell Philosophy. Over the period, This can be reduced .
• Addition to Outsourced field Support , Existing Critical Success Factors like Low Cost product Logistic & CRM will
Provide the Competitive Advantage than Competitors. Hence Kapoor will Prefer the Dell Larger Server.
Conclusion : Making a Decision
Thank You
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