Dell's transformation: a story of "beauty and loneliness"

Drive north from Austin, the capital of Texas, for about 20 miles, and you will arrive at the small town of Round Rock, Texas. In the minds of ordinary people, this small town is not very famous. But in the minds of IT people, it is very famous and is called "Silicon Mountain". It is as famous as San Francisco, which is known as Silicon Valley.

It is far from San Francisco, where Silicon Valley is located, and it is about 1,800 miles away by car, but it is inextricably linked to San Francisco. A media colleague told 21st Century Business Herald that because there are always employees from San Francisco working here, Austin's housing prices have soared. An average house costs about $300,000, which is 50% higher than the housing prices in surrounding big cities such as Houston, San Antonio, or Dallas, because San Francisco's housing prices are notoriously expensive in the United States.

None of this would have happened without a company and a person. The company is Dell and the person is Michael Dell. For Americans, Michael Dell, Dell and Austin are the stories of "one person, one company and one city". This is a typical American story.

On November 6, the "Dell Global Conference" was held in Austin, and Dell founder Michael Dell accepted interviews from media including 21st Century Business Herald.

For Michael Dell, the past year was a thrilling year: on October 30, 2013, Michael Dell and Silver Lake Capital completed the $24.9 billion privatization of Dell and delisted from NASDAQ . After Dell was privatized, Michael Dell will continue to serve as the company's CEO and hold 75% of Dell's shares.

Dell's business transformation is taking place simultaneously with the privatization, from PC business to system integration and server business, and from pure hardware to software integration. Michael Dell said, "Dell's privatization is to promote business transformation. Before privatization, shareholders were skeptical about this transformation, but now Dell has the final say."

Among the top three PC manufacturers in the world, Lenovo Group currently focuses on hardware manufacturing, including PCs, tablets, and smartphones, and is experimenting with smart TVs, insisting on the hardware path; after three years of wavering, HP finally made a difficult decision and announced on October 6 this year that it would split the company into two, one is "Hewlett-Packard Enterprise" which mainly engages in enterprise hardware and service businesses; the other is "HP Inc" which mainly engages in PC and printing businesses. There are rumors that HP Inc will be acquired by Lenovo, but Yang Yuanqing directly denied it, saying that these businesses have no value to Lenovo Group.

Dell's transformation is a lonely story: it neither sticks to hardware like Lenovo nor splits and transforms to software and services like HP. For customers, Dell's identity is a "total solution provider." This is exactly what Michael Dell hopes to happen.

This is an era of transformation. A company controlled by itself can focus more on innovation and face the uncertainty of the future. This is what Dell foresaw when it went private. Currently, everything is still under Dell's control, and the future looks to be getting better. It is a beautiful story.

No stock market is getting better

How is Dell doing after it was delisted and privatized for $23.6 billion last November? Michael Dell's answer is, "Dell is getting better and better without the stock market."

In the PC market, according to IDC data, Dell's PC shipments in the third quarter of this year increased by 19.7% year-on-year, which is three times that of HP, five times that of Apple , and ten times that of Lenovo. "If we look at the US market, the year-on-year growth rate of overall PC shipments is 3%." Michael Dell added, "but if Dell is excluded, the growth rate is only 0.3%."

Dell also performed well in the server field. According to Dell's data, Dell is the second largest x86 server supplier in the world and the largest in Asia Pacific and Japan. In the second quarter, Dell was also the only server manufacturer in the industry that maintained growth in the rack and blade fields.

In the storage field, Dell's performance is even more milestone-data from IDC shows that if calculated by sales capacity (in TB), in the first half of 2014, Dell was the largest supplier of internal and external storage.

In addition, Dell's software business has also achieved double-digit growth. According to 2013 sales, Gartner has ranked Dell as the world's number one IT service provider in the healthcare industry. In addition, Everest Group's PEAK Matrix report on bank outsourcing also lists Dell as an important competitor.

Michael Dell said: "Dell has become the fastest growing integrated technology solutions company in the world."

Dell's channel revenue has accounted for 40% of its global revenue, which was only 33% a year ago. Michael Dell said that Dell's channel strategy has been very effective. Data provided by Dell showed that Dell's channel expansion speed is four times the average of the IT industry, which will allow Dell to expand more quickly and contact end customers.

Dell is no longer a pure PC manufacturer. Its products include hardware, software, and services, and it has all the products in the end-to-end solution. According to Michael Dell's plan, Dell has withdrawn from the red ocean of the PC market and transformed into a company focusing on overall solutions.

Michael Dell began to tease his competitors: "Everyone has heard about HP splitting into two companies, but in my opinion, this will only help shareholders, not customers." Michael Dell went on to say, "For IBM , it is obvious that there is a lack of end-to-end solutions, and in this regard, Dell is undoubtedly the most powerful company now."

Four directions after privatization

How did all this happen? It was through privatization. "Being out of the stock market freed us from the constraints of short-term goals in units of 90 days (a quarter), allowing us to make long-term plans that are more beneficial to customers and Dell's own development." Michael Dell explained.

After privatization, Dell has formulated four development directions, namely Transform, Connect, Inform, and Protect. These were also the key themes of the "Dell World Conference" last year and this year. Dell will continue to move forward in this direction in the future.

In terms of transformation, Dell will continue to innovate at the infrastructure level, including data centers, hyper-converged infrastructure, and public cloud brokerage and hybrid cloud services.

Michael Dell said, "Data centers have become our new business growth point. At the IT infrastructure level, we not only conduct in-depth research and development ourselves (such as software-defined networks, flash storage, and the new generation of PowerEdge FX series hyper-converged systems), but also have extensive cooperation with NUTANIX and VMware in the field of hyper-convergence, providing customers with more comprehensive infrastructure options."

In terms of cloud computing development strategy, Michael Dell said, "In terms of public cloud, Dell will stick to the intermediary model. Currently, Dell's public cloud market can provide integrated services of five or six public clouds. In the future, it will expand to 1,000 different types of public clouds and provide customers with more open and flexible cloud services through Dell's hybrid cloud solution."

In terms of connectivity, Michael Dell's strategy is this: "Connectivity means better connecting customers with corporate IT, applications, and data. In this regard, Dell will not enter the fiercely competitive smartphone field, but will only provide environmental coverage through virtual terminal/desktop services."

In terms of insights, Dell's main work is to help customers manage data and achieve data analysis and insights based on this. Michael Dell said, "In the future, there will be hundreds of billions of devices connected to the Internet. This collection of data will bring unprecedented challenges. Dell's strategy is to work closely with partners such as Oracle, Microsoft , SAP , VMware, Cloudera, etc. to quickly deliver data processing platforms to the market.

In addition, Dell QUEST database software components will also play a more powerful role in data integration.

Protection is also an area where Dell focuses its investment, especially when mobility has become the mainstream development trend in the industry, but many customers are still unwilling to get involved due to security issues. According to a survey report released by Dell at the same time as the opening of this conference, among the 2,000 companies surveyed, 44% of them are unwilling to deploy mobile solutions due to security issues, and 52% are unwilling to adopt the cloud. The security concern rate for big data is smaller, but still as high as 35%.

Therefore, security is actually a business opportunity. Dell can now provide file-level encryption solutions to protect data security in all application scenarios. "Dell's security business has grown by 380% year-on-year," said Michael Dell. "It can be said that this will also be an important part of promoting overall business growth in the future."

Gene modification and re-emergence

The background of Dell's transformation is the decline of the PC market. Since the first quarter of 2012, the global PC market has entered a long period of decline due to the impact of new smart terminals such as tablets and smartphones. Global PC shipments have continued to decline. This trend has continued to this day, and the decline has only stopped in the third quarter today. The market is generally not optimistic about what will happen next: the factors that impact the PC market still exist. Although the development of tablets has been hindered, smartphones are growing more rapidly.

In addition to the decline in market share, there is also a decline in profit margins. The entire PC industry's profit is less than 1%, even lower than the famous sunset industry, the color TV industry.

There are roughly two reasons for the decline in profits: one is that the market competition is too fierce, with global giants including Dell, Lenovo, and HP all competing for a share of the PC market; the other is the narrowing of industry technological innovation. In the early stages of PC industry development, there was a large space for technological innovation, high industry profits, and a large number of competitors. What was considered a blue ocean has now become a red ocean.

The narrowing of the space for technological innovation has reshaped the geographical distribution of the global PC industry, with the center of gravity of the PC industry shifting from the United States to China. The reason is that Chinese manufacturers, such as Lenovo Group, can better utilize local cheap labor to produce cheaper products. Labor costs have become the most important driving force for industrial migration.

In the second quarter of 2013, Lenovo Group replaced HP as the world's PC king, which is the result of the geographical migration of the PC industry, which is a major trend.

When asked whether the PC business is a thing of the past, Michael Dell believes that the PC will be reborn because it is still part of the end-to-end solution.

Michael Dell said: "Dell will continue to focus on tablets and laptops, such as two-in-one products. The PC business is still the core business for Dell. We believe that PCs are still indispensable to the business, and we will focus on the commercial PC field in the future." In the future, Dell's physical terminal (PC, workstation) business will go hand in hand with its virtual terminal (focusing on the virtual desktop market) to provide customers with comprehensive business terminal solutions.

PCs once brought glory to Michael Dell, Dell, and even the city of Austin. Born in 1965, Michael Dell dropped out of school in 1984 to found Dell. In 1988, Dell was listed on NASDAQ. In 1992, Michael Dell became the youngest CEO of a Fortune 500 company.

Throughout the PC era, Steve Jobs in Silicon Valley, Bill Gates in Seattle, and Michael Dell in Austin were the brightest stars of this era. Due to the success of the direct sales model, Dell's PC sales have been ranked first in the world for a long time, and Michael Dell is therefore known as the King of PCs.

Saying goodbye to yourself, especially a very successful person, is a very painful thing. According to Lei Jun, the founder of Xiaomi Technology , you must first reset your life to zero before you can start a second business. In the past year, Dell has been trying to accomplish this very painful thing. Now it seems to be going well.

The more far-reaching impact of this transformation is that it may further transform Dell's genes, from a sales-oriented company to an IT company with more technical and innovative capabilities. This is a huge challenge, but for Michael Dell, a 49-year-old Texas boy, it is not too late.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.