Reclaiming the crown?

Security and software may be the order of the day at Dell, but with upheavals at rivals and an expanding channel, the US giant still believes it can once again be the PC king, reports Jack Gilbert

When Michael Dell started making computers in his dorm room at the University of Texas in the 80s, only the most clairvoyant of oracles could have predicted the success Dell's eponymous leader would go on to enjoy. And, just as few could have foreseen the vendor's astronomical rise, not many anticipated the vast changes the company has implemented over the past few years.

Until seven years ago, Dell was operating a predominantly direct business, but today it claims that 35 per cent of its total revenues go through the channel, a percentage that is increasing every year. Meanwhile, having traditionally been seen as a giant of the PC and hardware market, it has also gone to great lengths to expand its portfolio and is now heavily targeting software and security.

That diversity was constantly referenced at Dell's Security Peak Performance conference in Berlin last month. During the convention it was announced that Dell is now a $2bn (£1.3bn) software company globally, has seen its number of security partners increase by 41 per cent year over year in EMEA, and is aiming to double its EMEA software revenues over the next five years. But despite this emphasis on other areas of its business, senior figures in the Dell team are still focused on retaking the crown as the biggest PC vendor globally. With a fast-growing channel, its recent move to go private and major changes from the HP and Lenovo camps, Dell is now claiming that once again it has the chance to leapfrog the competition and retake the mantle as the world's number one PC vendor.

PC kings

Aongus Hegarty, EMEA president of Dell, said he hoped the US giant will reclaim its crown in the PC market within a few years.

Hegarty also stressed how this business is central to Dell's current strategy and it is constantly making ground on its competitors.

"For nine quarters globally we have been taking share in the PC market. It is not an old business for us; it's a current and very important business with 300 million new PCs this year being bought globally. It's a very significant market and you can see the types of innovation and development around the products," he said.

"We will broaden and expand from there to that position of being number one in a number of years' time across the whole PC market"

"We are not going down the path of [the PC] business being less important. That business is actually core, central and very important, and we are going to continue to invest and develop it. We are continuing to take market share and we have been doing that for more than two years."

Hegarty's claim that Dell is catching up to its competitors in the PC space is supported by figures from IDC. For Q1 2015, Dell shipped 9.2 million units and held a 13.5 per cent share of the PC market. Leading the way was Lenovo, followed by HP, with the former holding a 19.6 per cent share of the market and the latter at 19 per cent, still a little way ahead of their nearest challenger Dell.

But Dell has continued to make steady ground on the leaders in the market, according to IDC, holding an 11.7 per cent share in the same quarter in 2013, showing it has increased its presence in this industry by 1.8 percentage points over the past two years.

According to Hegarty, one of Dell's strengths in its quest for the number one spot is its fast growth on the commercial side.

"If you look at the commercial end of the market, and at the real high-end technology solutions in the PC side, we have been taking significant share and grown very strongly. We will broaden and expand from there to that position of being number one in a number of years' time across the whole PC market."

Hegarty also said Dell's ability to provide a full portfolio of products gives it an edge, particularly in the mid-market.

"A lot of the customers in the mid-market space - medium-sized companies - don't have specialists in datacentre, storage, networking and software; they have one or two people in technology and they want to work with a firm that can bring that breadth of solution to them.

"Here is your client at the front end, here is your datacentre solution, and here is the software and security that goes around it - that's the type of solution we can bring to market. And we see hardware, whether it's servers, PCs or tablets, as being central to that."

HP and Lenovo uncertainty

There has been much upheaval of late among Dell's competitors in this space, with HP's forthcoming split into a PC and printing business and a separate enterprise and services company coming at the start of November, as well as Lenovo's acquisition of IBM's x86 server unit last year.

Alexandre Mesguich, senior vice president of research and business development at analyst Context, said these developments can give Dell the opportunity to seize market share.

"The opportunity is now for Dell. It has a massive chance to take as much share as possible because there is a lot of uncertainty and question marks around the integration of acquired businesses by Lenovo, as well as HP's ability to deliver the agility promised with the split," Mesguich said.

"I think they are in a good position to take market share. They have worked on all the tools and have improved the partner programme, simplified the way they work with the channel and are increasing their sales force to be able to capture that market share and deliver on that opportunity."

Hegarty also said that the forthcoming HP split presents an opportunity, particularly as Dell is staying together as one unit.

"We are unique in the fact we have only one entity. We don't need to concentrate a lot of time on shareholders, public markets, splitting our company in two - that's other companies' strategies, not ours - so I would call [the HP split] a distraction."

Dave Hansen, global vice president for software sales and marketing at Dell, went so far as to say he expects partners who are worried about the HP split to move over to Dell.

"I am convinced that [partner movement] will happen. I don't know in what order of magnitude, but I do know some partners are very interested in having deeper dialogues with us about that," he said.

Partner thoughts

According to Jerry Mumford, sales manager at Dell partner Frontier Technology, the US giant is well placed to catch up with its rivals in the PC space.

"With Dell delisting from the stock market in 2014 and Michael Dell back firmly in charge again, they certainly have the agility to react to competition. Their biggest challenge now must be seen from Lenovo, which has very deep pockets and is gaining market share very quickly across both the personal computing and server categories," he said.

Dale Hyde, business development manager at Frontier Technology, added: "I believe Dell has enough presence in the market to [be number one in the PC market] so long as it can match the agility of its competitors. Dell's channel isn't the strongest but I think this is less important with PCs than, say, the server and storage market, as PCs will tend to be procured directly rather than via the channel."

Adam Pedder, managing director at Dell partner Shadowfax, said he has found Dell's hardware products to be superior to those of Lenovo and HP.

"In comparison with the likes of HP and Lenovo, we have always found Dell equipment to be better built, have a longer lifespan and come with a better level of support. Simple things such as wiping and rebuilding Windows on a Dell device is much simpler and faster with the on-board recovery partition, compared with HP, which has to ship out rebuild disks to ensure your copy of Windows is licensed correctly," he said.