Term Paper on Dell Computer Corporation

Dell is a direct company. What does direct mean? It means accountability, it means service, and it means efficiency. Dell has become the largest supplier for personal computers and servers to corporations in the United States, and the second largest vendor of servers in the world. Dell has experienced growth of 54 percent per year on average for the last ten years. Dell sees that this direct system and ability to understand the customer's needs, gives us a tremendous amount of information-information thus allowing us to improve Dell business systems. This has certainly benefited Dell and its customers as well.

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While Dell is taking advantage of this, it is certainly not the only one. Commerce is growing in a tremendous way and usage on the Internet is skyrocketing. By the end of this year, two hundred million users will be online, and in the next five years, commerce is expected to be 25 times higher what it has been during the last years. Networks are moving from dial-up to broadband so users can always be connected. This alternative offers a richer experience and new types of media that enhance the user's experience. What effect is this having on Dell economy and on the way businesses work? Economies tend to work based on the cost of interactions and the cost of transactions. When you want to buy something, the cost is based around the physical infrastructure, the land, the buildings, and the people involved, so that when you want to buy "it," "it" was there. The field of consideration was usually based upon your method of transportation and therefore, how far you could travel. What Dell is seeing now is that the field of consideration is much more global. It's no longer dedicated to a remote region. Information is replacing inventory, and intellectual assets are replacing physical assets.

I believe there's an inverse correlation between the amount of information you have and how many assets you need. In other words, if I have perfect information about what Dell customers want to buy, I need very little physical assets in the way of inventory to be able to supply that. If I have absolutely no information about what customers are going to buy, I need a tremendous amount of inventory to prepare for the possible outcomes. Dell Corporation is a wonderful example of this. Through Dell supply chain optimization, Dell has reduced Dell inventory over five or six years from 30-40 days of inventory to only about six days of inventory. This is ten times less inventory than Dell competitors, who have a combined manufacturing and distribution channel. That is important because the value of materials declines very quickly and Dell can pass that savings along to Dell customers, as Dell as provide a better experience.

All of these factors are having a huge inflationary effect on Dell economy. And that, by the way, is good. It means efficiency has increased. It means businesses can connect with their suppliers and their customers more efficiently and specialize in the things they do best. This represents a kind of virtual integration, as opposed to vertical integration.

Using Dell as an example, Dell has built the Premier Page, a vertical portal for businesses to interact with Dell. It has all the information that a customer would want in an interaction with Dell. This has allowedly us to bring economies of scale to Dell customers, driving their costs of acquisition and support down and as Dell driving Dell costs down. Dell online commerce has been roughly tripling on a year-over-year basis, and now represents about 25 percent of Dell's revenues with a very significant portion of Dell customers buying online.

Dell is also expanding Dell support offerings with knowledge-based online support tools. Dell has a tremendous amount of information internally to support customers who call us on the phone. Why not provide that information in an easy-to-get format for Dell customers? And in fact, they're using it at a tremendous rate. About 25 percent of Dell support incidents occur online, and for some categories of support, it's much higher.

What kind of infrastructure does it take to run a site like Dells? Dell is the world's largest commerce site running NT. In the last two years, Dell has seen an 1100 percent increase in the amount of traffic to dell.com and a 1400 percent increase in the amount of revenue from dell.com. It's a large network of Dell servers and storage: more than 100 tetra bytes of storage data, 350 power raid servers, Dell data centers redundant on three continents, and certainly a 100 percent up-time target. Dell goal is to provide a better experience online for Dell customers than they can get in the physical world. Dell built a scalable architecture based on open standards in a very cost effective and secure way. Security is very important to Dell customers and certainly to us. I think the important point here is that large highly scalable e-commerce sites can be built on NT. Dell is proving it and, in effect, eating own dog food with dell.com and with the other sites that Dell run.

Dell have been developing products for the enterprise market for quite some time, and Dell offer a broad range of server and storage products, from entry-level work group products up to complex data center and storage products. Dell have a broad set of alliance partners to give us the capability in terms of software and systems management to support the most complex kinds of network environments. Dell has multiple NT servers sharing multiple redundant storage systems, and a very broad range of offerings. Dell is now the number two supplier of servers in the world and clearly the fastest growing by a wide margin.

What does all this really mean? It means that a company like Dell can provide a higher level of quality and service and a better experience to its customers, reducing the cost of doing business for both the customers and for Dell, and at the same time deepening Dell customer relationships. It means that the Internet is widening Dell's competitive advantage and increasing the structural cost advantage that Dell already has with its direct business model. When commerce transactions and support go online, Dell gets tremendous economies of scale. Dell is also offering a broader range of products and services. Dell recently introduced gigabuys.com, where customers can buy a full range of computer products to complement their Dell products. Gigabuys.com also introduces Dell to a broad range of customers who aren't Dell system buyers.

All this has certainly caused a lot of growth in Dell Corporation, but Dell want to take it to the next level. Dell has just announced what Dell call Premier Commerce, which takes the input Dell has, from Dell customers over the last two years through Premier Pages and drives several key improvements: more choices, adherence to specific corporate configurations, facilitated work flow ability to accommodate complex approval processes, and enhanced support capability. And to give you a demonstration of Dell Premier Commerce engine, I'd like to introduce Chris Halligan.

It's an entirely dynamic commerce application, which is important to us because the dynamic quality of the data means that it's updated, it's current, and it's accurate. The back end is also dynamically fed from Dell legacy systems that manage SKUs and pricing. Some of Dell customers like to get purchase history data. Dell offers online purchase history reporting so you can see where it was shipped, who bought it, what kind of product it was, and so on. On the tech support side, there is a tremendous amount of service Dell offers on-line. Each time Dell build a PC, Dell put a five digit alphanumeric code on it that's unique to that machine. A customer can go to Dell support site, key in that code, and get the original configurations of that machine as it was shipped, the days left on its warranty, where it was shipped, and all the driver files and utilities. The site will test the system for year 2000 compliance, and if it's not compliant, the customer can download bios that will make it so. It also provides access to help desks for the same trouble shooting tools that Dell internal technical support representative’s use.

Dell really wants to move into two areas. One is to automate the payables process so that Dell customers will be able to do their receivables and payables online. Beyond that, Dell is going to make some fairly significant moves with respect to commerce integration. As strongly as Dell feel about Dell Dellb technology, Dell want to begin integrating Dell systems with Dell customer's ERP systems. If Dell can do that, then all their processes and workflow can leverage all of Dell capability, and Dell can enhance Dell relationship significantly.

Reference

Pearlson, K. and Yeh, R. "Dell Computer Corporation: A Near Zero Time Organization", University of Texas case study, April 1999.
Pearlson, K. "General Motors: Rebuilding an IS organization", University of Texas case study, January 1998.
Pearlson, K. and Belcher, C.W. "The Human Resources Information System at UT-Austin", University of Texas case study under preparation, 1998
Pearlson, K and Christensen, N. and. "Continental Airlines: Outsourcing IT to Support Business Transformation", University of Texas case study, October 1996.
Pearlson, K. "Teaching Notes: Creating a Teaching Note to Accompany Case Studies", Published by the Prentice Hall Series of Case Studies in Management Information Systems, June, 1995.
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Nelson, K. and K. Pearlson, "Software Maintenance Process Flexibility: Conceptualization, Measurement and Validation" under revisions for (and will be resubmitted to) Information Systems Research, (Originally submitted December 1997).
Pearlson, K. and Saunders, C. "Building Telecommuting Theory from Paradoxes", University of Texas Working Paper, October 1997
Paul, D., K. Pearlson, and R. Assessing McDaniel, Technological Barriers to Telemedicine: Technology Management Implications.
IEEE Transactions on Engineering Management Special Issue on Technology Management in the Health Care Sector, May 1999
Nelson, K. and K.E. Pearlson, "Measuring Process Flexibility: The Case of Software Maintenance Teams" University of Kansas working paper, January 1997.
Pearlson, K.E., and N.S. Balaguer, "The Delivery of Information Technology for Research and Development: A Marketing Approach" Working Paper, January 1997.
Pearlson, K.E. "Alternative Work Arrangements and Business Processes" Working Paper, September 1996.
Paul, D., J. Butler, K. Pearlson, and A. Modeling Winston, “Organizational Learning and Adaptability as Resource Allocation: An Artificial Adaptive Systems Approach", Computational and Mathematical Organization Theory (4) pg. 301-323, winter 1996.
Balaguer, N.S. and K.E. Pearlson, "Personal Portable Technologies and Field Service Work: Remarkable Improvement in
Performance with Minimal Change in the Job" Proceedings of the INFORMS Technical Section on Manufacturing and Service Operations Management (MSOM), June 1996.
Smith, H.J. and K.E. Pearlson, "Code of Ethics: Drawing the Line", Beyond Computing, June 1996.
Shaw, T. and K. Pearlson, "The Role of Ideal Types in Information Systems Contingency Theories", University of Texas working paper, January 1996
Pearlson, K., A. Winston and J. Cash, "The New Customer Service Paradigm: Reengineering the Customer Service Processes for the 21st Century", University of Texas working paper, November 1995. Page 6
Pearlson, K. and A. Winston, "Towards a New Perspective on Work: Managing Knowledge Workers in Turbulent Environments", University of Texas working paper, August 1995.
Jarvenpaa, S.L, B. Ives, and K. Pearlson, "Global Customer Service for the Computer and Communications Industry", published in Global Information Technology and Systems Management, Idea Publishing, 1995.
Victor, K. and K. Pearlson, "IT Functional Support of Interorganizational Process Reengineering", University of Texas working paper, 1994. Presented at the 28th annual HICSS conference, January 1995.
Pearlson, K. and N. Balaguer, "Field Service Management: Managerial Implications for Personal Portable Technologies"