Dell India: Tech’s ‘New’ Poster Boys

With 30% growth in FY15, Dell in India is successfully transforming itself into an end-to-end enterprise solution player from a PC vendor only

Dell’s recent $67bn acquisition of EMC (the largest ever deal in the tech industry) has hogged the global headlines in the last few weeks. India has not been an exception, with both the business and technology media analyzing threadbare the financial and technological implications of the deal. While this acquisition might signal a tectonic shift in the tech world, the fact of the matter is Dell itself has been undergoing a paradigm shift (albeit successfully) in the last couple of years since going private.

In an emerging market like India, this successful transformation is gradually starting to become visible. But how? To understand this transformation better, it makes sense to look back what happened 18 months back. In September 2013, Dell became private with shareholder approval and subsequently what changed at Dell was accelerated speed and momentum to execute plans to make Dell more responsive towards customers with end-to-end salable solutions.

Steady growth over the years with a whopping 30% growth in FY15 confirming the success of Dell's new model

What was a matter of great pride was that it was Dell India that presented the channel led go-to-market to the global team so as to remain more relevant to the market and this was accepted. Thereafter, it became even more critical for the Alok Ohrie-led Dell India team to implement this model successfully in India.

Alok Ohrie, MD, Dell India had then summed up the three key pillars on which the success of this new model depended. This included a dramatic shift in behavior towards the customers by becoming a trusted advisor, maximizing the coverage (on all of enterprise, commercial and consumer front) and improving processes and internal systems to support business growth.

One year down the line, Ohrie reiterates the need to take a status update on each of these three areas. And thereafter analyze the growth shown by Dell India across the board in what Ohrie calls as the “historic 12 months”. 

In the overall analysis, nearly two years since Dell made its transition to a private company, the transformation journey continues as the traditional hardware company tries to solidify its position as an end-to-end player in the changing IT market. The move seems to have turned out to be fruitful as the PC major put up an impressive show across all business segments, clocking a massive 30% growth in FY15 over the previous fiscal. Post privatization, strategies were realigned, internal organization was restructured in line with the new objectives, and a bolder road-map was laid out.

The performance in the last one year throws enough evidence that the decisions are paying off well. The fact that the company is no longer under the constant glare of Wall Street and doesn’t have to think about meeting short-term investor expectations has shifted focus on long-term performance globally and has instilled fresh confidence in the leadership team to make some bold moves.

In FY15, the company has stayed focused on acquiring new capabilities, reorganizing back-end operations, and optimizing its supply chain. Privatization has brought in the much needed flexibility that is crucial in doing so. At the heart of Dell’s ongoing transformation lies its new go-to-market strategy which was initiated in early 2014. This has helped the company in significantly expanding its market coverage, geographic reach, and partner ecosystem. In India, while the customers have grown by 25%, the number of partners has gone up by over 100%

Trusted Advisor for Enterprises

In order to understand how Dell India is becoming a more trusted advisor for enterprise customers, there is need to look at multiple initiatives that have been undertaken in the last one year. And that has also been successfully implemented. For one, Ohrie informs that 7 solution blueprints have been defined for the Indian enterprise customers. “These are actually reference architectures or engineered solutions” Ohrie informs around uniform communications or collaboration, desktop virtualization and cloud client computing, cloud computing services, analytics, business processes, virtualization and hi-powered computing (HPC).

Secondly, the sheer number of wins is an indicator of the success of these solution blueprints. With 186 wins, this business has grown by 52% year-on –year. Ohrie clarifies that since 3 or more of Dell LOBs go as part of one of these solution stacks, it further emphasizes the magnitude of the success this has achieved.

Thirdly, Dell India invested extensively in customer solution centers too—many of these are co-located with the Dell R&D facilties—where enterprises are being familiarized with the solutions by means of briefings, design workshops as well as proof of concepts (PoCs) and demos.

What these initiatives mean is that Dell had now begun to fully orchestrate itself as an enterprise solutions company. And though it had taken the company nearly four years and more to change itself from a PC vendor to an enterprise IT company, the transformation seems to be happening and the efforts seem to be paying off. Manish Gupta, Director, Enterprise Solutions Group, Dell India reiterates that with these reference architectures and appliances in each, Dell is now poised to compete against the likes of HP (Converged Infrastructure) and Oracle (Exadata).

Though it has to be kept in mind that enterprise IT is being disrupted by new companies like Nutanix (existing Dell partner), Cumulus Networks, Illumio, HortonWorks, AppDynamics, and Box amongst others. As Ohrie informs, Dell has been working with Nutanix and Cloud Era for off-the-shelf appliances. These companies are still under the radar, but they can significantly alter the balance of power within a few months. These companies are fundamentally redefining the older ways of technology and are poised to create web-scale hyper-converged infrastructure to handle next generation workloads.

Assimilating Enterprise Solutions

One big advantage that allows Dell to reach out to all enterprises now is its end-to-end capabilities acquired through various acquisitions. Dell now competes in all categories including servers, storage, networking, datacenter solutions as well as software. “Dell is in all aspects displaying its position as the world’s fastest-growing large integrated IT Company. We have successfully managed to elevate the market conversation from product led to solutions led. We are extremely happy with the response from the server market. Customers are seeing value in our ability to provide end-to-end solutions and the results are a testament to this,” says Gupta.

The Enterprise Solutions Group (ESG) did well with the servers, storage, and networking segments gaining momentum. In India, Dell currently has 23% unit shipment share of x86 servers as per the Q4 2014 results from IDC. Globally, it continues to see a surge in revenues in the server space and is inching closer to big rivals like HP. Demand from new age eCommerce and start-up companies was a key factor in driving growth in this space.

Being relatively new, Dell storage segment also showed impressive growth signs. The company is placing bets especially in the hybrid flash storage space. In Q4 2014, it held about 8% market share and was ranked #5, as per IDC.

To enhance its strength in the services space, Dell is pumping in investments into areas like digital mobility and cloud-based services. The company is seeing strong traction in the Indian market for application services and is primarily focused on verticals, including healthcare, manufacturing, and retail. In FY15, Dell also had significant deal wins in India, prominent one was a deal with Flipkart, where the eCommerce company deployed Dell’s PowerEdge Servers.

Dell became the largest x86 server vendor in India cornered 38% revenue share of the India x 86 server markets in Q3 2014 (as per IDC) which was more than 6 points higher than the #2 ranked vendors in the market. Dell’s x86 server revenues have grown Q/Q consistently in India for 4 consecutive quarters since Q4 2013. On the storage front, while one year back Dell had only entry-level IP SAN arrays, it has added more product lines during the year. Today in storage alone, Dell has dedicated resources for its Compellent-based SC line, FluidCache for SAN, EqualLogic-based PS Series, and PowerVault line. Add to this with the EMC acquisition now, Dell would have access to EMC product lines like VMAX, VNX, VSPEX, Isilon, XtremIO though some rationalization (as against multiple overheads) is expected in the future.

The software-defined strategy is also paying dividends for Dell in datacenters, storage as well as networking. Dell was one of the first vendors to ally with Cumulus and BitSwitch for software-defined networking and with Nutanix for mid-markets. The hyper-converged strategy, according to Gupta, has worked wonders for Dell with more than 9% growth (grown by 170 basis points) in last one year. In networking too, Dell has gained by 80 basis points though primarily functioning as a switching player within datacenters. One big mobile advertising firm is currently running ts datacenter on Dell solutions.

With the advent of the forces of Big Data, Social, Mobility, Cloud and Software Defined Everything, enterprise computing needs are changing and driving IT decision makers to evaluate fresh approaches to the datacenter. Dell’s server strategy has been centred on developing products and solutions that prepare customers for the demands placed by the upcoming IT trends. Dell’s future-ready product line of servers along with the new go to market strategy, enterprise stock-n-sell, enterprise solutions group expansion and channel focus have contributed to this important milestone.

Dell had cobbled up a set of acquisitions to round out its products and services portfolio. Perot Systems, Compellent, Quest, Force10 and now EMC are some of the key acquisitions made by Dell over the past few years to become an end-to-end enterprise technology provider. And while this has enabled Dell to play in almost all the technology categories, more importantly Dell in India has been bagging Greenfield enterprise customers, competitive winbacks as well as future-ready enterprises.

According to Gupta, the top 5 verticals for servers, storage and networking solutions have been professional services, banking, manufacturing, telecom and government. While Dell’s market share in banking grew by 10%, professional services has been witnessing the maximum traction this year. There has been a reason behind this too. Gupta explains that professional services includes not only IT and BPO companies (high consumption of technology) but even the new-age e-commerce companies. “Since most of these companies have zero legacy technologies to protect, these are directly moving to an open architecture. Hence the modern open architecture strategy is gaining grounds rapidly.”

For enterprise solutions alone, there is 35% increase in investments in recent times. Primarily, this is being utilized to upskill people in customer domains and verticals—31 weeks of training has been assigned for this. The partners are also being enabled through instructor-led trainings, online trainings and certifications. An online solution configurator has also been created through which partners can showcase technology solutions. And lastly there is a customer solution center co-residing with R&D labs which acts as proof-of-concepts for customers.

The Software Side Story

In the past few years, Dell was working hard to change its image from a hardware manufacturer to a software and services company, more precisely to an end-to-end solutions player for clients. After integrating the various product lines it sourced through different acquisitions in the past 2-3 years, things are finally looking up for the Dell Software division according to Murli Mohan, Director, Dell Software Group and it is set to position itself as an important player in the software market.

In the software space, Dell’s acquisitions have helped it build a strong portfolio including information management, data protection, and security. Mohan informs with its suite of software products, Dell is clearly targeting four critical markets: data center and cloud management, enterprise mobility, information management and security. “We believe these are the areas that are of primary importance to the enterprise in recent times and will be the trends in the future,” he states.

On the series of acquisitions Kace, Boomi, Wyse, Quest, Sonicwall, AppAssure, to name a few, Mohan comments, each of these companies had come with their own sets of capabilities, helping their clients in meeting security, analytics, clouds and other needs separately. For greater efficiency in functioning, Dell has integrated the different R&D teams that were acquired and created new software portfolio leveraging the combined R&D strength.

For example in enterprise mobility solutions, Dell is embedding Sonicwall secure mobile access solutions along with Windows 8.1-based client devices. Similarly, the Dell-Wyse cloud client manager is being ported on iOS and Android to provide mobile device management capabilities, he says. Similarly the company is leveraging the key capabilities of other acquired companies and is targeting diverse industries especially in the mid-market segment.

Mohan asserts that even though Dell has made a relatively late entry in the enterprise software, positioning has not been a major challenge owing to its already strong repute in the global market. “As we expanded our focus into software and services in tune with the global market trends, we will bring innovative solutions built around cloud and information management, mobile, security and data protection for our enterprise clients,” he states.

There have been two game changers for Dell Software Group, according to Mohan. One was the increased focus on channel for enterprise software (capacity doubled). The big 5 SIs as well as Tier 2 global SIs like Mindtree have dedicated teams for propagating Dell software. The number of distributors for software too has doubled to nearly 200, with about 50 mandated to carry a specific software target where they get rebates on specific sales.

Secondly, maximization of coverage through partners has also paid off for Dell software. The software group has been undergoing joint GTMs with servers as well as storage teams and this has been a clear differentiator for Dell software with enterprises.

Consumer Business Spreading Far and Wide

While it is aggressively chasing its enterprise objective, the company remains pretty focused on its PC business. India still holds immense potential for PCs as is evident from the 7.5% revenue growth in the Dell CSB (Consumer and Small Business) segment in 2014, which is the highest ever annual share gain in the India CSB segment. As per IDC estimates for Q4 2014, Dell was ranked #2 in the overall PC market with a shipment share of about 25%.

Talking about coverage maximization, brings us back to Ohrie’s assertion that this should be the second key pillar on which Dell’s success should be measured. On the consumer product front, Dell now reaches 1100 cities from a billing perspective. With India having 1609 towns with more than 50,000 populations, the plan is to reach out to all of them through partners as well as directly very soon.

P Krishnakumar, Vice President, Consumer and Small Business, Dell India (better known as KK) further elaborates. With the next billion PCs set to come from emerging markets, “It was three years back that Dell India embarked on the journey to increase its PC market share in India”. There were few indicators, especially a KPMG-MAIT survey that revealed some interesting statistics.

For one with a household PC penetration hovering in the 9-10%, India was low in the scale even amongst emerging markets. Even Sri Lanka at 12% was ahead of India. And what made the whole thing more complicated was that even this penetration level was not uniform. In the 30 Tier 1 and Tier 2 cities, the household PC penetration was around 60%, in Tier 3 & Tier 4 cities between 10-20% while in Tier 5 cities, it was in the abysmally low 4-5% range. Therefore KK informs that it was clear that the next million PCs in India would come from Tier 3 to Tier 5 cities. Accordingly, the coverage strategy too got designed.

With two years of this three-year journey over, Dell today has 650 exclusive stores in 350 cities while it is present in multi-brand outlets in 1100 cities. Not unexpectedly, the growth in Tier 3 to 5 cities has been double of what has happened in Tier 1-2 cities. Today, Dell has nearly 20% market share in PCs—analyzing further it has 8% share in desktops and 24% in notebooks.

KK asserts that the focus has not only been on coverage, but also on multiple categories of products catering to all price ranges. “With ownership of a PC nearly equivalent to 2 months salary in many households in smaller cities, we have to be conscious about the pricing models as well as the need for touch and feel for the customers.” Not just price-wise, even category-wise, Dell has different PC models to withstand extremes of dust, cold, heat, power fluctuations in varied terrains.

With students forming a large part of the customer base, through various communications Dell has been targeting school students upto Grade 9 with their desktops and all-in-ones. Notebooks are being targeted at Class X to college going students and also those just leaving colleges and joining jobs. Accordingly, KK informs that from March to May the focus is on school children. Dell is reaching 2o schools each in 20 cities in Tier 2 and Tier 3 cities. “We are reaching 3 lakh students accordingly and offer attractive EMI schemes for them.”

From June to August, during college admissions the focus is on college students through college ambassador programs. From August till Diwali the target is to leverage on the festive season—lots of localized festivals and Dell’s positioning as an aspiration brand has paid dividends. And to sustain all this there is need for an extensive service network which Dell is doing by covering 20,000 pin codes.

Marching Ahead on Commercial Channel

When the new model was designed an year back, Dell had primarily three types of accounts. There were about 2500 large Dell-led accounts, which could be managed by Dell but could be serviced by partners. There were distributor-led primarily SMB accounts where Dell was doing no direct billing and those that were managed by regional distributors. Finally, there were partner-led accounts where Dell was doing no direct billing, but those which were being managed by authorized partners.

Anil Sethi, Director, Channels, Dell India asserts that Dell has shone on all three fronts. Today, commercially Dell is touching 221 cities through its own and partner billings. This coverage, according to Sethi, has improved dramatically because of the partner-led accounts. Today, Dell has 2800 registered partners, with 524 resellers who are actively billing. The channel business itself has grown by 54% year-on-year, informs Sethi proudly.

Sethi elaborates about the Dell Storm channel program for premier and preferred partners. This program is intended to increase partner profitability, engage partners in more lines of businesses and increase in rebates. There are 138 partners involved under Dell Storm. Under Premier and Prefered partner base, there are 14 global SIs as well as 38 strategic SIs. “The intention is to see partners upgrade,: asserts Sethi. There is an allocated market development funds (MDF) earmarked for partners to utilize for events and proof of concepts, with 26 of them already having done so to some extent.

Process Improvements Pay Off

Realigning and improving internal processes and systems has been the third pillar for the spectacular growth Dell India achieved in FY15. Ohrie informs that much investments have been made on those fronts with the aim odf making it easier for sellers, customers and partners to do business with Dell in India.

A slew of online training programs, innovative programs like Coffee with Dell have been initiated to ensure and improve on these and measures have been put in place to check their success every six months. As a result, the Net Promoter Score (NPS) for Dell has improved by 2 basis points for customers and by 13 basis points for partners.

India holds a key position in Dell’s future growth strategy. It is now the fastest-growing market for the company globally and is the third largest market after the US and China. Going ahead, India R&D will play a crucial role in Dell’s enterprise strategy.The company will also be looking at expanding its presence in tier-3 and -5 cities and further strengthening its network of channel partners in India.