Thursday I wrote a piece about the Dell and Wal-Mart deal in which Dell has plans to sell its systems on the retail level. I later received a comment from Richard at Dell who mentioned I might be interested in reading an article at Austin American-Statesman which I wanted to share with you. This is a good article since it explains what Dell needs to do to get back on its feet and what direction it appears to be heading. It also interviewed Kevin Kettler, who is Dell’s chief technology officer and who provided some insight to the many problems Dell has to overcome.

One point that was made that really stood out and that I was personally not aware of is that of the $57 Billion big ones that Dell took in last year, about 85% of the revenue came from businesses. What is also surprising is the following:

The old Dell built basic, inexpensive servers that its commercial customers would buy by the dozens or hundreds and stack in corporate data centers. Dell sold a vision of the scalable enterprise — a data center that could be expanded server-by-server as a company’s needs grew — and it offered the cheapest bricks.

That worked to Dell’s advantage for several years. But electricity bills have soared in recent years, and technology managers now say it often costs them as much or more to operate servers as it does to buy them in the first place.

That pushed many commercial customers to H-P and IBM, which had better blade server designs and teams of experts to help design and improve data center operations. Customers need help in cutting energy costs, but also with extracting more processing power from their centers without having to add another group of servers.

Which answers the question why Dell is now pushing itself as a Green company. The days of offering cheap servers that use high amounts of energy have come to an end. Companies not only want inexpensive systems but also systems that are highly energy efficient.

On the consumer end, Dell admits it missed the boat as consumers started to purchase more laptop systems from retail stores instead of ordering online. The article went on to say:

The same thinking goes for Dell’s consumer products. Home users started shopping at retail stores and buying more notebook computers. H-P, Acer Inc. and Apple Inc. soaked up consumer sales, which have driven the industry’s growth over the past two years. Dell missed out.

Dell has moved back into retail, most notably with last week’s announcement that it will sell PCs in more than 3,000 Wal-Mart stores starting June 10. The company will sell two desktop models to start.

Beyond stepping back into the retail wars, Dell has also changed its approach to home computing. It plans to roll out more prepackaged bundles of products — both its own and other companies’ — all tested and certified to be simple to set up and run as an interconnected system.

Kettler said the idea is to let consumers set up systems right out of the box without suffering through a lot of tech jargon and confusion.

A home entertainment bundle and a return to retail store shelves will help Dell get back some of its luster with consumers, but the company can’t forget straightforward hardware design, either, analysts say. It ultimately needs to produce sharper products and raise its cool factor.

Developing and selling end-to-end systems “just brings them up to speed with the competition,” said John Doggett, a senior management lecturer at the University of Texas. “The big challenge for Dell is what it’s going to do to make itself special and unique.”

So it does appear that Dell has a long road ahead to regain the confidence of both business and home users. It is safe to say that this turnaround is going to take some time to accomplish.

You can read the full Austin American-Statesman article here. (Note – if the link doesn’t work you may have to sign up like I did to view the site and articles. The main site is located at: http://www.statesman.com.)

Comments welcome.

[tags]dell, business, consumers, servers, computers, direction, new[/tags]