How a private Dell works with customers, and sees its rivals

Dell isn't in search of dramatic innovation, and therein lies the risk for the new version of the company

HOLLYWOOD, Fla. -- Dell held its user conference here last month in a beach hotel next to a calm ocean with no threat of storms. There were families and children on the beach and the atmosphere was relaxed. For a company that wants to be known as the strong, almost silent type, the location may have been perfect.

Dell, now privately held for nearly a year, wants to maintain a reputation for innovation -- it has increased R&D investments from 1.6% of annual revenue to 2.1%. Its revenue was $56.9 billion in 2013, the last year it reported financial figures.

Company executives say that because they are no longer required to issue quarterly public reports, they are freer to invest in projects that may take some years to develop.

But Dell remains a deliberately conservative company when it comes to research, particularly when compared to Hewlett-Packard and IBM. Its executives describe an approach focused on pragmatic investments that directly improve its products. Dell isn't aiming to make waves with what it calls the "science fair" experiments undertaken by some of its rivals.

Another change since Dell went private, apart from the increase in R&D spending, is how the company interacts with customers. The sales pitches and incentives that used to arrive near the end of each quarter are less frequent, if they come at all.

Jeff Stacey, a senior technical analyst at Richardson International, an agribusiness, uses Dell systems and praises the engineering. But he was less pleased with the predictable end-of-quarter, quota-driven calls from sales representatives.

That stopped when the company went private, and he welcomes the silence. "If we need anything, we call them," said Stacey.

Forrest Norrod, vice president and general manager of Dell's server business, said there is less stress at the end of a quarter and less pressure to close by week 12.

"You got a more relaxed time period, a more relaxed engagement where you can talk more about [the customer's] problem," he said.

Dell tells its customers that it wants to focus on what can help them over the long term, and make faster decisions.

This approach is illustrated by Dell's decision to give users a choice of network operating systems, termed disaggregation. Networking systems have traditionally been sold with an operating system that can't be swapped out. But users of Dell networking hardware can now run either the vendor's Force 10 Operating System or Linux-based networking software from Cumulus Networks.

Gartner praised this decoupling of networking hardware and software. In a report, the IT research firm said Dell's move "increases customer choice in networking software, reduces long-term vendor lock-in, and increases the potential for independent hardware and software innovation."

Before the move was announced in late January, Tom Burns, vice president and general manager Dell Networking, needed to speak to Michael Dell, the CEO and founder. He approached Dell at last year's Dell World in December, shortly after the company went private.

In a hallway at the conference, Burns asked Dell if he could get one or two hours of his time to present his plan. Dell replied, "What do I need an hour or two for?" Burns recalled. He then quickly outlined the plan and, he said, Dell's response was: "We don't need a meeting -- do it."

Burns said that if Dell had been a public company, detailed presentations outlining the financial implications, investments and market reactions would have been expected. Since going private, "our decision-making is faster, clearer and a bit crisp," said Burns.

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