January 14, 2002 1:25 PM PST

Dell taps Compaq exec to boost services

Dell Computer has recruited a former Compaq Computer executive to run its consulting group as it moves deeper into the services market.

Jeff Lynn has joined the company as the vice president of professional services and in this position will run Dell Technology Consulting, a small but growing organization within the company aimed at offering high-end consulting services, such as designing worldwide storage networks, for large institutional customers.

In the past two years, Dell has started beefing up its services organization as part of an effort to expand beyond the PC-building business. The company, which has traditionally partnered with third parties such as Unisys to provide services for its hardware, has been strengthening the Technology Consulting unit as well as increasing its focus on more mundane services such as desktop maintenance and help-desk outsourcing.

Dell needs an in-house group to tackle large company projects such as integrating e-mail systems or databases, analysts said, to help it win and retain large corporate accounts. Further, margins from services can often be higher than those from hardware.

"I think (Dell) definitely needs to have a relatively sizable in-house consulting team," said Brooks Gray, an analyst with Technology Business Research. "They have to sell the higher-margin prods and services in order to help offset the eroding margins in their PC biz."

Services is the fastest-growing unit at the company and accounts for approximately 10 percent of revenue. However, it hasn't been a completely smooth migration. The company has already scrapped a Web-hosting service.

At the moment, Dell Technology Consulting is made up of only a few hundred employees, but the company has been adding staff. Though small, the unit has been key in securing a number of accounts, executives report. It has completed more than 1,000 projects so far in North America and a couple hundred more in Europe.

"A lot of people are surprised to learn that we have about a $3 billion services business and it's the fastest-growing unit within Dell," Dell Chairman Michael Dell said in a recent interview with CNET News.com.

"We're also trying to take some of these more complex design projects, where you might design a SAN (storage area network)...or you might design an Exchange implementation, and find out how you replicate that tens of thousands of times, so you take out some...uniqueness and cost," Dell said.

Although growing, Dell Technology Consulting is dwarfed by consulting giants such as IBM and Ernst and Young. As a result, Dell often partners with established consulting groups on contracts.

"We're not developing applications, as an EDS would do, so we partner with companies like that for that level of service," Dell said, referring to Electronic Data Systems. "But for the closer-to-the-box services, the computer systems sale-enabling services, I think you'll see Dell invest aggressively in building those capabilities on top of what we've already done."

Dell has also jumped on the storage and networking bandwagons in recent months, as part of the effort to branch out from its traditional PC business.

The company inked a wide-ranging deal with EMC, announced in late October. It also recently launched the PowerConnect line of network switches for small and midsized businesses. Here, Dell takes on players such as 3Com and Netgear. Its plan? Entice its large customers to buy the switches for a lower price, instead of going to a third party. Switches connect office PCs and servers together, so they can swap data.

Lynn previously ran the professional services group at Compaq. He left the company toward the end of last year, a Compaq representative said. Before that, he worked at IBM.

 

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