Why history isn't on Dell's side

Correction, 1:20 p.m. PDT: This blog initially had an incorrect first name for the former CEO of Dell. He is Kevin Rollins.

Tech pundit Nicholas Carr predicted Dell's current predicament more than three years ago.

Carr, in a guest column for BusinessWeek Online, wrote that he worried Dell didn't understand how the computer market and consumer tastes where changing. (Full disclosure: I was the editor on that column, but Carr's spotless writing made my job pretty easy.) In fact, he found then-CEO Kevin Rollins' dismissal of the iPod as a "fad" and a "one-product wonder" troubling. Carr found a nice way of saying, "Are you kidding me?"

Is Dell the Ford of computers?

(Credit: Dell)

Spin forward three years to the onslaught of bad Dell news: Rollins is long gone, and Michael Dell is back in the corner office, trying to get his company back on track. Dell announced Thursday that layoffs are likely to go deeper than the 8,800 already announced. It has lost the biggest computer maker mantel to Hewlett-Packard (CNET blogger Don Reisinger has a nice take on Dell's market share issues), and the stink of the subprime loan mess could even rub off on the Round Rock, Texas, company.

But Dell's issues go a lot deeper than managing expenses, and adding a line of nicely colored laptops and a new ad agency, as Dell has done, won't make them go away. In short, Dell just isn't cool anymore, and it probably never was.

Carr nailed Dell on this. For people who want to understand how the computer industry works (and how in many ways it's not all that different from other industries), the column he wrote for BusinessWeek should be required reading. Carr compared Dell's run in the 1990s to Ford's early success in the auto industry. Like Ford with its Model T, Dell stuck with its bland box strategy for too long. Carr wrote:

Like Dell with PCs, Ford Motor came to dominate the car market a century ago by turning the automobile into a cheap, mass-market product. Other manufacturers couldn't compete with Ford's extraordinarily efficient operations. By the early '20s, sales of Ford's drab but well-built Model T surpassed those of all other U.S. automakers combined.

Then the market changed. As consumers began to take cars' basic functions for granted, they started seeking a little pizzazz in their vehicles. An unadorned black roadster was no longer enough--everyone suddenly wanted a stylish set of wheels. Niches proliferated. Fashion mattered.

Ford was out-innovated by General Motors, which understood consumers wanted style, taste, something that represented who they are. That's something Apple has always understood about its customers. Even HP got a handle on this several years ago. By 1926, GM's Chevrolet was taking market share away from Ford. By 1927, Chevys were outselling the Model T. Carr continued:

Ford was slow to respond to the rise of the mass-class market for cars. Finally, however, it took action. On May 25, 1927, Ford announced it was discontinuing the Model T and would close down its main factory in order to revamp it for a new line of more attractive models. But the carmaker's glory days were over. It would never again come close to dominating the market the way it had just a few years before.

Ford's fall stands as a cautionary tale for all companies that have thrived by riding the commoditization wave of a new consumer product. If Dell wants to continue to rule in the home as well as the workplace, it may need to class up its act. Rather than dismissing fads, Rollins should try starting a few.

The 1990s were for the computer industry what the 1920s were for the automotive industry. One size fits all is long gone. Consumers are going mobile and making statements about who they are with the computers they buy. The question now is whether Dell & Co. can find a way to prevent history from repeating.

[Galaxy5]

Good article

Dell has no sense of design; witness the monster XPS laptop with <br />LEDs. Some of our developers were given these laptops due to <br />their impressive specs, but most were embarrassed to carry the <br />things around. <br /><br />Two out of the four later switched to MacBook Pros because they <br />are lighter, cooler, and let them test against three OSs on one <br />machine - and they were only a few bucks more than the <br />Latitudes Dell was selling.

[GoGo Delicious]

Mr. Dell should follow his own advice

The CEO of competitor Dell Computer added his voice to the <br />chorus when asked what could be done to fix the Mac maker. <br />His solution was a drastic one.<br /><br />Michael Dell said before a crowd of several thousand IT <br />executives. "What would I do? I'd shut it down and give the <br />money back to the shareholders." <br /><br />Hey Mike when are you going to sell Dell and give me my money <br />back.<br /><br />I am waiting . . . . .

[dg-seattle]

One difference between Dell and Ford...

"sales of Ford's drab but well-built Model T surpassed those of all other U.S. auto makers combined."<br /><br />Dell's PCs were drab, but I woudn't call them "well built" - especially during the last couple of years. The last Dell system I had was a laptop and that was given to me by my company. It was the worst piece of junk laptop I've ever had - so many strange issues. My company finally dumped Dell completely. <br /><br />That aside, instead of focusing on innovation, they focused on squeezing as much profit as possible by cutting corners at every turn. When they outsourced their support to India, that was pretty much the last straw for me and a lot of other loyal Dell fans.

[pugster]

Lower price products does not mean higher quality

Just looked at an Ad in the morning newspaper featuring a bunch of Sub $1000 'servers' with Windows 2003 server OS on it. It is just a bunch of low speced desktops running windows 2003 server. It probably cost dell as much for the hardware as well as the OS. I don't know who in their right minds would buy that stuff and personally I don't know if Windows 2003 would run reliability on that 'server.' Most companies do want reliable computers and service and are willing to pay a few hundreds more for it. Unfortunately, even today, they don't understand it, and advertise cheap pc's for cheap price.

[ralfthedog]

QC is everything.

Price is far over rated. I know a local computer company that has been in business for about 10 years. They have not had a warranty repair yet.<br /><br />A cool thing happened to them the other day. A local TV station was going around to all of the computer stores in my home town. They brought in an easy to fix computer to see if they would over charge. After pointing out that the last computer store had damaged the computer in a more substantial way, they were told that they were the only store to pass the test.<br /><br />If a little three man operation can provide an excellent product and excellent service, why can't Dell?

[gnye43]

Totally Agree About Outsourcing Tech Support

What Dell and other US companies failed to do before outsourcing tech support to India was to investigate the cultural implications. As a woman, I have had an awful time in dealing with Indian men in tech support for other US companies as well. I bought my 3rd and last PC from Dell this past Christmas because I refuse to deal with any company that outsources its customer service and tech support to India.

[nachurboy]

I'm Confused

If the article is saying Dell should be like Apple (looks, not just function), how did HP beat Dell to become number one? HP isn't any better than Dell at coming out with creative or "wow" products. In fact, I think HP's lineup is worse than Dell's if you're comparing them to Apple's products.<br /><br />Apple is Apple. White box PC's are White box PC's. I don't think you'll find many, if any, Windows based computer makers able to match Apple for their design abilities (except maybe Sony).

[pugster]

HP's did well on the Business segment.

HP did well on the business segment in terms of desktops and laptops.

[ewelch]

Not so confusing actually

HP was able to make its way into the workplace by kickbacks to <br />IT people. They created a brand loyalty with good service and <br />not cutting corners at every point. <br /><br />When I was told to buy a PC laptop for our department, the IT <br />department would not accept m proposed Compq laptop. They <br />insisted I buy a laptop from HP's business line. Which I'm glad I <br />did. It was well built, had all the features I could want (except a <br />great wide screen with millions of colors) and lo and behold, <br />ended up costing $1,000 more than a comparable PowerBook <br />from Apple at the time.<br /><br />Go figure.

[ralfthedog]

HP has good QC.

HP has good quality control. They focus first and foremost on making a good product. Dell takes scrap components from returned computers and puts them in "New" systems. Dell is also known for purchasing parts from lots that have a high fail rate just to get a discount. <br /><br />Even if Dell were to put on a 100% quality initiative where they push for a six sigma fail rate, they are sunk. It is easy to turn a good reputation into a bad one. A bad reputation is forever. Dell will either go out of business or be relegated to selling disposable computers at the dollar store.

[delf76]

PC's Manufacturers need to listen...

If PC manufacturers (including Dell) want to do something to improve the overall customer experience, quit putting "crapware" on the computers! This trialware, stuff just complicates the user experience.

[johnqpope]

The Next Chapter

If anyone believes Dell doesn't now understand the need for style, they haven't seen our newest products, e.g. the XPS lineup. And thanks to a strategy broadly outlined to analysts this week, we're confident the next chapter of Dell's history will prove the auto analogy a bit oversteered.

[oxtail01]

Clueless Dell

You clearly point out why Dell will fail. Putting on a pretty face doesn't change tha fact that it's still crap underneath. Deceptive pricing, atrocious service, short cuts in manufacturing can't be hidden by "style". Dell doesn't understand that this is a mature market and the buyers are pretty sophisticated in knowing and demanding a product that delivers real value.

[baconstang]

It's just lipstick on a pig.

Try making a stylish machine that runs 3 OS's, doesn't come with <br />crapware, has the top rated user experience, excellent service and, <br />oh yes, stores you WANT to be seen in. Then sell it for less than <br />Macs.

[als]

Michael Dell Going To Jail

So, when is New York state Attorney General Andrew Cuomo going to put this guy behind bars?<br /><br />"At Dell, customer service means no service at all," Cuomo said. <br /><br />"The lawsuit alleges that Dell misled its customers by applying high credit rates to their computer purchases although it had promised cheap financing. The suit also alleges that Dell failed to deliver rebates, warranties and technical support as simply as it had promised."

[gerrrg]

As if HP's products create brand distinction?

I don't think so. What's the difference between HP, Dell, Acer, Compaq, Gateway and Lenovo?<br /><br />It wasn't that HP's computers were better built inside, that allowed it to overtake Dell in market share. It was Dell's failed attempt to outsource the core value of their computer: an excellent customer support.<br /><br />I guess the real issue is whether or not Dell should expand their products to a broader array of consumer electronics. But then they would fall victim to the standard analyst's paradox:<br /><br />a. expand by adding other products.<br />b. shrink back to focus on core products.

[pilaa]

Dells Biggest Problem IS...

Dells biggest problem is that they are NOT an innovative company in terms of developing cutting edge products by nature. <br /><br />They built their reputation on copying their competition's computer products by making them cheaper and faster and in greater numbers by streamlining the "Just in Time" on demand delivery system. It seems their business processes were probably their biggest innovation ans was definitely ahead of its time in the early 90's. <br /><br />As far as their products, there is nothing new or different about them and their probably never was. If they were smart, they would start looking at R &#38; D to come up with a new idea or two and compete with Apple there. <br /><br />Personally, I don't think they have the talent or ability to do so and, with layoffs coming, the resources to compete. <br /><br />Apple has the innovation corner all to itself right now. Even Sony is running scared...

[thurston24]

Dell is Gateway

Shifting to stores, shifting mfg to China from mfg in Austn...slimming down to cut costs, cutting its direct model.....They are becoming Gateway. <br /><br /><br />To paraphrase the great leader of Dell: <br />"I would shut it down, and pay the investors back."

[jasonfiske]

Outsourcing to India would have been a positive

I actually ended up talking to someone in Malaysia where there <br />was so much delay on the line I could barely understand the <br />non-english speaking rep on the other end.<br /><br />Lucky for me, I got the XPS, so I got the "high end" customer <br />support. Which meant getting transferred around for hours.<br /><br />That was the last Dell I ever bought. I'm an IT professional and I <br />recommend that every person I know in my personal life gets a <br />Mac. I get one Mac support call for every 100 PC support call.

[Understarsidream]

They've also gotten very expensive...

Something the article missed is how expensive Dell computers have become. They're even worse than Apple now in terms of cost vs. return. You can walk into any Best Buy, Circuit City, etc. and pick a Sony/Apple/HP for the same money or less without having to wait.

[Renegade Knight]

Good Point

Anything I've priced out is always more expensive on Dell. I like Dell, but won't pay more than a modest premium to stick with them.

[bluehairmail]

Dell is way less than apple

I would guess that you guys here are in the know about computer sales, however i was mistaken. One can walk into a bestbuy right now and buy a dell computer. And there prices are very competitive in the stores. While i am no dell fan boy, i have to say that a couple of my friends bought some new dells. Inspiron 1525 and an XPS M1530. Both are built extremely well and look great. While the inspiron is plastic, it was put together very well for a 700 dollar laptop. and the XPS is just beautiful. What i ask from this community is no what you are talking about before you type. thanks

[gefitz]

So, Dell is in the tank because they aren't "cool"?

No. Dell is in the tank because their products and support have declined in value relative to the rest of the BUSINESS computer market. Server AND desktops. The consumer market, while significant, is much less of a factor here.<br /><br />The consumer market may decline when your product isn't "cool". fine. That consumer market is shrinking anyway, so where Dell needs to refocus is upon where it's initial period of growth was based: satisfying the service and quality needs of the business sector.<br /><br />Innovation no longer occurs with hardware. The hardware has become ubiquitous and homogenous. Since Dell hasn't made inroads to providing software services at all, it must focus on the things it can change...namely, pumping out higher quality in less time for less money.

[gefitz]

Oh, and by the way...

counting on catering to consumers, and building "coolness" to do it, may be an exceedingly bad idea when consumer spending just might be on the decline for a while....just a thought.

[law_hog]

Coincidentally

Dell acquired a reputation for crappy build quality a few years ago. Sales dive is a no-brainer after that. Another parallel with Ford perhaps...?

[Goodbye Helicopter]

Once known for support...

In the late 80's and early 90's Dell had a reputation for decent <br />phone support. Now, they've got squat. Price is no better for <br />quality than any other vendor. Dropping value is what's killing <br />them. Funny thing is, their overseas factory is probably got more <br />sophisticated employees than what they had in Round Rock.<br />Bad service and crap quality has killed them. Their business <br />model is built on high-volume, low-margin. That works fine in <br />good times, but makes for a tough strategy when spending is <br />down and big clients want more guaranteed service-level <br />agreements. (which is what HP among others, are providing to <br />businesses)<br />Dell makes junk and leaves you with it.

[kschroedermwi]

Dead on

When I first started buying Dells, if I had a problem (even if was my fault) I could call up support, say what the problem was and either have it fixed or have a replacement part sent. A year or two ago I bought a new graphics card and needed a new machine around it. So I bought one that the sales person said would work.<br /><br />It didn't. The PCI-Express slot was the wrong type. No problem. I called up Dell and said I needed a new motherboard. They said no (?!?!?!?). I had to return my existing machine and buy a new one. This after spending 10 hours transferring all of my data and software onto the new machine. I sent a letter to the Rollins and Dell. The response I got back from their offices were exactly the same. "Send in the machine and buy a new one." <br /><br />So I went and bought a new motherboard at another store and actually got the machine I wanted after that.<br /><br />I can understand that I'm not the typical computer user, but Dell should take into account that I have been asked by a dozen people since that fiasco as to which computer they should buy. You can guess what my answer was.<br /><br />(Yes, I'm a little bitter over the whole thing :-))

[jlm429]

do businesses care about cool computers?

i think small and medium businesses buy a lot of computers, didn't buy a lot of model t's - so I'm not sure if your analogy applies because businesses don't really care about cool.

[douglasmcstewart]

Catering only to business obviously hasn't worked that well

The point of the article is that in the HOME computer market, Dell needs to be more creative.

[jlm429]

consumer pc market in a slump

The consumer market is in a slump - and yes dell has made some mistakes and lost some of the consumer pc market share. But the article implies that it's doomsday for Dell, while it has a record market share in business and government sales.<br /><br />The cuts are a necessary evil for Dell to get back on track, and if I had to gamble on this one, my money is on Michael Dell - not some CNET blogger.

[macrhino]

My money is not

Well buy some Dell stock my friend. As for me, I'd sell the company <br />and give the money back to the shareholders.

[Imalittleteapot]

Wake up Dell.

Let me start by saying I own three Dells. I only purchased one. I got a hefty discount. The other two were basically given to me, or at least for now. They're alright machines. No worse or better than your average HP, Compaq, or Acer or whatever. Then again most my machines go up in a cloud of smoke after a few years. So, what do I know? However, these are my Dell complaints.<br /><br />They should stop putting bloatware on the computer. Ship trial disks or something instead. Their computers will boot faster. Their customers will thank them. <br /><br />Dell isn't super expensive , but Dells always seem to be $75 or more than their competitors. That isn't sale price or promotion price though. I'm just talking about base price here.<br /><br />Maybe you want to make an argument about quality? That's fine, but why doesn't Dell? Not only do they charge more they don't make the argument in their advertising as to why they charge more.<br /><br />Just focus on a few high quality parts, like RAM or the power supply or something, and then advertise their PC's aren't generic crap like the other guys. Put a good warranty on all their machines to back that up. Apparently their support sucks though, so I don't know if that will help.<br /><br />If they don't want to do that they can compete on price, but they're not cheaper than anyone else.<br /><br />All they have to do is be the leader at something. It can be quality, price, service. They could make all their computers pink instead of just a few if they have to, and simply be the leader in pink laptops. I'm a guy and I almost bought one. Anything could work. As long as they lead in something. Right now they're just standard at everything they do. Except they want more money for it. Go figure.

[ralfthedog]

Dell will never be able to compete in quality.

They have developed a bad reputation. They could start building the best computers with the lowest failure rates in the world. No one would care. Once your reputation is screwed, it is screwed.

[powersville21]

Dell sank because of outsourcing and cutting corners

Former CEO Kevin Rollins had a background in business consulting, not computers. He thought the company could outsource customer support and cut corners on quality. At one time, Dell's customer service and support was a major attraction for customers large and small. Apparently that's not the case anymore, at least not since the Rollins years.<br /><br />Another oversight in the consumer market was the reliance on direct sales. While that may work for businesses, a lot of consumers want to be able to test out a product before buying it, "kicking the tires" so to speak. Dell was late to the game in selling through retail stores like Best Buy.<br /><br />As someone above also noted, the tricks involved with the financing charges further angered many people, including most importantly the attorney general of the state of New York. (Let's just hope that Cuomo doesn't have the same proclivities for, er, paid company that his predecessor did. You know, that Spitzer fellow. ;) )<br /><br />All of these factors led to the tarnishing of the Dell brand name.<br /><br />As for the blandness of their products, that may partially be result of the fact that Dell doesn't actually manufacture many of the products they sell. Like other PC companies, they largely buy their notebook PCs from Taiwanese companies wholesale and merely act as resellers for those products. When Dell went into the printer market, they merely resold Lexmark printers that had "Dell" labels slapped on them. Not very impressive.<br /><br />Dell was long known for having a minimal R&#38;D budget, probably the smallest among the major computer companies, and completely dwarfed by HP and IBM. This enabled them to lower the company's costs but it also meant that they produced relatively few innovations on their own. Another reason why many think of them more as a reseller than a "real" manufacturer of tech products.

[Imalittleteapot]

Printing

I don't disagree with your post, but my opinion on slapping the Dell name on Lexmark printers. I think the basic idea is good. They shouldn't be dealing with trying to manufacture keyboards, mice, monitors, printers, and stuff anyway. They could sell it as is or put their name on it. I don't care either way.<br /><br />They just need to make sure they slap their name on parts that will hold up, and work well. Really if customer service is their number one complaint then that's what they need to be working on.<br /><br />It is nice to have one stop shopping that if you had credit with them or whatever. Just get what you and pay later.<br /><br />Since all they do is repackage other peoples products or put them together in a computer there isn't any reason for them to deal with just computers anyway.<br /><br />But seriously, I wouldn't want Dell making their own printers. I'd rather have a printer made by a company that makes printers instead of Dell buying them out and changing everything around and screwing up the product more.

[chris_d]

Dell's problems

From what I have seen, others have been right about Dell cutting <br />corners. They were outsourcing tech support to India to people <br />who in many cases weren't qualified -- not because of their <br />accent (although sometimes that caused issues with <br />communication) but because they didn't have enough knowledge <br />and were just reading a script. <br /><br />Dell also was somewhat smug about how little it invests in R&#38;D. <br />That's caused issues. For example, I bought my dad a Dell <br />Inspiron laptop and it came with a Dell 1490 wireless card. The <br />card had all kinds of issues. It was running the newest drivers <br />but it kept losing the wireless connection. Thanks to Google I <br />was able to find a forum post from another user that identified <br />the issue as the power save mode. After instructing my father to <br />disable power save on the wireless in Windows, the card now <br />works just fine. Where's the quality control and testing? If you <br />do a Google search on this you will find many users having <br />problems with this card; most have no idea why it's not working <br />properly. If it hadn't been for Google, I probably never would <br />have found the answer.<br /><br />Aside from that, it's not a bad laptop (unless you have to take it <br />apart -- looks like a nightmare on the order of the Apple iBook) <br />as long as you can do your own tech support. It is quite speedy <br />with a nice AMD processor and appears to have decent <br />construction quality.