Dell Computer Corporation Strategic Plan block 6, team 11 Steven Huang • Sri Kalyana Rama Chakravarthy Maddala • John Moon • Andrei Outkine • Noga Peled • Kris Yam

Align Strategies with Dell’s Goal Deliver Application Outsourcing (AO) Expand Product Selection Focus on Solution Delivery Goal Maintain historic growth of firm and shareholder value Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

Dell’s New Vision To be the Global Leader in IT Outsourcing Solutions

The Changing Environment In-house Hardware Desktop-centric Outsource Software Network-centric

Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

What is Application Outsourcing? ` Enterprise Companies S A P AO Provider Small to Medium Size Businesses Mobile Workforce Hardware Data center Integrated software Support Maintenance

A New Application Model Custom Standard Software Mainframe Client/Server Internet IT Infrastructure

Dell’s Customers Evaluate AO Benefits Risks Minimize TCO lower software upgrade costs cost control Information security Access to new technology Quality of service and support Minimize “down-time” Focus on core business Scope of services

Dell’s Customers Evaluate AO Benefits Risks Focus on core business Minimize “down-time” Access to new technology Minimize TCO lower software upgrade costs cost control Scope of services Quality of service and support Information security

Application integrator AO Success Criteria Hardware support skills  Customer service support skills  Relationships with software vendors  Application integrator  Network service centers ?

AO Revenue Growth CAGR = 60% estimated margin 30% - 45% Source: Forrester Research

Focus on Solution Delivery Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

Leverage Competitive Advantage ... Knowledge Capital Competencies Competitive Advantage Practice Areas Reputation Expertise in the analysis of complex business issues e-commerce Consulting Business Processes

… into Consulting Services e-Commerce Implement “Be Direct” Model Build e-Businesses Business Process Design Facilitate Process Development and Improvement Optimize Clients’ Supply Chain Management

Dominate a Specific Niche Strategy Implementation McKinsey AT Kearney Gemini Consulting Andersen Consulting Dell

Expand Product Selection Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

Complementary Product Offering Low value-added assembly • Handheld PCs • PDA products • Mobile devices High value-added assembly • Data storage • Network computer • NetPliances core products Manufacture & Sell Sell via OEM Contract

Focus on High Growth, High Margin Source: DataQuest, 1999

Financial Projections Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

Significant Market Potential

New Vision - Financially Attractive Dell’s Current Cost of Capital = 14%

Shift in Revenue Mix Other 15% 7% Enterprise 6% Services & AO 12% 22% PCs 81% Enterprise 12% Other 7% 6% 15% 57% Services & AO 22%

Maintaining Top-Line Growth ... CAGR=30% New Model Current Model CAGR=23%

… And Boosting Earnings

From Strategy to Vision To be the Global Leader in IT Outsourcing Solutions Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

Questions ?

AO Target Customers Small to medium size businesses (SMEs) estimated 300,000 emerging enterprises in U.S. (Forrester Research) Mobile workforces increase in tele-commuting workforce Enterprise companies

High Margin in AO Business Estimated Gross Margin 30% - 45% Software Licenses 15% - 20% Infrastructure 25% - 30% Support & Maintenance 15% - 20% Source: Company research and Cherry Tree & Co.

AO Competitors USinternetworking (USIX) Corio Electronic Data Systems Corp. FutureLink Distribution IBM Global Services Telecomputing ASA AristaSoft ServiceNet Global Recruiting Services Oracle Business OnLine

AO Enabling Technologies Ubiquity of the Internet Increasing availability and decreasing cost of bandwidth Proliferation of e-commerce & e-business Shared applications in corporations

Attract and Retain Talent Software Experts Dedicated Employees Hardware Experts

Link Vision with Values Comparable Compensation Package Attract & Retain High Growth Potential Access to Cutting Edge Technology

Establish Partnerships Motorola 3Com HP Nokia

New Product Growth Opportunities Source: Dataquest, August 1999 Revenue ($M) Storage Area Network (CAGR = 29%) Other Products: Handheld devices (CAGR = 77.4%) Web terminals (CAGR = 124%) Info. Appliances (CAGR = 58.1%

Traditional Distributed Data Storage Model file server app. server user Limited capacity (file server bottleneck) Permits limited expansion Backup and recovery consume bandwidth Cumbersome design and management storage deployment and support costs can total 10 times the equipment acquisition price

Storage Area Network (SAN) Model app. server user file servers Higher availability (redundant connectivity) Faster performance (smaller, specialized servers) Easy expansion Consolidated management and control devices can be physically distributed, but locally managed

SAN Benefits and Disadvantages Permits servers to communicate with storage devices in a many-to-many relationship Separates data traffic from LAN traffic Backup operations performed off LAN Disadvantages Requires compatability between all network components (switches, hubs, routers)

Reasons for International Expansion Capture a share of soaring international market Mitigate slowing domestic growth Better serve international customers multi-national corporate customers Strengthen Dell’s competitive edge

High International Potential Source: eTForecasts, October 1999

How to Succeed Globally? Leverage Domestic Competitve Advantages Supply Chain Mgmt. Brand Management Dell’s “Be Direct” Policy Flexibility, Dependability, Adaptability Strong customer base … to Succeed Abroad • Replicate Supply-Chain infrastructure - plants in strategic locations - leverage existing customer relationships • Promote “Be Direct” selling abroad • Build brand equity

International Selection Criteria Growing presence of high-tech firms Strategic location proximity to suppliers reduce transportation costs to customers No dominant competitor Strong economic climate Political stability Reduced trade barriers