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

2. 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

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

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

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

6. 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

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

8. 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

9. 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

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

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

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

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

14. … 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

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

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

17. 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

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

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

20. Significant Market Potential

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

22. 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%

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

24. … And Boosting Earnings

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

26. Questions ?

27. 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

28. 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.

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

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

31. Attract and Retain Talent
Software Experts
Dedicated Employees
Hardware Experts

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

33. Establish Partnerships
Motorola
3Com HP
Nokia

34. 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%

35. 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

36. 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

37. 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)

38. 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

39. High International Potential
Source: eTForecasts, October 1999

40. 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

41. 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