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Dell Abandons Its Customization Roots
LiveFreeOrDieInTheGo writes "Dell intends to scale back its build-to-order service model, while increasing sales of prepackaged systems. The goal: $3B USD savings by 2011. The downside: customers expect Dell to build-to-order. The deeper downside: Dell will outsource more production and assembly."
Will this affect their offering of pre-loaded Ubuntu systems? There isn't a huge market for them, unfortunately. But I remember all the old Dell commercials - the main thing they had going for them was customization. I guess they're just becoming an entrenched monopoly like IBM or Microsoft, now.
I'm a fan of Dell kit, but when HP hae beaten you in sales for 6 successive quarters - as stated in the article - limiting the amount of customizing may save you cash, but it isn't going to get more people buying your kit is it?
The 'fix' doesn't seem to be the solution to the highlighted problem... sure it'll save you money in the short term, but no gains in share there at all. Less customization is never going to make a punter go "oh, I'll buy that because it's not as customizable".
Add to that the outsourcing of manufacture and it all looks like a world of hurt waiting to happen.
*baffled*
When companies seek to recover these kinds of profits, they cut something more important.
Their reputation.
Most likely, they will move their call centers out of India and into a lower paying 3rd world country. The lower techs will be given even less latitude to help fix problems. Along with that, they will reduce access (and numbers) of higher up support, along with "new policies" of the 'not our fault' game.
They will obviously cut their unprofitable programs, such as their IdeaStorms website, all Linux support for low and middle tiers, along with the cheaper customizable options. They will leave customizing available for the higher packages, as all businesses cater to the big spenders.
Yes, our system is based upon a race to the bottom, but depending how you get there means if you survive or not. That really depends on how their deals with Microsoft go, as they are parasites upon MS.
Ubuntu is just another disk image like windows xp, or vista.
I work for a small (about 100 person) company with a heterogeneous environment (Linux, OS X, Windows). In the past few years the IT team has settled on Dell for quick turnaround of ordering customized systems and consistency (the devil you know). They order Dell laptops, desktops and servers. It has pretty much turned into a "Dell house." The quick turnaround on customized orders is extremely important to meet developer needs. If Dell makes custom ordering take longer or involves increased hassle, I would bet that our IT management would start looking into other vendors.
Dogma - "let's just say we'd like to avoid any empirical entanglements."
Outsourcing lowers the GDP of our country, reducing our buying power. What logically happens is jobs are removed from our country.
Now, tell me how people can afford to buy stuff if they have no job, or one that pays 1/2 as much?
e.g.
1. We will cease customizations through our "Dell Home" program but will continue with it in our "Dell Large Business" program.
2. We will cease customizations for our "Dimension" line but continue customizations for our "Optiplex" and "PowerEdge" lines.
2. We will continue supporting some customizations (e.g. RAM and HD) but cease support for other customizations (e.g. anti-virus software).
3. We will increase the price on customized models and decrease the price on prepackaged models in order to reshape demand.
Ahh...but you see that's 5-15 years down the road. The shareholders (e.g. uber-rich trading firms) all want to meet this years or this QUARTER's financial targets.
You can get rich if you own a politician, but you have to be rich to buy one in the first place.
So, remind me again what I can now get from Dell that I couldn't get from any other manufacturer? Nothing? Oh well then I might just take my business elsewhere. Hrmph!
"The deeper downside: Dell will outsource more production and assembly."
Which will result in lower prices which is good for consumers. How is this the deeper downside? Why are Americans, which have one of the highest standards of living in the world, more deserving of these jobs than people in other countries?
Creative Demolition
Well, if you want to talk about 15 years down the road you might as well mention that in 15 years all the demand from our outsourcing will make the Chinese as well off as us, forcing them to charge as much, cancelling out any benefit of outsourcing there.
You're a little capitalist, and you don't even realize it. Want all the jobs to stay in our country? That's greed; the same thing driving those shareholders to make more money. Unfortunately, whining doesn't get much done, so we'll all have to work really hard and offer some kind of advantage to keep the jobs. It's called "competing".
Our system isn't a race to the bottom. It is a race to what people want. People want computers at the cheapest possible price and they do not care about tech centers or even support.
Outsourcing is a good thing for the economy, not a bad thing. If Ford did not outsource, for example, it would have to make everything from the drills for the oil, the refineries for the gasoline, the machines to make the steel and the chips and the plastic, really, recreate the entire economy and in doing so lose the efficiencies that come with shared costs. We can lament outsourcing of some function at a company, to make ourselves feel good, but, if there were no outsourcing, there would be no cars, no tvs, computers, or any of the millions of products, in all their choice and complexity, because those products would not exist without outsourcing.
We ourselves, each and everyone one of us, outsource all of the time. Go ahead can say Dell is terrible because they outsourced a call center to India or the Philippines, but we outsource every time we use a stapler or a printer, or for that matter, even a computer. How many developers recommend using MySql or Postgres or even Linux over some solution developed in-house. That is outsourcing too, and without that outsourcing, it is very likely that there would be less jobs and more economic stagnation. Few products have the margin or merit to justify the creation of a custom database server or operating system solely for them.
In that vein, outsourcing a call center might actually result in -better- customer service. If a place in India has 200,000 people answering the phones, they are going to get the economies of scale that even Dell could not possibly get.
Outsourcing actually -creates- opportunity. Any time you see more than one company engaged in a similar practice, that is an opportunity for a product or a service than can be outsourced to someone else, and that person might as well be you. If outsourcing did not exist, then, there would be no opportunity, the companies that could have benefited from outsourcing would stagnate, and products would remain more expensive, rather than less.
Bottom line is, outsourcing is a good deal, rather than a bad once, and the dramatic increase in the standard of living in much of the world - from the skyscrapers in China, the surge of wealth in India, to the internet of south korea and the massive works in Dubai, the world is getting richer and better off for it. Even in the USA, where outsourcing has been the subject of much debate, everyone has benefited from outsourcing.
This is my sig.
Ah yes, but you see, working for your living instead of getting the money by playing the stock market or owning Dell is so Middle-ages, and people who depend on it should really move on or die off. By removing menial jobs from the country the Big Boys are actually helping people to transition to pure royalties-based industry, and get the money the way it's meant to be had - by sitting in leather armchairs and smoking Cuban cigars while reading the stock market reports, not something as vulgar as working in an office.
(If you don't see Alien-grade sarcasm dripping from the above words, get yourself new glasses.)
-- Sig down
Thats exactly it: nobody with power cares for the long term maluses by strongly pushing outsourcing.
As long as the quarter looks good, its golden. Another question would be this: Why do the uber rich trading firms want to only see short term gains, and not longer term ones?
What financial disadvantage would there be if companies developed new things and technology, and continued further research going ahead up to 30-100 years? Ma Bell did that and we ended up with the transistor, lasers, Unix, C...
They can't. In the words of Marriner Eccles: Guess where we are right now?
We are all just people.
Outsourcing lowers the GDP of our country
Can you please explain how that is so? Reading countless economics text books about the benefits of division of labor have confused me.
stonemasons, i swear it has to be something of that kind that allows completely useless people to run these companys.
If you mod me down, I will become more powerful than you can imagine....
---Maybe you're not seeing the long term gains of outsourcing.
I understand all right. It raises the whole world out of poverty by spreading the money where labor is cheap until they're equal with everybody else. That that means for me, my generation, and my children is that it effectively lowers our wages. I dont like that, and I think its fairly easy to see why.
Selling out our ability to create is just a bad idea altogether. It weakens our military and our ability to protect us.
---Maybe you failed to consider all the new factories that the outsourcing companies will have to build to handle the increased load? And what about all the people who will get new, higher paying jobs in those factories? And what about the the standard of living increase those people and their families get because of this? Oh wait, all those people will live in a different country. Racist much?
Smart much? Cause you aren't showing it. It's called nationalism, and yes. I have it. Since our world has no real idea of free travel and migrating citizenship (what Adam Smith believed), we are bound to our country. Because of that, I will attempt to make this country good to live in, and that means having jobs and money abound.
---In that case, maybe you're forgetting the poor people in our country that will be able to afford new computers now? And what about all the money that will be saved by people/companies who buy Dells?
If the poor people worked HERE instead of over there out of our territories, they could afford to buy them now. And pray tell, dont we see what the quality is when we seek the bottom? Or do you think lead is safe for children?
---If nothing else, look at it this way: Now that Dell has fewer employees doing manual labor, they'll be able to hire more people to design new, better machines.
In actuality, they will spend more on advertising, along with paying more to their top execs. The stock prices might go up some.
You should have been looking into alternatives years ago.
Anyone can build and sell a server - supporting it is where the company wins or loses.
I call IBM at 3am when a server up and dies. Tech is onsite in two hours, new parts arrive 45 mins later... a bad power regulator fried all 16 sticks of ram. They didn't have enough on hand, so three other couriers were dispatch from two other states with more than enough ram to get the server up and running.
Three hours later the box was back up.
Dell - will argue to the enth degree about predicted drive failures alarms from their raid controllers... we just call them dead now so they'll send replacements. The drives take about two days to show up which is about enough time for the drive to finally fail.
Not really.
The Dell brand is primarily going to be 'standard' home user and the corporate market. There's not a huge amount of customization needed there.
For the gamer who wants to customize a system, but not build it from scratch, there's the Dell subsidiary Alienware.
I like you, Stuart. You're not like everyone else, here, at Slashdot.
Can you please explain how that is so? Reading countless economics text books about the benefits of division of labor have confused me. Try at least a little harder than that.
Imagine a widget factory. The factory takes in raw materials, and produces finished widgets. The widgets are sold on the market for some price that exceeds costs, resulting in profit. The workers are paid a salary, which they can use to buy widgets. With the exception of possibly exhausting whatever raw materials are used to create the widgets, you can repeat this wealth-generating cycle forever. (I.e. it's not some sort of closed system, and it's not zero-sum; you're creating wealth by adding value via the raw-materials-to-finished-products process. There are other processes that create wealth, this is just the most obvious.)
Now, we outsource that factory to Somewhere Else, but continue to import the widgets to satisfy domestic demand, perhaps at a lower price. Now, consumers buy their widgets from Somewhere Else, meaning that wealth flows over there. At the same time, all the people who work at the widget factory are unemployed.
Do you start to see a problem here? If you can't find something else for your former widgetmakers to do, you end up just draining money out of your economy. If you have modern finance at your disposal, you can conveniently spend more wealth than you actually have, issuing debt and importing stuff; at least you can until people stop wanting to buy your debt. This isn't sustainable. Eventually you either literally run out of hard currency (the case if you use gold or something else that can't be created), or people decide to stop buying your debt. And then you have a bunch of angry, unemployed ex-widgetmakers who can't afford to buy widgets anymore. Problem.
Of course, there are cute responses to this. You could argue that this is just the way things are supposed to work -- if the widgetmakers couldn't compete, they deserved to go out of business. Fair enough, and that actually makes a certain amount of sense.
But suppose you have an entire nation of widgetmakers? An entire nation of people who have built themselves a nice lifestyle (oh, and by the way, a huge fucking quantity of nuclear weapons) for themselves, making widgets, and suddenly end up unemployed? What do you expect them to do, calmly and rationally reduce their standard of living so that they can compete better on price? I don't think so; not when they have the ability to go and take a lot of wealth via brute force.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
And that is why everything will not be designed and built overseas. The Chinese would want to sell you stuff only if they know you can pay.
What *will* be designed and built overseas is whatever that can be done cheaper.
If it costs Americans $1 to make a plastic spoon and if the Chinese can sell it for $0.98, then that will be outsourced.
The Chinese know you can pay for it (since you were spending $1 for it until now) and the Americans are better off by $0.02.
The guy who loses is the guy who actually makes the spoon for $1. He can either go do something more productive that people would willingly pay for, or he could gather a bunch of economic ignoramuses and try to force people to buy his stuff.
all you have done is grossly over simplified the whole process and picked out the little bits that suit you. the money doesn't just flow in one direction to the widget makers, the widget makers need people from widget land to show them how to build the factories and train them, they need someone to design and market the widgets for them in the first place. In short the clever widget makers who started the whole industry get to specialise at a different part of the supply chain, and don't have to spend all their time subsidising work that can be done better/cheaper else where.
if your idea's really did work, why does communism and protectionism fail?
If you mod me down, I will become more powerful than you can imagine....
Why exactly is that assumption false? We are creating a country of ownership of ideas and not of production. That in of itself is a loss of power if we ever have a military action against those countries of of an ally of them.
This is the time you're supposed to prove me wrong... not show me maps of "not accounting for inflation" pretty graphs. Didn't you even read the comments below the graph, or did you just go "goo goo gaga pretty"? Erik Koht poignantly said that if we were to apply EU standards of living to the USA, 40% are in poverty level.. But even that tells not the whole story.
What I would venture is happening in our country is a ever-widening gulf between those who get paid to do and those who get paid to think. Our idea is we can just outsource it and sweep it under the rig, so to say. We have jobs that routinely get paid 100k+, and then we have 35k jobs. Those are the 2 working parent family households.. Manufacturing traditionally held that role of between intellectual and manual labor that a family could progress to higher socioeconomic ladders if they so chose.
I also have been told stories by the older generation that college could be paid off each year by working 40 hr/wk on summers. No more. Instead, we have corporations that demand we all have college, even traditionally they did not require it. Now, college has turned into a sorts of a new high school in which we pay to learn what once they would train on the job.
Unless we rebuild our nation, starting with our currency, then to manufacturing, and on, I can see us economically dying to countries like China and India that have almost 2 billion between them. Even during the Cold War, the USSR only had 200m civilians. That's a drop in the bucket compared to what China and India can do.. I wonder how high the Chinese could push oil? 200$ a barrel? 300$ a barrel? Or even our worst nightmare of switching OPEC to the Euro?
Ah yes, the slashmyth that shareholders aren't US! People who bought stock, or have a mutual fund. People who have a pension or other retirement plan. How many here have even read the prospectus they send out to shareholders, or voted in a meeting? It's easy to have a scapegoat. If it can work for third world countries like North Korea and Iran, then it can work for slashdot? Yeah! It's all the rich folks fault that you're apathetic.
The problem is unions and government regulations. Try firing someone. You have a union to deal with. Try building something really innovative, say a nice new nuclear power plant. Your kids will be grown before you get a single hole dug; you'll still be waiting for the next mountain of papers to be filled out and processed.
The Canadian automotive industry died because it has even more regulations and unions than the US. China kills US manufacturing because it has less regulation than the US plants. Can you believe that a US plant has to not only pay property tax but a tool tax on the machines? Ol' Patrick Henry would roll over in his grave.
There are two solutions to this problem:
1. Protective tariffs: historically a bad idea (recall the Civil War).
2. Deregulate and deunionize: historically a good idea (think the Iron Lady salvaging Britain).
Unfortunately, the US is rapidly adopting Hillary's favorite idea: the government can save you! Guess how?
But then, I don't know of any candidates who don't subscribe to that idea. Republicans just aren't what they used to be. It seems the only differences are on social issues. Economically, all the big candidates look the same. It's so frustrating to talk to people who like what Ron Paul says but dismiss him offhand with a sickly smile and say "But he's not electable."
The only way to save our economy is to somehow break through people's thick heads. Unfortunately, we are living a generation that thinks in a herd mentality, usually delivered by rich morons like Oprah.
I only hope the generation now at college (that like Paul so well) will learn something from the current disaster and do something about it.
(Wow, I this post is all over the map. I feel better after just saying it all though.)
The government can't save you.
I think it's a kind of hero worship. "Corporate Saviors," I believe they were called in the 80s or 90s.
It's a kind of narcissism to believe that it takes these special people to run your company, you have to get just the right person, someone who's done it before, even if they were a spectacular failure. Besides, look at the severance packages.. the companies must have believed in them to offer them that much...
But it's not all that different from the idea of the box-office superstar. As if only a few people making $20million a picture are capable of making good films. Precisely when it's just the opposite: a movie star will get people in the seats opening night, and maybe save a poor film, but a good movie will get people in the seats five weeks later and establish the body puppets associated with it as "movie stars."
Anyway, my point is that there are talented, capable people waiting in the wings in every field, and you might just be able to get great performance *and* save on salaries by expanding the scope of your talent search. I hope you're listening, shareholders meetings and Hollywood producers.
Can you be Even More Awesome?!
All great companies ever created were created by engineers and run by engineers.
Many great companies have been driven to destruction by control freak managers with zero ability to know technology.
Not to say that there arent control freak engineers out there making mistakes, but they at least create something aswell, not just create lies.
Liberty freedom are no1, not dicks in suits.
Yeah, but where does all the food end up. And what's your friend going to spend all that money on, anyway? not food from you, that's for sure, because your friend's cheap food resulted in you abandoning your food-growing efforts.
People forget that money and wealth are not the same thing. This is one of the things that makes economics harder than it looks. You have to take a holistic approach to understanding, and it's extremely easy to get caught up in one aspect and misunderstand its overall effects on public welfare.
Can you be Even More Awesome?!
Dell beat themselves at their own game. They created the commodity PC market, and now they have nothing to compete on except for price...
It turns out that now-a-days, people want more than just price. They want design, portability, battery life, higher end features, an OS that works without having an IT dept to maintain it-and they are willing to pay for it. Those people are now buying Apple notebooks and iMacs. The clunky old inspirion doesn't cut it.
The other end of the market, the bargain basement cheap custom PCs that businesses buy by the boatload. Well, it took 10 years, but everyone else caught up with Dell's business model and are doing the same thing. There really is no cost advantage or ease of procurement when buying Dell vs. any other PC mfgr. Dell can't drop the price any lower to compete, because their margins are already razor thin. Their supply chain is leveraged to the max, so there is no room for efficiency there either.
Dell is getting beat at its own "cheap" game, and has no model to compete for the business of users that want more than just "cheap". I'd say they are between a rock and a hard place.
Profit, remaining the difference between income and costs however, isn't as simple as "reduce costs, increase profit"... you stop selling things, you stop getting the income too.
Speaking as a manager who purchases regularly... Dell's god awful love of non standard components to try and drive customers back to them for upgrades is next to inexcusable. I tolerate it because office machines can be bought to the spec I need without cracking the case. To now be told, "Oh? You need a high end processor and ram but don't care about the rest of the system? Sorry, that only comes in our high end system and you now have to pay for media burners, graphics cards, hard drives and Vista Ultimate that you don't want."... Especially when I can't buy a lower end system and swap out the processor because the old motherboard won't support it and can't swap out the motherboard because the case uses non standard connectors and fan mounts... I'm going to be going straight to the competition.
So, yes, Dell will cut $3B in costs. Part of that will be the costs of all the systems they used to sell to me. Along with the profits on those systems too. Assuming the same holds true for others, they successfully cut off their $4-5B nose to spite their $3B face.
The last time I priced a machine from them, I could get equivalent performance for literally half of the price by building it myself. At least, as long as my definition of "performance" didn't include, "really cool looking, glowy case"
Actually a premium case and some glowy bits don't add that much to the bill at all.
Sounds good in theory but I don't think that's quite how it works. Even CEOs who would be considered to have failed end up being hired pretty easily somewhere else. The way CEO performance is measured goes like this. When the company the CEO is heading does well, the CEO gets the credit. When the company the CEO is heading goes down the tubes, there's an excuse like "bad economic climate", "piracy" or something else.
After quitting or being fired from their previous position they are hired with little regard to what their previous performance was because there's always an excuse. Ok, if a CEO does something mind boggingly stupid that will probably have some impact. But run-of-the-mill poor performance won't be enough to make them unemployable.
I agree with most of your point except that I don't think the rationale used by the board in case of failure would be "the CEO was successful at company X so we had a good reason to hire him." I think the rationale is more like "the CEO was labeled with the sacred seal of corporate infallibility, the three-letter acronym "CEO", so we had a good reason to hire him."
Heh... I guess I'm more cynical or something.
In the end, the strength of an economy depends on supply and demand, if the US wants plenty from China but China wants nothing from the US the economy will falter. Imagine as an extreme example that the US was full of hairdressers and China was full of widget makers. The borders are closed so no tourism or working abroad. Selling off ptoperty would be a short-term solution and so ignored. The hairdressers can cut each other's hair creating value internally, but if they want widgets from China they have nothing to offer. There's no supply chain because there's no incentive to supply in the first place. If there were a flow, part of the value would remain in the country but it'd still be a net transfer of value out. The whole theory of comparative advantage assumes there's something both parties want in infinite amount. If China were to say "US goods/services/whatever? Well, actually we're covering domestic demand already so there's nothing we need really..." the US is screwed. Or it can take on debt, which means it's screwed somewhat later.
I see it in my own country, we have oil and so our economy is strong because the world wants oil. Everything else has problems because the input costs are so high, it's difficult to be competitive at anything. In the real-world economy with uncertainty it'll easily happen that in the market you think you'd make money there's overproduction and so your head is first on the block because your costs are the highest. If you do find stable demand, there's always someone out there with an eye to undercut you. In practise, it doesn't work nearly as nicely as in theory.
Live today, because you never know what tomorrow brings
You mean for the gamer who wants to customize a system, but not build it from scratch, and is hemorrhaging $20 bills out of their anus, there's the Dell subsidiary Alienware.
The way CEO performance is measured goes like this. When the company the CEO is heading does well, the CEO gets the credit. When the company the CEO is heading goes down the tubes, there's an excuse like "bad economic climate", "piracy" or something else.
Exactly. It's the same as religion:
Things go well - Praise the Lord ! Without him we'd all be fucked.
Things go badly - it's part of his "greater plan" or "we weren't worthy" or some other such bullshit.