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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."
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.
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?
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.
Remember: The market is steadily moving towards laptops. And laptops are harder to custom-build.
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.
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....
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.
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."
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....
Dell unfortunately is a victim of its own success too. They sold a crapload of computers during the boom years and had phenomenal growth. The problem is that there's no way to sustain that growth. They'd have to sell like 10 billion computers a year. But Wall Street hits them hard when they can't the market's predictions. So they have focus on making more profits. Which means cutting costs by getting cheaper parts, labor, etc. All the while, the margins are shrinking. It's a bad cycle.
Well, there's spam egg sausage and spam, that's not got much spam in it.
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?
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?!
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.
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.
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.