Inside Dell

Last month, I accompanied several representatives from Windows & .NET Magazine to various Dell facilities in the Austin, Texas, area. Most readers are probably somewhat familiar with Dell (formerly Dell Computer), the world's largest PC maker. However, I suspect most people don't understand how Dell came to be such a large and successful company. Even I was surprised by what I found out during the visit. Here are the highlights.

Real-Time Manufacturing
Dell builds computers at various huge automated factories in and around Round Rock, Texas, near Austin. As many readers might expect, part of Dell's success involves continually adapting its computer parts requirements according to the orders the company is receiving, in real time, then negotiating the best price for those parts, according to its volume needs. For this reason, Dell's prices fluctuate fairly regularly, and the company is able to maintain some of the best price-to-performance ratios in the PC industry. Dell is so large, in fact, that its main suppliers have parts warehouses nearby to keep up with Dell's demand. During our visit, parts arrived on one side of the server construction factory, while shipping trucks were pulling up to the other side to cart away finished systems to customers.

Inside the factories, Dell has seemingly perfected a process that began with Henry Ford's first automobiles. Orders come in, triggering an assembly line that moves through case inventory and parts requisition (e.g., CPUs, RAM, hard disks) to one of the many builder stations. The assembly-line process assembles the various components into the case, then scans and identifies each part so that for future service calls, technicians will know exactly which parts went into the system. The completed case then travels down the line, at which point it receives documentation, software disks, and any other stray parts. Finally, the whole kit is boxed up and set on pallets at the far end of the factory, ready to go out on the next available truck. I've dramatically simplified the process here, which, frankly, is rather awe-inspiring.

Corporate Culture
Dell, like any other large company, has hokey mission statements and pledges to better serve customers, but with a strange difference: Despite my constant exposure to Grade A public relations on an ongoing basis, I got a different vibe from Dell. These people were serious about continually meeting the company's overall goal, which basically amounts to providing its customers with the best computing experience for the best price. I know that sounds glib, but in our various meetings with folks from the company's various product groups, this mantra came up repeatedly. This belief is really is part of the company's corporate culture.

The other important and often overlooked truth to Dell's success is the company's across-the-board pragmatism. Critics often point out that Dell rarely innovates and is never the first company to market with any particular product type or technology. These critics almost never understand that this lack of innovation is part of the plan and that when Dell does enter a market, the company tends to dominate it. Let's look at a few examples.

Dell was notably absent in 1996 when Microsoft announced the first handheld PCs based on Windows CE, and likewise was nowhere to be found when Microsoft updated that software for Palm-sized PCs and Pocket PCs. However, when that market finally became viable--after watching high-profile disasters by the likes of NEC, Philips Electronics, and other early adopters--Dell jumped in last fall with its Axim line of Pocket PC devices. Instantly successful, the devices have garnered excellent reviews and good word of mouth. More important, from Dell's perspective, the Axim is now the number-two selling Pocket PC, behind the HP iPAQ. Dell has carved similar markets for itself in printers, servers, and storage, and the company has big plans in other product areas for the near future.

The point is that Dell actually validates a market by releasing product, and to many decision makers, certain product categories become worth evaluating only when Dell jumps in. Although that's not technically "innovative," it's certainly proven to be a more viable business strategy than being first to market.

Serving Its Corporate Master
Finally, Dell also does a commendable job of serving its corporate customers, although I should point out that many companies, including HP and IBM, have similar programs. In its corporate-oriented products, such as its Latitude line of notebooks, Dell has specifically created platforms that live at least 2 to 3 years and configurations that live 12 to 18 months, compared with the consumer-oriented Inspiron line, which changes models every 2 to 3 months. The idea here is that corporate customers want to ensure that they can roll out Dell's products over a long period of time and not have to worry that the product will be obsolete before the rollout is complete.

Dell ensures that its Latitude products maintain parts compatibility, making future upgrades less painful. Thus, batteries, optical drives, and the like are compatible between a wide range of Latitude systems that existed over a long period of time. Recently, Dell began winding down its Latitude C series, which began life in 1997, an eon ago in the computer industry. Its new D series is part-incompatible with the C series, and Dell hopes this new line will also have a 4- to 6-year life cycle. The D series was necessitated by changes in mobile computing that would have been impossible to fully realize on the aging C platform, and all D series systems are based on Intel's exciting Pentium M mobile platform.

Also, Dell is keenly aware of what its customers want and what they're buying. Looking forward, the company has some interesting plans for expanding into new markets and extending its current products to better match customer needs. Much of this information is under nondisclosure agreement (NDA), but I'll have more to say in the coming months.

We have tentative plans to visit more companies in the future, but I'm curious if this short look behind the scenes at Dell was worthwhile. Let me know what you think, and whether there are any other companies about which you'd like to learn more.