Dell Technologies helps organizations build their digital futures and individuals transform how they work, live, and play. Dell provides customers with one of the industry’s broadest and most innovative solutions portfolios for the data era, including traditional infrastructure and extending to multi-cloud environments.
Dell is helping customers accelerate their digital transformations to improve and strengthen business and workforce productivity by offering secured, integrated solutions that extend from the edge to the core to the cloud.
Dell is expanding its IT-as-a-Service and cloud offerings to give customers greater flexibility to scale IT to meet their evolving business needs and budgets. As strategy enthusiasts, we decided to analyze the business model, supply chain strategy, and marketing strategy of Dell.
Marketing Strategy of Dell
Dell’s customers include large global and national enterprises, public institutions, governmental agencies, educational institutions, healthcare organizations, law enforcement agencies, small and medium-sized businesses, and consumers. Hence Dell has a unified global sales and marketing strategy that is customer-focused, collaborative, and innovative.
Go-to-market strategy — Dell sells products and services directly to customers and through other sales channels, which include value-added resellers, system integrators, distributors, and retailers. Dell continues to pursue a direct business strategy, which emphasizes direct communication with customers, thereby allowing it to refine Dell’s products and marketing programs and strategy for specific customer groups.
In addition to Dell’s direct business model, Dell uses its network of channel partners to sell Dell’s products and services, enabling it to serve a more significant number of customers efficiently. Dell has a partner program for the development of channel sales, which provides appropriate incentives to encourage sales generation. During Fiscal 2022, Dell’s other sales channels contributed over 50% of Dell’s net revenue.
Dell’s go-to-market engine includes a 32,000-person sales force and a global network of over 200,000 channel partners. Dell Financial Services and its affiliates (“DFS”) offer customers payment flexibility and enable synergies across the business.
Large enterprises and public institutions — Dell maintain a field sales force for large enterprises and public institutions. Dedicated account teams, which include technical sales specialists, form long-term relationships to provide Dell’s most prominent customers with a single source of assistance, develop tailored solutions for these customers, position the capabilities of Dell Technologies, and provide it with customer feedback.
For these customers, Dell offers several programs to provide single points of contact and accountability with dedicated account managers, special pricing, and consistent service and support programs. Dell also maintains specific sales and marketing programs targeting federal, state, and local governmental agencies and healthcare and educational customers.
Small and medium-sized businesses and consumers — As part of its marketing strategy, Dell markets its products and services to small and medium-sized enterprises and consumers through various advertising media. To react quickly to Dell’s customers’ needs, Dell tracks its Net Promoter Score, a customer loyalty metric widely used across multiple industries. Dell also engages with customers through Dell’s social media communities on Dell’s website and in external social media channels.
Supply Chain Strategy of Dell
Dell owns manufacturing facilities in the United States, Malaysia, China, Brazil, India, Poland, and Ireland. Dell also utilizes contract manufacturers worldwide to manufacture or assemble Dell’s products under the Dell Technologies brand as part of Dell’s strategy to enhance Dell’s variable cost structure and to achieve Dell’s goals of generating cost efficiencies, delivering products faster, and enhancing Dell’s supply chain strategy.
Dell’s manufacturing process consists of assembly, software installation, functional testing, and quality control. Dell conducts operations utilizing a formal, documented quality management system to ensure that Dell’s products and services satisfy customer needs and expectations.
Testing and quality control are also applied to components, parts, sub-assemblies, and systems obtained from third-party suppliers. Dell’s quality management system is maintained by testing components, sub-assemblies, software, and systems at various stages in the manufacturing process.
How Dell pioneered the Just in Time to gain market share?
Dell has implemented programs and methodologies to ensure that the quality of Dell’s designs, manufacturing, test processes, and supplier relationships are continually improved. Dell maintains a Supplier Code of Conduct, actively manages recycling processes for Dell’s returned products and is certified by the Environmental Protection Agency as a Smartway Transport Partner.
As part of its supply chain strategy, Dell purchases materials, supplies, product components, and products from many qualified suppliers. The strategy of contracting multiple vendors for procurement needs is called Multi-vendor sourcing.
Dell maintains more than 2,400 vendor-managed service centers. Dell’s supply chain strategy drives long-term growth and operating efficiencies, with approximately $75 billion in annual procurement expenditures and over 750 parts distribution centers. Together, these elements provide a critical foundation for Dell’s success.
How does Dell make money: Business Model
Before we understand how Dell makes money and its business model, let’s understand the structure of offerings from Dell. Dell designs, develops, manufactures, markets, sells, and supports comprehensive and integrated solutions, products, and services. Dell is organized into two business units, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
Infrastructure Solutions Group (“ISG”) — ISG enables customers’ digital transformation through trusted multi-cloud and big data solutions built upon modern data center infrastructure. ISG helps customers simplify, streamline, and automate cloud operations in hybrid cloud deployment. ISG solutions are built for multi-cloud environments and optimized to run cloud-native workloads in public and private clouds and traditional on-premise workloads.
Client Solutions Group (“CSG”) — CSG includes branded hardware (such as desktops, workstations, and notebooks) and branded peripherals (such as displays and projectors), as well as third-party software and peripherals. For customers seeking to simplify client lifecycle management, Dell’s PC-as-a-Service offering combines hardware, software, lifecycle services, and financing into one all-encompassing solution that provides predictable pricing per seat per month. CSG also offers attached software, peripherals, and services, including support and deployment, configuration, and extended warranty services.
Dell made $102 Billion in 2021, a 17% growth from 2020. Dell makes money primarily from two revenue streams: products and services. Product revenue includes the sale of hardware products and software licenses. Service revenue includes service offerings and support services related to hardware products and software licenses. Products and Services contribute 70% and 21% to Dell’s revenue, respectively.
In 2021, product revenue increased by 18%, primarily due to an increase in product net revenue for CSG and, to a lesser extent, ISG product net revenue. CSG product revenue increased primarily due to increases in units sold of both commercial and consumer product offerings as a result of continued strength in the demand environment and, to a lesser extent, an increase in average selling price principally related to our commercial offerings. ISG product net revenue increased primarily due to increased sales volumes of server offerings.
At the same time, services revenue increased by 13%, driven primarily by growth in CSG services revenue and, to a lesser extent, growth in both ISG and other businesses’ services revenue. Growth in CSG services revenue was primarily due to increases in services net revenue attributable to both CSG hardware support and maintenance and CSG third-party software support and maintenance. ISG services revenue increased primarily due to growth within hardware support services, while other business services’ net revenue increased due to software support and maintenance growth within VMware Resale.
