Commentary: Dell's unsure opportunity

Small businesses offer a definite profit opportunity, but Dell Computer will not find it easy to make the most of that opportunity.

By Martin Reynolds, Gartner Analyst

Dell Computer's move into the small and midsize business market--a clear shift away from its traditional large-enterprise focus--was probably inevitable, given the slowing growth in the heavily saturated corporate PC market.

Small businesses offer a definite profit opportunity, but Dell will not find it easy to make the most of that opportunity.

Small and midsize businesses have

See news story:
Dell thinks small
presented a strong challenge, especially for major name-brand manufacturers such as Dell, because buyers in those businesses are more individualistic than corporate purchasers, with fewer of the identifiable common traits that marketers love. One buyer may, for example, choose a full-featured, high-end notebook because it seems a good solution for both work and home needs. Another may be satisfied with a low-end--and low profit margin--desktop model chosen entirely on the basis of price.

Still other buyers at small and midsize businesses may not really care about the computer at all, preferring to buy a system from a small reseller that integrates hardware, software and support--in effect, operating as the business's IT department. Many resellers prefer "whitebox assembly"--building their own computers using generic parts--because it offers an extra profit margin. Resellers are critical to this market, and Dell will have to work hand in hand with them, enabling them to expand their businesses or increase profitability by eliminating system costs.

In this competitive environment, Dell cannot rely on brand recognition or perceived quality advantages. It must offer a compelling value proposition that its products are better than the alternatives--and a significant part of that proposition will have to be based on attractive pricing. Small and midsize businesses are likely to be very interested in Dell's products, but they cannot be expected to pay premium prices for them.

(For related commentary on technology for small and midsize businesses, see registration required.)

Entire contents, Copyright © 2001 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.