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Dell continues services expansion

The company is beefing up its services arm, gradually adding more of its own staff in an effort to make its high-end hardware more palatable to big-business customers.

Dell Computer is beefing up its services arm, gradually adding more of its own staff in an effort to make its high-end hardware more palatable to big-business customers.

Services work typically involves not only support of computers the company sells but also more sophisticated help with planning, installation and other work. While Dell has relied on partners for all but the most basic services, companies such as IBM, Compaq Computer and Hewlett-Packard all have well-developed services businesses.

Dell now has acknowledged that services are a key part of selling high-end equipment such as servers and storage systems and has come closer to weaning itself from reliance on third-party deals with IBM and Unisys to provide services.

"With the server and storage market, customers' expectations on services have increased," said Bob Riazzi, director of enterprise services marketing for the Round Rock, Texas-based company. "We've added a lot more mission-critical support packages," including fast response to customer problems, Dell technicians dedicated to certain customers, and staff who can work at the customers' locations, he said.

Services are gaining in importance as Dell, like its competitors, struggles to stave off further economic damage in the flagging technology market. But services may not be a miracle cure from ailing PC sales: Companies such as HP and Sun Microsystems hoped customers would continue buying high-end products and services through the current technology slump, but those areas have not proven immune to spending cuts.

Dell brings its own style to the services business--the style that won it success in the PC market as well. The company doesn't intend to be like IBM Global Services, which will handle just about any job, no matter how complicated or obscure. Dell, rather, will focus on services that apply to large numbers of customers--in other words, the services it can sell in high volume.

"We are going after targeted, focused, broad-based applications that, frankly, we have expertise in and our customers have approached us about," said Kevin Libert, director of marketing for Dell's enterprise systems and storage group. "The overall objective is to sell more servers and storage and raise the services up to the level required to do that."

The plan is bold. "Dell intends to commoditize services, even at the high end," Merrill Lynch analyst Steve Fortuna said in a research note Thursday. Dell expects its services revenue to grow twice as fast as the rest of the company's business, Fortuna said, with revenue of $3 billion to $3.4 billion in fiscal year 2002.

The services strategy at Dell has been long in the making. Last year, the company quietly started expanding its services offerings. Though it relies on partners such as Unisys, the company is taking on more work on its own.

"We are slowly building up a lot of internal numbers," Riazzi said. Among the 6,000 or so employees in support, Dell has between 500 and 600 people doing consulting work and will add hundreds more, he said.

IBM's Global Services unit was instrumental in the company's recovery in the mid-1990s. But services can be a tough business model; analysts have criticized Compaq's inability to benefit more from the services business it obtained when it acquired Digital Equipment in 1998.

Among the changes in Dell's support is the addition of a separate technical support hotline for high-end customers who aren't likely to make beginners' mistakes, such as forgetting to plug in the computer, Riazzi said.

In addition, the company will offer bronze, silver, gold and platinum support levels, each guaranteeing faster response to problems. High levels of support come with dedicated support staff, spare parts readily on hand, on-site repair services from Dell or third-party service partners, and guarantees that servers will stay up and running.

Dell also offers support not just for the hardware and operating system but also for higher-level software from Microsoft, SAP, Oracle and i2 Technologies.