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Dell taps small businesses, Web services in new strategy

The company jumps deeply into the Internet with an array of new services, alliances and product plans that will let it participate in more segments of the wired economy.

Dell Computer jumped deeply into the Internet today with an array of new services, alliances and product plans that will let the company participate in more segments of the wired economy.

In the consumer market, for instance, Dell revealed an alliance with the Microsoft Network Internet service to form a co-branded portal called "Dellnet by MSN" that will provide customized information and personalized services, along with standard Internet access, to home users. The service will be competitively priced.

For small and medium-sized businesses, Dell will work with AT&T and four other companies to create "DellEPro," which will provide Web hosting and URL registration services and broadband access. The consortium will also offer online "e-apps" such as 401(k) program planning, direct-mail campaign assistance and online merchant purchasing, said Stephen Godevais, vice president and general manager of small business and consumer products at Dell.

The expansion comes as a result of the changing nature of the hardware business. Although the PC has been the primary access device for hooking to the Net, simpler and cheaper devices are rapidly gaining popularity. At the same time, PC makers are trying to use their brand names and customer relationships to horn into the services business.

"We have to go beyond the box in a very aggressive manner. The Internet value chain is much larger than the PC," said Godevais. "You are going to see us play in various places in the value chain."

Products, Dell's stock-in-trade, will be part of this strategy as well. This week, Dell revealed plans for an MP3 player. In the near future, the company will incorporate MusicMatch, an MP3 recording application, in consumer desktops and laptops, Godevais added.

Home networking will become a major focus for the company, he said. The company is also strongly interested in working with household appliance manufacturers, he hinted.

"There are a lot of areas in the home...You may not want to access your toaster on the Internet, but how about your refrigerator or sprinkler system?" he said. Declining to specify what products the company had in mind, Godevais said, "We are talking to a lot of people."

Eye toward the Internet
Dell's Internet strategy has largely been a work in progress this year. Late last year, CEO Michael Dell indicated the company was interested in moving into Web hosting and other services. In April, many parts of the strategies and many new services were unveiled.

Along the way, the company has reorganized quietly. Several new consulting and services divisions were formed during the year. Typically, Dell doesn't announce these changes. For instance, Godevais oversees a group called the Internet Line of Business, which focuses on consumer devices. The group was formed recently but was not announced formally.

Although the strategy marks a departure for Dell, the change won't be radical. The PC, in Dell's view, will remain the focus of consumers and businesses, according to Godevais. Devices and services will largely exist to complement the basic functionality of the computer.

"The PC is at the center of the Internet experience. It will allow you to bring a lot of data into the home to a multiple set of appliances," he said. "Appliances do one or two things very well."

Multiplayer game consoles, or easy-to-use audio or video devices, are likely to be successful in the market, he said, because they can provide an experience or application the PC can't replicate easily. The PC, however, will be the conduit for Internet access. This will allow manufacturers to eliminate modems and other parts, as well as reduce the number of devices that consumers have to hook independently to the Internet.

Devices also have to be cheap, priced between $99 and $199, Godevais said.

"The problem with a lot of Internet appliances is that the price is far too close to a full-function PC," he said. "The ones that will be successful are the ones that are familiar to the customer."

Pumping up existing initiatives
The services and "e-apps" efforts launched today expand existing programs. The company launched Dellnet nearly a year ago as a way to balance its razor-thin profit margins with revenue from Internet subscription fees and e-commerce. Dellnet by MSN will differ in that it will begin to offer custom information services. The graphical interface will also change, Godevais said.

Dell rival Gateway also has introduced its own ISP service, Gateway.net, and has a partnership with America Online to develop Net devices. Web hosting was introduced earlier this year.

The idea behind these distribution deals is to get MSN in front of as many eyeballs as possible. Microsoft has targeted ISP leader AOL as its primary Net adversary and has competed neck-to-neck with the company in inking distribution deals.

Today's deal is the latest of Microsoft's attempts to distribute its Web portal through its traditional retail and PC manufacturer channels. Last year, the company struck a high-profile deal to market its Internet services through electronics retailer RadioShack, as well as a similar partnership with Best Buy.

The battle between these Net heavyweights is often fought on the PC desktop. Both MSN and AOL have distribution deals with PC manufacturers to offer their ISPs to new PC buyers.

The partnership will also extend into future products. The companies will investigate new services and Net devices and ways to upgrade consumers to broadband connections.

The AT&T deal is a work in progress. Other companies participating include Works.com, which will provide an online purchasing service and products; OneCore for financial management of payroll, 401(k), credit and merchant services; and ELetter, an online direct-mail service.