Dell Web hosting services focus on price, brand

Dell Computer this morning announced new Web hosting services targeted at small and medium-sized businesses, part of an expanded push into the services industry.

As in the PC market, Dell is positioning itself as the company that can deliver technology faster and cheaper than competitors. The company, of course, is not alone. Both Gateway and Micron, the two other major direct PC makers, have similar hosting efforts.

Gartner analyst Audrey Apfel says Dell Computer is being aggressive in its Web-hosting business strategy for several reasons. Among them: Good Web hosting sells more servers, which means Dell can attempt to sell more of its servers. see commentary

Under one of today's service options, for instance, DellHost, the Web hosting division, will set up a Web site on a dedicated server for a customer within 24 hours. Customers can also get a domain name through DellHost for $25 a year, less than the standard $35 annual fee, because of an alliance with Network Solutions. Network Solutions will also recommend Dell as a hosting site.

"We're relatively small in hosting, but they see our trajectory," said Tim Mattox, general manager of the company's hosting group. So far, DellHost has signed up 2,000 customers in two months.

The push toward services comes from both necessity and opportunity. With margins on hardware dropping, the company is seeking new and possibly more lucrative markets. At the same time, its existing customer base and financial strength give it a solid platform for entering the services market.

Services, in fact, accounted for approximately $500 million in revenue in the most recent quarter, making it one of the fastest growing divisions at the company.

"Tomorrow's dollars are not going to come from a desktop sale," said Amir Ahari, an analyst with US Bancorp. "They're going to come from how much footprint do you own in a data center or a department or workgroup organization. That translates into more storage sales and more services sales."

The push into services began last year. The company hired Steve Felice, former CEO of service provider DecisionOne, and put him in charge of Dell Expert Services. This group oversees an array of service groups, including Dellhost.com and Dell Technology Consulting group, that have popped up in recent months. Expert Services also forms alliances with application service providers and other companies.

Overall, Dell will mostly focus on services that can expand hardware sales. With Web hosting, consumers technically won't buy servers. Instead, Dell will buy them from itself and then rent space out to customers on these computers, along with any sort of consulting, technical help or other assistance that might be required.

"We want to wrap services around where they are related to hardware," said Mattox. Of the hosting division, he added, "I think it will be massive."

News.com's Stephen Shankland contributed to this report.