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Dell at your service

Gary Cotshott runs one of the fastest growing units in the company. But can he maintain the pace as Dell's horizons expand?

Dell became a PC behemoth by making the process of buying a computer as simple and predictable as getting lunch at a fast-food restaurant.

In the past few years, the Round Rock, Texas-based company has turned its operational abilities in winnowing costs out of manufacturing to the services business.

Dell Services is now one of the fastest-growing units in the company. Can services, which require humans to help other humans, be racked, stacked and packaged? Gary Cotshott, vice president of Dell Services, says they can. And he's not alone. Tata Consultancy Services, Infosys Technologies and other Indian giants have been growing at more than 30 percent a year by doing this.

Cotshott, who at close to 6 feet 6 inches is one of the tallest guys in IT, recently spoke with News.com's Michael Kanellos and Charles Cooper about Dell's plans and the demise of the all-you-can-eat model.

Q: Why don't you give us the quick rundown on Dell Services?
Cotshott: I think you know that we're pushing towards our $60 billion objective, which we put in place some years ago. We're a little bit ahead of schedule.

As a matter of fact, we cast a new objective for the company, which is to reach $80 billion (in annual revenue) in the next three to four years, and obviously there are various components to that. One of those is services, which has continued to grow very aggressively. In this past quarter, we just finished up at about a $4.4 billion annualized run rate. We are growing at 30 percent year on year.

What sort of engagements are you looking for?
Cotshott: We've continued to evolve it, but yet stay focused on what's important to Dell. We're not trying to be the next HP or IBM Global Services, no need to, no, thank you. We address about $90 billion out of a $600-plus billion services market in the world.

I think the days of the big buffet table, "all you can eat" outsourcing are dead.

We obviously deploy and support the products that we put into the market. In addition, we provide a suite of professional services: Unix to Linux migrations, Unix to Microsoft, Exchange migrations. Some customers have deployed an infrastructure fairly inefficiently, and so they expect that they need to consolidate it. We sell a lot of high-performance systems as well, so we do a lot of systems optimization and tuning.

Services seems sort of "un-Dell," because you're not talking about efficiencies in manufacturing.
Cotshott: Well, so we see the world differently, right? We believe there's an "S" curve of standardization and commoditization for services. Many of our competitors want to keep services up on the proprietary level. You know: Lock you in, high margin, you can't get away from me.

But over a period of time, you've seen certain services that have come down that commoditization curve. There are processes and approaches that can be utilized, that are highly efficient.

We also have a very significant partner ecosystem that we use as part of our business model. We always have a certain amount of competency in everything we do in Dell Services, but we make very important decisions around how deep the competency needs to be. In some cases, it's deep. In other words, we provide almost all of it, but in some cases, it's a narrow amount of competency, complemented with a whole lot of partner-based resource skills.

Think about our production lines, where everything is built to order. When you need a processor and a disk drive, and two processors show up, that's a problem. In the services world, it's right skill, right place, right time.

Your services are connected to Dell hardware, but will you manage stuff from other vendors?
Cotshott: We don't do enterprise; we don't manage the enterprise. We do manage clients, from desktops to notebooks. So if there is a multivendor shop--and virtually all customers are--we will take on a managed services transaction. Nobody is pure, and so we will go in and we will manage that environment.

Take the New York Department of Education. They had 800 suppliers, 300,000 seats. We gave them a complete managed service relationship. We still supply the New York Department of Education with Apple (computers) today, because the customer deems that to be important. However, it is a declining presence of mix over a period of time.

Will you see Dell deploying IBM servers in the enterprise? The answer will be "no." I have no interest in doing that. Why? Don't need to. We're not in the service business to be in the service business. IBM and our competitors are in the service business to be in the service business.

So then, you're in the services business to...?
Cotshott: We are in the service business to enable our core business. We have a core product business, it's great, it's growing, it's taking shape. We will consider engagements that are multivendor in nature to the extent that it assists us in some significant transformation to Dell.

Customers love the fact that we're focused, because I'll tell you that in that $600 billion market, there are companies who perhaps can get lost in it. Customers know you can't be good addressing everything.

We're very straightforward. We tell our customers, "Here's what we do; here's what we don't do." If you want a significant application developed from scratch, that's not us. Go to Accenture or IBM. I think we'd confuse our customers and perhaps damage our own credibility if we said, "Oh yeah, you know, we will service those HPs and IBMs and all that Solaris stuff."

What do you think of IBM's latest problems? Did the company just have a bad quarter, or has corporate America turned on these large consulting and outsourcing gigs?
Cotshott: I don't think anybody is really going to question IBM, because they are a very powerful force in the market and they are very good in what they do.

That said, in my personal opinion, I think the days of the big buffet table, "all you can eat" outsourcing are dead. You read in the press that IBM is saying: "Hey, not as many big deals out there. Looks like we've got to go after some smaller deals for a change." I just think that's a reflection of a market where customers have become much more sophisticated.

How about Unix? Is it dead?
Cotshott: Well, certainly the share of Unix unit volumes continues to decline. I think it's too early to say Unix died, because there is this infrastructure that's out there, which continues to need to be fed. But if you look at Unix shipments as a percentage of total shipments in the market, the trajectory is like this (arm pointing downward).