Nows the time to drive a hard bargain with Dell

As the IT giant looks to go private, IT leaders are at an advantageous position says Ovum analyst

IT leaders world over are busy trying to assess the potential impact of Michael Dell & Cos plans to take Dell private. They are doing the right thing, for it is not everyday that a company of Dells stature makes such a move.

According to Carter Lusher, Research Fellow & Chief Analyst, Enterprise Applications Ecosystem, Ovum Research, the implication of going private is that Dell is planning radical changes to its strategy and product roadmap. While the company might come out of this transition stronger with a product lineup that better meets the needs of businesses and public sector organizations, there will be uncertainty as to what products and services stay, get strengthened, or get eliminated.

In Lushers view this type of ownership change is not intricately smart or dumb; rather, it is simply a tool and what matters is the execution. A major danger for Dell during this period is that business and public sector prospects and customers stop buying Dells products and services by adopting a wait and see approach. This transition will be seen by strong competitors such as IBM and Oracle as a prime opportunity to attack Dells enterprise and public sector prospects and customers by heightening the uncertainly in contrast to their stability.

The research and advisory firm sees effective communication to prospects and customers about its strategy and product roadmap as a critical success factor to get through the transition. While this might sound simple, it is not. Compounding Dells challenge is the deep-seated brand identity as a PC company, which is only reinforced by the presss characterization of Dell as a PC maker in every article, including headlines, Lusher says.

Another communications challenge will be how Dell Services (built on the Perot acquisition) shares its financials for the due diligence phase on large, multi-year IT services deals. This is a non-trivial problem as the major IT services vendors (such as IBM and Accenture) are public companies and routinely provide details on financials.

Ovum is not recommending that CIOs and IT executives stop buying from Dell. Rather, IT organizations need to assess the risk to their infrastructure and put into place plans should Dells radical hardware, software, and services shifts require changes to procurement plans.

One opportunity for organizations that are in contract talks with Dell is to drive a hard bargain, whether on prices or incremental product or services to be added at no additional charge. A better deal for a contract today is only reasonable to offset the increased risk premium associated with Dell for the immediate timeframe, concludes Lusher. Salomon Sko

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