Dell's Battle Has Just Begun


Now comes the hard part for Michael Dell. With the yearlong battle behind him to take Dell private, the company founder now faces the biggest business challenge of his lifetime. The iconic entrepreneur, who is one of only a handful of the original gang that founded this industry and, as such, earned the ability to be universally recognized by his first name, now has to turn a battleship and redirect it toward growth.

While I certainly would not bet against him, it's not an easy task to turn around a company that is steeped in selling products used in on-premise infrastructure into one that can play in the new world of cloud deployments. So what are the challenges Michael must stare down, and what are his chances of success?

First and foremost, while he has done a remarkable job building out a viable indirect channel, it's not one that is as robust and ingrained in the company's strategy as it needs to be. Sure there is a partner program and a recruitment initiative, but the company needs a better go-to-market strategy with those partners. It needs a process and an understanding throughout its ranks that going to market with partners is different than selling to them as part of an infrastructure sale—a subtle but significant difference. From my perspective, it's something for which Michael has brought in the right channel talent to execute on, but he is going to have to stay close and be clear about what he wants accomplished.

 

[Related: It's Official: Dell's Top Execs Sound Off On $24.9 Billion Buyout]

Secondly, the company needs to shift away from a perception that it's a hardware-only supplier and convince the world it's a full-solutions play—not an easy task for a brand that defined low-cost infrastructure hardware. Dell has also historically, and to this day, used price as its strategy. Unfortunately, this strategy no longer works.

Dell's journey to a solutions sale rather than a hardware sale positioning will be made easier as a result of going private. Investments will need to be made and costs will need to be cut, and those are best done without having to take into account how the public market will react. It's why Michael has told stockholders the company needs to transform itself quickly.

All this is happening at a point in time when the PC market is undergoing a major upheaval. Research firm IDC is predicting tablet sales worldwide will outpace PCs in the fourth quarter. While PCs will outpace tablets for the year, it's an onerous sign that tablets are rapidly eating the PC market.

While it's easy to argue Dell could be squeezed, it still has a number of fundamental advantages in the market. One of those is Michael himself, who is a relentless competitor and is anything but the type of executive to sit in the ivory tower and manage from behind the desk. He's completely engaged and touches down at levels that one would never expect. He's not afraid to pick up the phone and call a journalist that he believes needs to understand his position—something that was routine in the early days of the industry but is unheard of today.

In the end, I think Michael will pull it off because he knows what needs to be done. Three to five years from now, the company will be considering another public offering with a position that looks nothing like its legacy of being a low-cost PC supplier to small and medium business.