Services move clicks for resurgent Dell

The computer giant is investing in the Republic again but in a different guise. Its chief financial officer explains how it switched focus from hardware to services

TWENTY YEARS after opening its manufacturing plant in Limerick, Dell has announced a new wave of investment in Ireland but times have changed and there’s not a production line in sight.

The closure of the factory in 2009 is a reminder that Ireland had priced itself out of the market as a place for high-volume manufacturing. This time around, Dell is investing in two technology solution centres, evidence that the State continues to make progress in reinventing itself as a home for high-tech jobs.

About 150 positions are expected to be created over the next two years, split between a cloud research and development centre opening in Dublin, and an expanding solution centre in Limerick. The job-count may not be as high as the old manufacturing facility, but no one will complain because it’s not the same Ireland that welcomed the company here in the 1990s. It’s also a very different Dell.

Like Ireland, the computer giant lost its aura of invincibility somewhere in the middle of the last decade. No longer the number one PC-maker and struggling to reinvent itself, Michael Dell took back the helm after a period of uncertainty. Three chief financial officers came and went in 18 months before Brian Gladden took up the job.

In Dublin for a meeting of the company’s finance leaders, Gladden said there was “a lot of change” at that time. Paid to protect shareholder interests, he’s a master of understatement, a poker-faced American who would prefer to downplay a period in Dell’s history that many commentators labelled a crisis.

Judging by the company’s most recent results – record earnings per share and revenue of $15 billion (€10 billion) – he has played his part in a successful restructuring process that turned the firm around. Advancing ambitions to become a solution and services firm, rather than a pure play hardware manufacturer, has been crucial to the recovery.

“The company is clearly transforming,” he said. “The move to the enterprise and the data centre was a priority for us and something we have focused on for a while. Now it’s an $18 billion part of our business.”

Although Gladden said the change in direction was under way before he joined, growth through acquisition began with his regime. “Being confident and capable of acquisitions, using it as a major driver of growth, is a change in direction for Dell,” he said. “There’s no question about that.”

Last year, the company acquired eight firms and more acquisitions are planned. The bullish strategy is something the company has become very good at, according to Gladden, because it hired the head of acquisitions from IBM.

“All the companies were bought because we thought we could grow them. You will not see us buy a company, take cost out and rationalise GA [general and administrative expenses]. You will see us buy them, add sales people, technology, RD resources and work very hard to get them into our sales force so we can sell their products,” he said.

The type of firm it buys is a clue to where Dell is heading – the cloud. Network, security and storage specialists have a valuable role to play where infrastructure and applications are available on demand, delivered back to customers by service providers like Dell.

Back in April, Dell made clear its commitment to this model with the announcement of a $1 billion global investment in cloud services and plans to build 10 “next-generation” data centres.

But Gladden is unusually restrained about the cloud (that poker face again) with a pragmatic view that’s mercifully free from the hype that pours forth from some vendors.

“There is an awful lot of marketing around the cloud, no question,” he said. “We’ve been very clear that our role is as a major infrastructure provider . . . we had virtualisation discussions eight or 10 years ago but today we’re still only seeing 25 per cent implementation of virtualisation across servers. Major technology changes take a long time.”

He also uses the “early days” argument to deflect accusations that Dell’s April announcements were received with lukewarm enthusiasm by analysts who said they had heard it all before.

“There will continue to be other investments and more clarity around what we’re doing. We don’t want to provide all the competitive intelligence around how our solutions will be differentiated. It’s an evolving space, no question about it,” he said.

As for the Dell’s ongoing presence in the Republic, Gladden said it was one of the countries where the company still sees value.

“We’re going to invest in multiple solution centres around the world – the one in Limerick is the first. We look at the capability and success we’ve had here, and the talented teams we have in place, and we would consider it one of our centres of excellence from an R&D standpoint.”

Could this be the same man who drew up the plans to close down the Limerick factory in 2009? Apparently not. The plans were well under way by the time he joined in 2008.

“We continue to execute on optimising our global supply chain,” he said. “As costs have changed in other parts of the world, it’s something the competitive environment has demanded from us.”