Dell Pins Hopes On Services To Boost Profit
CHRIS PORTER, a 26-year-old computer technician with a master's degree, works for a temp agency. Every day, the agency sends him out to customize Dell computers. That puts Mr. Porter on the front lines of Dell Inc.'s next major business push.</br></br>Dell is applying the low-cost techniques that put it atop the PC industry to the computer-services business. It is tapping a glut of trained technicians and hungry-for-work service companies, aiming to make the unsexy business of maintaining and servicing computers for corporations its next big moneymaker.</br></br>The low-cost structure mirrors the way Dell revolutionized the PC business a decade ago. While competitors designed their PCs with special bells and whistles and filled warehouses with them, Dell bought components off the shelf and built the computers to customers' orders, reducing overhead and keeping prices low.</br></br>With services, "we can do it differently," insists Dell President Kevin B. Rollins. He says Dell's approach results in service costs that are 20% lower than rivals', and predicts the fast-growing business will contribute $10 billion in annual revenue within a few years, up from about $1.5 billion today. By contrast, such services contributed $9.5 billion to Hewlett-Packard Co.'s revenue and $25.1 billion to International Business Machines Corp.'s last year.</br></br>Yet unlike IBM and H-P, Dell won't repair other manufacturers' equipment, focusing instead on the nearly 90 million computers it has sold in the past five years. That could lessen the appeal of its services operation to customers that own many brands of gear. Dell, though, expects to take customers away from H-P and IBM as these clients buy Dell equipment.