Bangalore: It has been a year since Suresh Vaswani, a former joint chief executive officer of Wipro Ltd’s information technology (IT) business, became Dell India chairman and executive vice-president of Dell Services, leading its applications and business process outsourcing organization, which is one of the four pillars of Dell’s ongoing global efforts to become an IT services and solutions company rather than just a hardware and hardware support seller. The other three pillars are the existing support and deployment around its hardware, cloud and IT infrastructure, and security. Spearheading the global services play, currently around $8 billion (around Rs 42,960 crore) of Dell’s total $60 billion revenue, is Steve Schuckenbrock, president of Dell Services.
Vaswani and Schuckenbrock spoke in an interview about how the services business is playing out, and how not having a services legacy is actually a major advantage for Dell, as it can focus on applications modernization for customers without worrying about having to cannibalize lucrative maintenance contracts. Edited excerpts:
One year down the line, how is the services journey going?
Advantage Dell: Vaswani (left) and Schuckenbrock say that not having a services legacy is actually a major advantage for Dell, as it can focus on applications modernization for customers without worrying about having to cannibalize lucrative maintenance contracts. Photo: Jagadeesh NV/Mint
Vaswani: It has been a fantastic year for me at Dell. Dell, from being largely a technology player, is aiming to become an IT solutions and services player that drives business outcomes for customers. In that, my business is crucial. We have a reasonably strong base to build the future, starting from our Perot acquisition (2009, $3.9 billion), with its capabilities and its healthcare and BFSI (banking, financial services and insurance) base. We have also combined Dell’s internal IT services capability, and that gives us assets in the retail and manufacturing space.
The way we are building the business, in terms of building our customers’ future, is the most exciting part. I come from a fairly successful top tier Indian services provider company (Wipro), and all said and done, that was about managing the customer’s past. Sure, it was about managing it well, delivering productivity, delivering some cost transformation, but at the end of the day, quarter after quarter, I was just looking at how many people I have added.
Steve Shuckenbrock talks about the roadmap ahead for Dell and how he sees India as a ‘center of gravity’ for the unit’s various operations.
Dell India’s Suresh Vaswani talks about the company’s growth drivers, the benefits of acquiring Perot and why is firm isn’t beholden to legacy platforms.
That was good, but here we are looking at what will happen in the future, how would I innovate, to transform business models, to take customers away from legacy and into the new environment, which is why we did the two acquisitions, Clerity Solutions and Make Technologies, recently (April 2012). I?believe we now have the best application modernization portfolio in the world. It is a means to an end, to take customers into new generation services and solutions. The world of today is about mobility, cloud, business analytics, social media, and IP (intellectual property)-based solutions delivery, and a lot less about the past.
Schuckenbrock: Things are tracking along the way we expect it. First half of the year, we reset the table, managed cost structures, invested in growth structures, our customer satisfaction scores went up, new signings grew by 74%, and profits grew faster than revenues. (In Q4 FY12, services grew 12% to $2.2 billion, now representing 14% of total business). In all four pillars we saw growth and profit expansion. We have a good balance and a good management team.
But everyone, from top MNCs (multinational companies) to the Indian tier I players, is calling out the same things—mobility, analytics, social media, cloud…what will be different with Dell?
Vaswani: The first step is to drive customers towards modernization. You need to be on future platforms. You can’t do mobility on mainframes, for example. It has to be done with applications modernization and then driving the future. Frankly, we have no substantial vested interest in managing a customer’s past. We don’t have too much legacy. There is nothing holding us back. With the others, the traditional IT services companies, with the top seven Indian and global companies, there is huge revenue coming in and a huge vested interest in not making the customers shift from legacy and modernize applications because you are seriously going to lose revenue. People don’t like that. You will land up in a poor headcount situation and poor utilization. But we are not in that situation. So we will drive it.
But won’t there be resistance from the client side, especially given the pressures on spending in the current environment?
Schuckenbrock: I don’t think the spend environment is being characterized correctly. Yes, budgets are growing only 1-3%. But consider the fact that CIOs (chief information officers) are having to embrace a different agenda. They have to both cut costs and increase their spend. This is an IT environment that has not existed before. I have been a CIO multiple times before, even at Dell. Most years, one would be either cutting costs or investing.
There would not be too many years when we would have to do both. But now that is happening year after year.
Those companies with business models invested in maintenance of the past, they are under pressure. Others, focused on the future, are seeing pretty good pipelines and growth.
Getting back to the competitive landscape... You are responding to RFPs (request for proposals put out by companies for outsourcing work) and you are also trying to make new deals. How are you going-to-market?
Schuckenbrock: One of the things we have done better over the last year is really focus on our existing accounts. Earlier we were not driving thought leadership. We have invested a lot in that now. A great example is a supply chain-oriented client in the healthcare vertical, where we were doing traditional support and services. When I made my first call there, I was told, “You guys are great, you deliver everyday, for the last 20 years; thanks, but unfortunately, I am going to bring in IBM and Accenture as I need thought leadership, we have some real problems here.”
I said, “Woah, give me 90 days.” I brought in a crack team, we brought in business and then IT strategy, we got sign off at the board level and we put that into an implementation and a ROI (return on investment) plan, and we have agreed on work for the next several years, with more scope around applications, infrastructure and security. We are really proud of this. And there are more than this one example.
Vaswani: There is a fantastic sales engine of Dell already out in front. Plus we are building a specialized (services) sales engine. That plus this can be really formidable. Once we are able to drive practices towards standardization, productization—and apps modernization over time, our account executives will create so much business that we will actually struggle to handle the potential than anything else. That is why we worry a little less about the economics of the situation and the ups and downs. We have that base to zero into. Traditional companies may not have that. They are too dependent on Fortune 500 and 1000 companies, all their top clients, to give them the revenue. We love our top customers and the revenue. But we have the ability to fan out into smaller sized companies too.
Where do you see this journey going in the next few years?
Schuckenbrock: When you consider that this industry is going through such a significant change with business intelligence and social media and mobility, the whole industry is going to shift. Dell wants to be a leader in the enablement of that shift. We have absolutely nothing to worry about in terms of cannibalization. We don’t have to add ornaments on the tree. You are already seeing the evidence, and I want to stay in execution mode. Sure we will buy more capability and invest organically, and we will stay the course. We are just getting started.