A new business Model for Dell

What do Dell do? They provide low cost computing resources to home users. Why is Dell’s star fading? Because they have  hit rock bottom, there is no other place to save money, their existing model has run out of steam. Instead they have made desperate lunges at the Games market and the printer ink market, neither of which are dell Core Competencies and therefore they struggle in both these spaces.

So what should they do? Well what’s cheaper than having Dell computer in your home? Not having a Dell computer in your home. What Dell should do is offer home users access to grid computing on a pay-as-you-go basis with access to as little or as much computing power as you require (ala S3 from Amazon but with Windows as the base operating system). They can still sell you a monitor, keyboard, mouse and box, but that  box is just a network connection to a blade server hosted in a Dell data centre that does all your computing.

They own the Windows and Office licenses, that you lease as part of your subscription (which keeps Microsoft happy, as they continue to stuff huge volumes of Vista and Office into  the market place) but they manage the storage and compute power, keep your computer humming and totally insulate you from hardware and software failure. The low cost set-top size boxed they give you can even include a cheap as chips disk to do really efficient local caching of content.

They get to continue building systems, but the systems are now almost completely rack based which means they can make much more credible sales to business. They also smooth out their revenue model because it goes to monthly subscriptions rather than lumpy seasonal purchases.  Finally they sell much higher priced more keenly specified desktops to the remaining market segment that previously were their Alienware customers.

Of course plans like these require a pair a cojones, which are sadly lacking in Dell at the moment.

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