Dell Business Strategy Secrets (Part 1)

By Russ Finney
February 14, 1999
As many of you may suspect, Dell Computer Corporation casts a huge shadow across the city of
Austin, Texas. In my role as Vice President of Information Systems at Tokyo Electron's US
headquarters, I often get the opportunity to see Dell close up, both as a local Austin IT
professional, and as a Dell customer. In this column, I would like to share some insights from
the amazing remarks made by Jerry Gregoire, Dell CIO, in a speech to our local Austin AITP
chapter.

Jerry Gregoire, Dell CIO

Jerry Gregoire: Keeping up with Fast Company

When Michael Dell went out to hire his current CIO, he wanted the best in the US. He found
Jerry Gregoire at Pepsi, and convinced him to come to Austin, Texas to run Dell's huge
Information Technology organization. Jerry accepted the offer, and he has been impacting Dell's
business practices ever since. Last year, Jerry was named Information Technology executive of
the Year by Austin AITP. He was honored at a citywide event keynoted by CIO Magazine
publisher, Joe Levy.
Recently, Jerry made an insightful speech to about one hundred IT executives at the regular
monthly Austin AITP chapter meeting. He began his presentation, "Keeping up with Fast
Company", by observing that "working for a High Tech company like Dell is a little weird.
Many of Dell's key vendors are also some of our key customers, and these relationships can be
little challenging". He also noted that at a technology literate company like Dell that "everyone
thinks that they are a CIO". Jerry said that he has given up trying to achieve "hero status" within
the business, and he then admitted that "deep within a IT profession's heart he or she knows that
his or her customers are generally dissatisfied and unsure of the competence of the IT
department". He stated that this situation is probably true for most IT departments in general.
Jerry also pointed out that the IT Department is under constant attack by outside vendors. No
other department in the company faces the "high powered marketing effort which is aimed
directly at information technology". End-users and executives hear a constant drum beat of
marketing messages that something better exists other than the approach now taken by the
current IT department. IT strategy is put into a light of constant doubt by vendors and consultants
all aiming to capture a part of the lucrative IT budget. Jerry referred to these industry "seers" as
"guys with big hats and no cattle".
Jerry also observed that some of the most valuable employees in the company are the "back
room folks who are keeping the operation running". He stated that in can be very easy to
miscalculate the loss a company suffers when one of these people leaves. Jerry remarked that
"there is no balance sheet for human capital loss".
Pulling the Plug on ERP
When Jerry first arrived at Dell, the company was deeply into a floundering SAP
implementation. Many Dell employees realized that the huge software package was not a good
fit, but it took Jerry Gregoire's courage and leadership to actually cancel the project. During his
AITP presentation, Jerry touched on his opinions regarding the current industry trend of huge
ERP implementations.
"I feel that the large packages can lead to complacentcy", Jerry stated, "no changes can be made
to these systems in order to create a technology advantage for the company". He then went on to
point out that "no IT director really wants to implement one - what they really want to implement
is best of breed systems. When we convert our company to a software vendor's vision, we give
up our ability to innovate."
The remark that Jerry made which caught the attention of the press was when he said that "I pray
that our competitors are successful in their large ERP implementations - then we will drive them
crazy with customer innovations using our own technology. Our competitors will find
themselves vendor dependent for these innovations". In today's fast-paced, web-enabled business
environment Jerry makes an important point. With sales being increasing driven by electronic
commerce, he reminds us that the technology behind these changes must remain flexible and
adaptive.
Speed is the Secret Weapon
Jerry continued his presentation by outlining some of the critical concepts CIOs should consider
as they formulate their company's unique information technology strategy. "First, the architecture
strategy must be open and flexible", he stated, "and the applications should bring empowerment
instead of presenting obstacles to the business managers". He outlined a few key characteristics
for a successful IT strategies:
• Common systems should possess a global look and feel.
• Applications should require no training, and they should be intuitive to the end
user.
• Systems should be able to be individually tailored to suit the end user's unique
requirements.
Sound impossible? Don't bet on it. Jerry correctly pointed out that "this is exactly the situation
millions of people encounter when they utilize today's sophisticated Internet web sites". How
much training does a typical Internet user receive before surfing through a new web site? In most
cases: none. This will quickly become the same expectation of business users toward new
business applications.
As the pace of electronic commerce increases, Jerry pointed out the increased need for speed and
flexibility when delivering both in-house and external applications. The ability to quickly deliver
technology at the speed the market demands will be the new corporate "secret weapon" to
capture and retain market leadership.
Dell's G2 Information Technology Strategy
At Dell Computer Corporation, Jerry has put into motion a strategy he has labeled "G2". This
strategy is the product of his vision of preventing "the layering of problems around a broken
core". By using best of breed applications, custom designed technologies with competitive
advantages, and intuitive interfaces for quick implementation, Jerry sees information technology
as providing a huge "value addition" to Dell's operations. Some of the key principals of Dell's
new G2 strategy are:
• Nothing should be limited by size - everything should be scalable through the
addition of servers.
• The principle future application interface should be a web browser.
• Key programming should be done using languages like Java or Active X.
• Message broker technology should be used for application communication and
interfacing.
• Technology selection decisions should be made on an application by application
basis - never accept less than optimal solutions.
• Databases should be interchangeable.
• Where it makes business sense, extend the life of legacy systems by wrapping
them in a new interface.
• Utilize "off the shelf systems" where appropriate.
• In house development should rely on object based technology - new applications
should be made up of proven object puzzle pieces.
Read Dell Business Strategy Secrets (Part 2)
Dell CEO Michael Dell gives his unique insights into the management philosophies now being
employed throughout Dell.