Q1)What are the key challenges DELL should be concerned with as it enters the large scale server market?
Support service in server market is more critical than in personal computer market, especially when the server is a large scale one, since a problem in server even for a short time could cause serious problem in the customer’s business. Having realized the importance, competitors such as Hewlett-Packard and IBM reduced their response time to enhance the quality of their support service. Dell also is extraordinarily committed to high-quality service, they proposed the response time as short as four hours. In order to accomplish their guaranteed lead time in highly volatile situation, Dell has two big challenges.
(1) They should train number of technicians for a high cost. Support service for servers cannot be mainly depended on call center or service website as Dell did for personal computers.
(2) They have to keep their inventory higher than desired in their operating philosophy where they believed there is an inverse correlation between the amount of inventory and the quality of information.
2. Should DELL outsource the four hour service level support or should DELL provide the service with in-house resources? Why or Why not?
Dell should provide the service with in-house resource if they are to “win” in the server market because it has been successful in personal computer market with the strategy of “Dell direct model”.
The computer manufacturer’s strength in personal computer market was to deliver high quality products and services tailored to meet customers’ needs. Potential corporate customers will consider purchasing Dell’s server expecting the same thing for servers. Just like Kapoor was wondering, the customers will not buy their servers, if the quality of Dell’s products and services were worse than its competitors’.
If Dell outsources the support service, the quality of service and products will decrease for two reasons. First, they cannot keep entire control over the support service if they cannot train their own technicians. As the case says they value the experience in customer interaction resulting in high quality of their service. They cannot expect the same thing from another company who would do the service on behalf of Dell. Second, Dell has been able to improve the quality of its products by directly interacting with its clients and using the feedback from support service. If Dell loses the source of information or compromise the quality of information, the company will have difficulty to maintain its reputation in product quality. The information from the in-house support service will also help to keep its server parts inventory lean, given they can better estimate the needs of those parts with more accurate information.
Of course the company could reduce training cost by outsourcing support service. However, the price elasticity in server market is lower than in personal computer market since the potential problem that can be caused by bad support service and product is critically serious. Reliability is more important than the cost or the price they could reduce by outsourcing and compromising the quality of their service and product.
3. If DELL outsources the service support, then should it use IBM as a vendor to provide the service support? Why or Why not?
Dell should not use IBM as a provider of the support service even if it decides to outsource the service. IBM may seem to be an attractive service provider because they are the one who can do the job the best. The company has more than 135,000 specialists in support service as well as long and extensive industry experience. However, IBM is a competitor in server market, the strongest one considering their market share. Even though IBM is willing to provide service to Dell, we cannot be sure that it will provide the same quality of service to Dell’s customers as to their customers. Furthermore, if IBM could interact with Dell’s customer frequently, there always is a chance for them to take the customers from Dell. The service provider could obtain critical information regarding Dell’s product, which could also be a cause for competitive loss for Dell. Again, Dell should not lose its opportunity to directly interact with their customer especially to their worst enemy in order to win in the market.
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