By routinely underselling its competitors, Dell has become the top PC manufacturer in the world, the second-biggest maker of laptop computers worldwide, and earned the fifth position in worldwide server revenue, according to recent figures from IDC.
In achieving these lofty market positions, Dell's low-cost build-to-order manufacturing model and resulting low prices have been a primary catalyst in the commoditisation of the PC, laptop and server hardware markets.
Dell's manufacturing model has the potential to cripple the already weakening profit margins of the high-end storage and networking hardware markets. But the company is reluctant to enter this space on its own, a move that has contributed to Dell's absence on the top five list of storage vendors by revenue compiled recently by Gartner/Dataquest.
"Our strategy for the company hasn't changed," said Bruce Kornfeld, Dell's director of storage product marketing. "We look to solve customer business problems, and right now there is the opportunity for solving Windows or NT storage problems inside corporations."
Some experts believe Dell could be positioned to gain a foothold in the enterprise switching market - long the stronghold of titans such as Cisco Systems and Nortel Networks - because of a levelling out of the playing field.
"Standardisation [in the Ethernet switching market] has occurred," said Dell spokesman John Weisblad. "That's the first step toward commoditisation. And when a market commoditises, Dell historically does well selling into that space."
But here again, Dell prefers to play in the small to medium-sized product categories.
"We prefer not to sell the high-end enterprise switches, but we connect to them," said Kornfeld, who added that Dell's PowerConnect line of switching products are aimed at small business customers looking to deploy small-area networks.
A key factor in Dell's market position in the storage and switching arena is that it does not commit large portions of its revenue to research and development. The company resells a number of products, from Fibre Channel switches built by Brocade, to high-end 32-way servers built by Unisys.
"Our stated strategy for much of our product line is to OEM components that don't make sense to design in-house," said Kornfeld. "Our philosophy is we leverage our partners' R&D as much as possible."
This philosophy could allow Dell to enter the high-end server market through a possible resale partnership with enterprise storage giant EMC, according to Moody's Financial Information Services.
Rumours of Dell moving into enterprise switching also make sense because of the difficulties that more established switch makers face, according to Brooks Gray, an analyst with Technology Business Research.
"The market's already commoditised," said Gray. "Dell will attempt to go for some volume. It's going to take time, and we'll see what kind of progress they make over the next year. Historically, vendors entering this market haven't succeeded. But Dell's management and the value proposition they bring to the market gives them a better chance of succeeding."
Gray predicts that the company might bundle its switches with low-end servers.
In September, Dell made its first foray into the switching market, unveiling its PowerConnect line of switches aimed primarily at small to medium-sized businesses. The line includes four products, led by the high-end PowerConnect 5012, which boasts 10 Gigabit Ethernet copper ports and two GBIC (Gigabit interface converter) slots, as well as virtual Lan support.
At the moment, however, Dell has no plans to roll out enterprise-class switches.
Dell's PowerConnect switches are a "test run" for a more ambitious bid for the lucrative enterprise market, said Gray. But in the meantime, the company has an opportunity to achieve volume in the small to medium-sized market, because it has a large server base in small businesses, and its hardware and services value proposition continues to improve, added Gray.
This was first published in October 2001