BMW becomes latest corporate to be won over by Dell's aggressive pricing strategy

Car giant signs £10m global deal for new desktop and laptop computers.

Car giant signs £10m global deal for new desktop and laptop computers.

German car manufacturer BMW has become the latest large enterprise to sign a major hardware deal with IT supplier Dell, whose competitive pricing appears to be striking a chord with users.

BMW Group has signed a $16.6m (£10m) global desktop and laptop hardware deal with Dell and chosen the firm as its primary supplier. The 13,000 Optiplex desktop PCs and 4,000 Latitude notebooks will be installed by the end of 2003, with Dell helping pre-configure and install the kit to BMW's requirements.

Other corporates have also chosen Dell in recent months. In April, the BBC signed a three-year contract with Dell for the supply of PCs and laptops for more than 25,000 users, as well as high-end Precision 650 workstations. Last September, British Airways signed a three-year, multimillion-pound deal with Dell for notebooks and desktops in a bid to standardise on a single desktop platform. Another firm that chose to standardise on Dell recently is pizza delivery chain Domino's Pizza.

"At the moment, Dell is on a roll," said Tony Lock, chief analyst at Bloor Research. He said the timing of the supplier's strategy is impeccable because a lot of companies carried out upgrades around 2000 and are now considering their next upgrade move.

"It is really a matter of size, and over the past 12 months Dell has focused very hard on providing the kind of customer service these large enterprise customers demand," said Lock. "The company is becoming much more of a one-stop shop. Now customers can get everything from Dell, and that makes account management easier for its customers."

Dell reported an 18% increase in revenue in its first financial quarter, with net profit for the period ending 2 May of $598m (£369m). Revenue came in at $9.5bn, up from $8.1bn the previous year, helped by strong growth in Europe, the Middle East and Africa, where sales grew 29%. Dell has predicted strong second-quarter revenue growth of 15%.

As part of an aggressive strategy, Dell has also launched low-cost printers and PDAs. It has an ongoing storage alliance with EMC, is active in the server space and is improving the services it offers to its customers. In May the company moved to drop the word "computer" from its name and replace "Dell Computer Corporation" with "Dell Inc" to reflect the fact that it is now more than just a notebook and PC supplier.

One attraction of buying Dell hardware is the competitive prices. "Every IT project has to cut costs or make more money - preferably both - and it has got to happen quickly, and Dell has extremely competitive offerings," said Lock.

While it has account managers for its larger customers, a cornerstone of Dell's strategy is that it sells direct to customers and bypasses the reseller channel. This approach has ruffled some feathers in the channel but it saves the firm money and helps it to be competitive on pricing.

Another key Dell strength, as in the BMW deal, is its ability to pre-configure hardware to a customer's requirements after it gets the order, enabling the customer to have uniform kit across the enterprise and minimising effort on the part of the user. "That is something Dell is very good at," said Lock.

Analyst firms IDC and Gartner said Dell led the market in terms of the number of PC shipments in the first quarter of this year. The market-leader position has regularly swapped between Dell and Hewlett-Packard over the past few years but Dell finally appears to be putting some ground between it and its rival.

Earlier this year the firm's chief executive Michael Dell said Dell was aiming to capture up to 40% of the worldwide PC market. While this might sound like a hollow boast, Lock is not so sure. "I wouldn't say it is impossible. Dell is very efficient at building PCs and it has a very efficient supply chain."

Companies that have chosen Dell

BMW


This month, motor manufacturer BMW Group signed a $16.6m (£10m) global desktop and laptop hardware deal with Dell, making the firm its primary supplier.

BBC

In April, the BBC signed a non-exclusive, three-year deal with Dell to supply PCs for more than 25,000 users. The deal included Precision 650 workstations and standard desktops and laptops.

Domino's Pizza

Last month, Domino's Pizza announced it was standardising on Dell hardware, including Poweredge Servers and Optiplex desktop PCs. Domino's aims to double the number of outlets it has in the UK - currently more than 250 - each of which has between six and 10 desktop computers and a PC and server in the back office. Domino's is also looking at giving store inspectors Dell's new Axim Pocket PCs by the end of 2003.

British Airways

In September 2002, British Airways signed a three-year, multimillion-pound deal with Dell for notebooks and desktops in a bid to standardise on a single desktop platform. The deal also included services.

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