One of the missteps IBM made last century was collapsing their sales model, which was services based, to generate a short-term revenue spike. Up until IBM collapsed their service model into a sales model, the company weathered world and U.S. economic problems better than most, had an incredibly loyal customer and employee base and was thought to be invulnerable. But IBM’s problem was the firm had so saturated the market that revenue growth had flattened. So, to temporarily fix that, they sold the equipment they had been leasing, affecting IBM’s stability and invulnerability to market changes.
Dell APEX effectively brings this model back and should represent the same initial advantages IBM enjoyed. Still, it also promises the same long-term risks if Dell reaches a similar level of market dominance years, or decades, from now.
Let’s talk about the advantages and long-term problems with everything as a service.
Dell APEX: Returning To A Better Past
I started working for IBM when their executive team decided to change course on IBM’s world-leading economic model, which had allowed the company to grow to dominance. IBM didn’t sell mainframes. They rented them and that rental fee came with a lot of services that had several sustaining benefits for IBM and its customers.
Those benefits included a steady income stream to IBM and a steady expense stream for customers, making forecasting and budgeting related costs relatively easy. It created a tighter relationship between IBM and their customers, because the engagement always included services and that tighter relationship led to industry-leading customer satisfaction and loyalty. During this time, the old saying “no one ever got fired for buying IBM” came to be. That level of stability allowed IBM to treat employees better (no need for layoffs), and IBM became a work-for-life company. While salaries at IBM were comparatively low, benefits were high and included pensions, generous travel allowances and very generous relocation packages. It was not only was difficult to competitively displace IBM solutions, recruiting out of IBM was equally problematic.
Dell’s APEX program appears to have advantages that weren’t possible back in the 1980s, with built-in flexibility in billing based on usage and far better tools to assure user productivity and engagement. These were serious problems back in the mainframe era, and mainframes were relatively easy to manage (given their low numbers). The ability of Dell’s tools to manage and secure distributed server assets is market leading.
So benefits include the near elimination of capital expense, operating expense costs that adjust for usage and far higher consistent engagement with the vendor, improving both user and buyer satisfaction and loyalty.
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Model Issues
The problems with this model take a long time to emerge but remain problematic. Vendors can begin to take customers for granted, treating the revenue stream like an actual annuity rather than a customer relationship that needs constant nourishment. Dell does have a defense for this problem in their net promoter score (NPS) effort they inherited from EMC, which puts executives on notice of abusing or mistreating customers. If Dell begins to take these customers for granted, this NPS system should alert out rapidly and force Dell to reverse this type of behavior before it becomes predominant.
As long as Dell continues to use it, this tool will provide the most robust defense against a future Dell following IBM’s path from the 1980s. As a result, as long as Dell can keep customers instrumented and executives accountable for rising or falling NPS scores, Dell, and Dell’s customers, should be able to avoid or indefinitely postpone a customer uprising.
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Wrapping Up
Dell Apex is a game-changing as-a-service offering that cuts across the company, much like IBM’s old mainframe leasing and services program. Dell’s program should have similar benefits to IBM’s, which, until that program ended, was a gold standard for technology companies up through the 1980s. The stability, both for customers and employees, has been missed since then, and Dell’s expected execution of their APEX offering should, over time, give them the same benefits that IBM enjoyed. However, this approach has risks that are mitigated by Dell’s aggressive NPS activity.
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