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Dells sales model is a perfect fit for procurement reform

When it comes to General Services Administration schedule sales, Dell Computer

Corp. is the Tiger Woods of government procurement. Just as there is no

other player who burns up fairways and greens like the young golfing phenom,

there is no company that scores GSA schedule sales like Dell.

Consider that it takes a combination of the four companies behind Dell

on the schedule list IBM Corp., Electronic Data Systems Corp., Oracle

Corp. and Gateway Inc. to surpass Dells total sales of $933.5 million

between July 1, 1999, and June 30, 2000. And no one could label those companies

slouches. Dells fiscal year sales has the company within striking distance

of becoming the first billion-dollar GSA schedule holder.

Dell can credit much of its success to the governments push to streamline

the procurement process in the mid-1990s, according to Thomas Buchsbaum,

vice president and general manager of Dells federal division.

There has always been a demand in government for commercial off-the-shelf

products, he said, and the company went to the GSA schedule more than 10

years ago to try to meet that demand. But it was the governments move away

from slow, bureaucratic contracting to emphasizing fast turnaround of orders

that pushed Dell to the top of GSA sales.

"As the federal government streamlined, they looked more to commercial

best practices to see how to get things done," Buchsbaum said. "They looked

to the likes of Boeing [Co.] and other large companies and began asking

how they managed [to buy IT products] without being sued by their vendors

or having contract awards challenged. It just so happened that Dells business

model was designed around selling to large company contracts."

When the government began allowing credit card purchases, Dell really

took off, said Mark Amtower, president of Amtower and Co. That played into

Dells strategy of emphasizing direct marketing at a time when other companies

were not nearly so attached to it. Add solid technology and a growing reputation

for customer service, and the scene was set.

"Dell was in the right place at the right time, with good products and

shipments that very seldom were DOA," Amtower said. "That enabled them to

quickly capture the new purchasing mind-set. It got to where the company

was viewed like the IBM of old no one would ever get fired for buying

Dell."

It also didnt hurt that Dell was one of the pioneers of online purchasing.

Even before the World Wide Web became a major force, the company was shipping

details of its products on floppy disks so that buyers could compare systems.

Dell saw the value of the Web before most other companies and made it easy

for buyers to configure the exact systems they wanted and to order them

online.

The government was an early target of this approach. In fact, one of

Dells first customizable Web pages called Premier Pages was created

to handle GSA business.

Looking forward, Buchsbaum believes there is still plenty of the traditional

product business to exploit. Although procurement streamlining has been

under way for some time, agencies have generally been slow to take advantage

of it, he said, which means Dells direct sales model will continue to have

advantages. And as awareness of the Dell name expands, the company is seeing

increasing success with agencies that have smaller budgets, where sales

of $25,000 and under are the norm.

There are also areas of "dynamic growth" that Buchsbaum feels will attract

more of the companys attention. As the supply of talented employees shrinks,

for example, agencies are looking to companies such as Dell to supply services

that they dont consider part of their core missions. So Dell is increasingly

involved in such things as software image management, in which it configures,

tests and delivers systems fully loaded with software including government-developed

software according to agency specifications.

Electronic government and information security are other potential growth

areas. In Buchsbaums view, security embraces both governments dealings

with the public and actual transactions, such as accepting tax payments

over the Web. Dell shouldnt have to put much effort into developing this

line of business, Buchsbaum pointed out, because the company has a long

history of conducting its own business over the Internet.

"Quite a number of agencies have been coming to us and asking us what

it would take for them to emulate our [online] practices," Buchsbaum said.

"So we see a good outlook for us in helping them with this."

But it will not necessarily be smooth sailing. Other companies are catching

on to what it takes to sell to government in this new age of procurement,

and Dell may find itself slipping in some areas. For example, although the

companys customer service has been rated as one of the best in the industry,

Amtower feels its not as good as it used to be, "contrary to what Dell

wants people to think."

Nevertheless, he added, "I dont see Dell faltering in the next 36 months.

There are just too many variables" that the company still controls.

Buchsbaum doesnt foresee many changes in Dells approach. After all,

why tamper with a winning formula?

"Weve seen changes at Dell, but theyve all been built around that

core approach that has been applied consistently over the years," he said.

"I dont expect us to ever lose sight of that."

Robinson is a freelance journalist based in Portland, Ore.

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