Mad Dog 21/21: The Post Office And Dell, Delivering Less, Hoping For More
February 18, 2013 Hesh Wiener
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Blame spreadsheets and those who worship them. That’s how to explain the Postal Service dropping Saturday mail delivery and Dell going private. In the case of the USPS, the destructive effect of confusing MBAs with education is obvious to everyone except the technocrats in charge. In the case of Dell, the danger of damage is just as apparent, but the hubristic bean-counters leading the retreat from exposure imagine they will reap huge rewards even as others suffer. In both cases, irritated customers will strike back. The instigators of these tragic follies will learn what Pyrrhus learned. The USPS and Dell both are having difficulty adjusting to the impact of the Internet. In the case of the Post Office, email and paperless billing directly compete with individually addressed mail. Offsetting this is the rise in package deliveries due to the growing popularity of online shopping. The risk to the USPS, should it lose favor with customers, is that other carriers will pick off the parcel business that right now looks to be the most significant opportunity immediately available to the USPS. In the case of Dell, which gets about half its revenue from desktop and laptop PCs, mobile devices boosted by cloud services have intercepted quite a lot of demand. The rapid shift seems to have caught Dell by surprise, possibly because Dell’s customers, 80 percent of them commercial or public sector organizations, have been overwhelmed by the pace at which their employees prefer smartphones and tablets to traditional PC clients.
The enthusiasm with which even the most conservative corporate end users have embraced mobile computers shouldn’t have surprised Dell and its key software supplier, Microsoft. Users just don’t love Windows and its applications, and some of them actually hate that stuff. They prefer the friendlier apps that run under iOS and Android. And even when they use mobile apps that are more or less the same as PC apps, such as email, they seem to prefer the Applefied and Googlized variations. These users don’t particularly care where servers are. They have no preference for glass house versus cloud hosting for whatever lies at the far end of the wire. Just like many IBM i shops may not have a preference for IBM’s System x machines for their Windows and Linux workloads and may in fact be using Dell iron for a lot of their work. Dell’s server and storage customers, who provide more than 20 percent of Dell’s revenue, may be as loyal to Dell as they are to the suppliers of bigger iron like IBM Power Systems running IBM i and System z mainframes. But to the extent their careers depend on pleasing their end users and corporate masters, they may not be able to stick with familiar choices when those choices stand in the way of more alluring styles of user support. Dell needs to find a way to make its offerings as attractive as anything coming out of the ether, and it may take more than a fresh skin on Windows do to this. Users just aren’t that easily fooled, not when they’re so dramatically exposed to alternatives via their personal phones and tablets.
Dell also faces a very serious problem selling client devices, one that it had mastered in the past using methods that no longer work quite as well. Dell won over corporate PC buyers by figuring out how to make it easy for IT executives to select and support PCs and laptops. For enterprise customers, Dell built customized versions of its sales web, enabling managers at client corporations to specify a group of machines and configurations and then, after that was all set up, letting end users (and workgroup managers) at those corporations to order machines from the roster of approved devices. That kind of marketing brilliance put Dell on top. For a long time, Dell stayed on top, even when its key rivals caught on and copied Dell’s tricks. Then along came BYOD and Dell became petrified, like a deer caught in headlights. Year after year the smartphone and then the tablet markets ran away with the revenue Dell once claimed (and did the same in the case of Hewlett-Packard and other PC suppliers). So far, Dell hasn’t adapted its strategy to the changing market, and neither has HP. It’s too soon to say much about Lenovo, which may become the world’s top corporate PC vendor if the Taiwanese Two, Asus and Acer, don’t successfully marry. And the whole bunch of them look silly compared to Apple, which, perhaps reluctantly, is willing to sacrifice its PC business on the altar of iTunes, and Amazon, which, with its Kindle, is the content vendor of choice for people not enslaved by deus ex earbud. Dell might have had a fighting chance if it had developed organs that put in touch with end users, the way Apple has done with its fabulous stores. But Dell’s managers, right up to founder and perpetual enchilada Michael Dell, just don’t want to soil their paws shaking hands with customers. Not only should Dell have built stores, it should have made its top managers and directors work in those outlets, talking to the folk that could have made and now have broken Dell’s future.
Dell isn’t alone in its crime against sense. The USPS is putting itself on deathwatch, too, not as its detractors claim by squandering money but rather by squandering public affection. For most ordinary people, by which we mean working adults, the only real contact with the Postal Service comes on Saturday, when there’s a good chance a mail recipient will meet and greet his postal carrier. The contact is an opportunity for the USPS to win hearts, minds, and shipping business. It’s a very nice thing. Because they come to our homes, postal carriers are woven into the fabric of communities, like teachers and librarians and cops and municipal service workers. Removing the USPS thread will weaken that fabric and alienate citizens from their mail service and in fact their communities. While there’s no question USPS has to be made more efficient, killing off Saturday home deliveries is the saddest, dumbest, nastiest, and most destructive tactic possible. It is as boneheaded as Dell withdrawing from public ownership when its weakened connection to corporate customers and their internal end user customers looms large as a strategic threat not merely to its growth but to its very survival. What Dell or at least Michael Dell thinks is so smart about going private is that it will reduce the amount of information the company is obliged to disclose. So if, for instance, its consumer PC business, which provides about a fifth of the company’s revenue, is losing money, as it does, Dell won’t have to answer to a lot of crabby shareholders about its incompetence. What alternative does Dell have? Well, maybe the company ought to figure out how to make money off consumers, which Apple has proved can be done (but not easily), and in return learn from fickle, stingy, demanding but nevertheless innovative consumers what today’s personal device market feels like. This might be handy in case tomorrow’s corporate market resembles today’s consumer market, which it very well might. A company with sharper managers than Dell apparently has might look at that agonizingly difficult fifth of revenue as the school of hard knocks that will teach it how to other four-fifths is going to behave. And if the lessons don’t apply to all the other four-fifths of Dell but only to the 30 percent or so that is represented by client devices sold to business users, well that might not be such a bad thing. But of course it is possible that I am wrong once again. It is possible Dell has a plan that will work and that this plan requires the extra secrecy only a privately held company can enjoy. Maybe that plan is the one I have heard whispered about in Austin (except during SXSW season when nothing whispered there can be heard over the din). Here’s that rumor: Dell will save itself by repositioning the indigestible services businesses, Perot Systems, it ate three years ago. It will get out of the trade that long since migrated to India and enter a field with lots of promise, one that will soon enjoy huge pent-up demand: Saturday mail delivery.
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