by Meridith Levinson

Inside Dell’s Turnaround Effort

Feature
Sep 18, 20077 mins
IT LeadershipIT Strategy

Steve Schuckenbrock, the computer maker's CIO and president of its services business, tells how IT is at the center of Dell's pursuit of consulting contracts, acquisitions and supply chain improvement efforts.

Once the number one PC maker in the industry, known for its outstanding customer service and well-oiled supply chain, Dell is now struggling to win back the confidence and admiration of Wall Street and its customers. The company reported disappointing quarterly financial results in 2006, lost market share and its title as the largest computer manufacturer in the world. It’s now number two behind HP. Also in 2006, the SEC began investigating the company’s accounting practices. (In August, Dell acknowledged that it had falsified quarterly financial statements from 2003 to 2006 to meet Wall Street’s expectations.) More recently, the company has had its hands full dealing with irate customers whose orders for flashy new laptops have been repeatedly delayed due to paint and display shortages.

Oh how the mighty has fallen. Dell is now at the center of a very public turnaround effort.

Steve Schuckenbrock is playing a key role in Dell’s revitalization. As CIO and president of the company’s global services business, he’s responsible for several components of Dell’s turnaround strategy: expanding the Round Rock, Texas-based company’s $5 billion enterprise consulting and managed services offerings, overseeing the integration of companies Dell acquires into its IT fold, making it easier for customers to do business with Dell by standardizing on business processes, and building the systems that will support Dell’s new retail business with Wal-Mart. Schuckenbrock, who reports to CEO Michael Dell, joined the company as its senior vice president of global services in December 2006 from EDS, where he was co-COO. He recently assumed the CIO role after previous CIO Susan Sheskey retired on August 10, 2007. Schuckenbrock moved to EDS when it acquired his previous employer, The Feld Group, where he served as COO. He previously held the CIO role at Pepsico and Frito Lay.

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Schuckenbrock tells CIO why he joined the beleaguered company, discusses his role in the turnaround and shares lessons learned from the laptop debacle.

CIO: How did the opportunity to join Dell as its senior vice president of global services come about for you?

Schuckenbrock: Michael called me and asked if I would be interested. I told him I’d be glad to talk about it.

What was the draw for you?

Schuckenbrock: The opportunity to do something new with the services model that not many companies other than Dell can do because of its direct relationship with its customers. Global services is a $5 billion business at Dell. Two-thirds of that is warranty support type work and the other third is a mix between professional services, consulting and managed services where we manage our clients’ distributed infrastructure. (For example, we manage 170,000 workstations for Boeing and do similar work for Citigroup, Unilever and AXA.) We think we can grow professional services much more significantly.

Dell has historically sold hardware and is [now] placing a significant emphasis on selling solutions. We’re building a consulting capability to help our customers optimize x86 in their environments. Most CIOs run their companies off of the x86 infrastructure. We believe we can provide our customers, especially our small and midsize customers, with a lot more than hardware. We can help them manage their infrastructure, provide patch management and software distribution management.

When did you take on the CIO role in addition to your services position?

Schuckenbrock: When Susan [Sheskey] retired. The executive leadership team didn’t want to wait to hire a replacement for Susan or bring in an unknown. I told them I’d do it. I took on both roles.

Being CIO seems very different from being president of the services business. How do the two roles match up? Are there any synergies between the two roles?

Schuckenbrock: The global services strategy is very dependent on IT. The infrastructure we run Dell on is the same optimized x86 infrastructure that we expect to provide for clients.

As CIO, what’s your role in Dell’s turnaround? What specifically are you doing to get the company back on track?

Schuckenbrock: Driving to consistent business processes and consistent systems that underpin those business processes globally. Consolidating our infrastructure to fewer, larger [data] centers. And building new systems’ capabilities. For example, we’re now selling directly to retailers. Wal-Mart is our first major retail customer. So we need our own point of sale capability. We need the ability to do store order and just-in-time planning and inventory management. We need to do more sophisticated work around price optimization in retail.

Are the efforts to consolidate infrastructure and standardize on business processes cost-cutting moves?

Schuckenbrock: Global consistency is not about cost savings. It’s about serving customers better. If a customer wants you to do something for them in Europe, they expect you to do it the same way that you do it for their business in Asia or the U.S. That is something we have to get much better at.

Dell is also looking to grow through acquisition. Will you play a role in those activities?

Schuckenbrock: We’ve made three acquisitions in the last three months. [ZING Systems, ASAP Software and Silverback Technologies ] IT is a very important part of the integration process, and we expect we’ll do more as we go forward.

Dell has had some problems getting its new line of colorful notebooks to market due to paint and display shortages—and the overwhelming demand for the product. How are you using IT to address that?

Schuckenbrock: We’re grateful for the demand, and we are working as hard as we can to deliver on our normal fulfillment cycles. Matching demand forecasts with supply all the way down to the component level is a very IT intensive process, and we’ll do anything we can to get better at it.

Didn’t Dell have the forecasting systems in place to realize demand would be so great?

Schuckenbrock: We had them in place. I think they worked properly and everybody would say we saw more demand for new very exciting products than we anticipated. When you get that level of demand with the degree of customization around paint colors you sometimes miss your predictions. We’re recovering pretty well. We certainly have taken stock of our learnings and built them into our plans to make sure we don’t have the same problem in the future.

What are the lessons learned?

Schuckenbrock: We could have had better buffer systems for the great demand we were fortunate enough to receive. For example, we needed the ability to queue up enough inventory in areas like colors where we had uncertainty [about the demand] so we can flex more easily. Also, we could have had better alignment between the business and IT in where and how we plan new product introductions and where and how we plan inventories. We assumed what worked in past would work in the future.

Dell admitted in August that it had falsified quarterly reports from 2003 to 2006 to make it look like the company was achieving its sales goals. Wasn’t Sarbanes-Oxley supposed to prevent this kind of thing? How did this happen?

Schuckenbrock: I really don’t want to comment on that. There are people who are closer to it than I am who are more qualified to comment.

You must be playing some role as CIO to enhance or put in place the financial controls necessary to prevent such fraud from happening again in the future?

Schuckenbrock: Absolutely. It’s one of the most important aspects of all of the systems development we’ll do going forward.

Can you tell me something about Michael Dell that no one really knows about him?

Schuckenbrock: I don’t know if I can. He’s pretty transparent. He’s smart. He pushes hard. He asks tough questions. You need to be prepared when you present an idea to him because he always already had that idea and two others you haven’t thought of.

I’m amazed we’ve been able to cover this much ground in 21 minutes.

Schuckenbrock: That’s how I do two jobs.