Seven Questions for Stephen Schuckenbrock, Dell’s Head of Services

When you think of Dell, you probably don’t think much about IT services. And, frankly, when you think of IT services, you probably don’t think first of Dell.

Steve Schuckenbrock’s job is to change that. Last year, Dell named him president of the company’s Global Services Solutions Group, and his assignment is nothing less than to build Dell into the kind of IT services company that can compete with the likes of Hewlett-Packard, IBM and Accenture. Dell’s biggest move on that score came in 2009, when it spent $3.9 billion on Perot Systems.

And services is part of the big transformation that CEO Michael Dell is leading at the company that bears his name, and about which he talked with AllThingsD earlier this summer. Dell’s future is less about the PC around which the company was founded, and more about being a well-rounded player in the Enterprise IT business, and that includes services.

Before coming to Dell, Schuckenbrock was co-COO at EDS, the IT services company that HP acquired for $13.9 billion in 2008. That unit has taken a lot of lumps in recent months from current HP CEO Meg Whitman, who has said she wants the group to focus on more profitable deals. When I sat down with Schuckenbrock earlier this month, naturally, I couldn’t help myself from asking about that first. But his reflection on the troubles there are closely tied to his view that the IT services industry is changing fundamentally in ways that Dell is uniquely qualified to meet.

AllThingsD: Steve, given your history at EDS and the things that HP’s current management has been saying about it, I have to ask what you think about the challenges there?

Schuckenbrock: I was co-COO at EDS six years ago, and I left before the sale to HP. So I have a lot of history with it. I left to basically start up the services business at Dell. It has a lot of wonderful people, and a really good culture of walking through walls for customers. And these kinds of businesses, you can kind of push that culture to the edge once, which Dick Brown (CEO of EDS 1999-2003) did, and then you can pull it back, and then you can push it again, and at some point it becomes hard to fluff that pillow back up. It began even before HP bought it, where there was this emphasis on cost, cost, cost, and you just can’t sustain that for six or seven years in a row. At the end of the day, through that cultural issue, you have an industry that’s changing dramatically, where the kind of big, custom, traditional outsourcing deals are kind of dinosaurs, and those have been the bread and butter of the business. And so when I spearheaded Dell’s acquisition of Perot Systems, we wanted to buy a company that was big enough to give us credibility, but small enough that we could change it. Yesterday’s model is quickly dying.

So are you essentially running the old Perot Systems?

It’s part of what I do. When I first came to Dell, I put everything in services together as one team, and then we globalized everything, so when you a buy a notebook in the U.S. and you happen to be in India, we know where you are, and we can fix the machine. We couldn’t do that in the past. We ran things in India one way, and in the U.S. another, and in Europe a third way. So we fixed that in the first year or two. Then we acquired Perot, and that built other legs of the stool within the services business. I left services for awhile, and ran sales for large enterprises. And then I went back to services.

And how big is services as a percentage of Dell’s business?

It’s about an $8.5 billion business, out of about $60 billion and change for all of Dell.

Let’s talk about this shift in model you brought up. What do services companies need now?

One of the things that attracted me to Dell a few years ago is that it’s a machine. Behind the 30-million-odd devices that we support is a really great standards-based machine. And our support services for our commercial customers has been ranked number one by TBR for something like 30 of the last 36 quarters. It has a really long track record of support. When you look at the big outsourcing contracts, they tend to be very customized, and so you do different things for each customer. And it’s generally driven by the large company’s view of the so-called “best way of doing things.” Well that customization worked in the old way, when margins were at 30 to 35 percent. When you start pushing margins into the teens and add in the capital intensity and then the risk profile of those contracts, it only takes a few bad deals to fundamentally break a good company. As x86 (systems based on chips from Intel and AMD) has become the dominant compute platform, services can start looking more like the machine that we have in the support business. Not identical, but more like.

How are they similar and how are they different?

Our field services are exactly the same, whether it’s for an outsource customer or our support services. Our service desks are run almost exactly the same as our support desk, with the exact same set of tools. I can get a lot of leverage from a call center with 30,000 people working with a customer that may only need 100. That’s a lot of leverage from a profit standpoint and a quality-of-service standpoint, because I don’t have to reinvent the wheel every time. So I think what Meg is saying about HP and EDS, and what I’m saying about Dell, is that we both want to go after customers that embracing a new compute model, and help them on the journey to get there. Customers who just want me to do it their way, but cheaper, I’m not so interested in. So you’ll see words like “cloud,” and “remote infrastructure” showing up in the services business, and “customization” will be a word from the past.

Are the customers getting it, or are they still fighting battles from the last decade?

Not only are the customers getting it, but they’re starting to push us, which is a good thing. About three years ago, I would talk to customers about all this standardization, and they would say it was more theoretical than practical. Today, it’s not. The cloud is standardized. When you access the cloud from a device, you don’t care whether the services are running on a Dell server or someone else’s server. What you care about is that you get the service that you want. It used to be that when you went to a customer, you had to do everything to their standards and specifications. Customers now say they want a service, and they’re less concerned with how it gets delivered. And that fundamentally shifts the model.

So why would a big company then choose Dell over HP-EDS or IBM?

I recently visited DuPont, which is a new customer, and they basically boiled it down to innovation, a conviction about the new computing models I talked about, rather than clinging to remnants of the past. And that’s sort of built into our DNA at Dell, because we’ve never been anything other than x86 and so we’re kind of wired to walk into the conversation and disrupt the old way of doing things. We also recently won a deal with CoreLogic, which provides all the real estate information for multi-listing services. And you can imagine how data- and storage-intensive that business is. And I won’t name the companies we were up against, but you can probably figure them out. And what the other guys proposed to do was to keep them running on the systems they already had. We proposed migrating to an x86-based big-data platform, and moving all their applications off mainframes and onto x86. We’re using our IP to help them move, and our storage technology that we’ve gotten from the various acquisitions over the past few years. So it’s another example of leaning into the future, as opposed to leaning into the past. Those are the kinds of deals I’ll do all day long.