Buying a PC Online: a 2015 Saga of Customer-Service Inefficiency

In this open letter to Michael Dell, CEO at Dell.com, we relate the saga of a friend I’ll call Russ and his journey to buying a replacement PC online.

Plan A: Lenovo Chokes
Russ had an old, Lenovo one-core AMD workhorse desktop upgraded to Windows 7 awhile back. The box got slower than molasses. After all the usual speed-up remedies failed, Russ decided to buy a new desktop. We consulted as I do for (too) many friends and decided on a modest machine with a solid-state disk. Russ went online and configured-to-order in early November. Problem solved ….

But not quite. Lenovo quoted a delivery date, and when December rolled around, Russ queried when was his new PC going to be built and shipped. The answer was “We don’t know, but hold tight.” Russ replied, “Not good. Cancel the unfulfilled order.” Lenovo said, and I paraphrase, “You can’t cancel the order because we have released it to our manufacturing supply chain in China. It will arrive when it is built and shipped.” Russ called American Express and put the charge on indefinite hold in case it actually arrives some day.

Moral: 1. Don’t take an order you cannot fulfill. 2. Don’t leave a customer hanging.

Plan B: Dell Gets to Bat
With a little coaching, Russ found what he wanted at Dell.com: an Inspiron desktop without an SSD but with a decent Intel “Haswell” Core i3 processor, 4GB of memory, and a 1TB hard drive running Windows 10. Price was US$449 with free shipping. The clincher was same-day shipping.

The Unboxing: a Moment of Silence and Sadness
The new PC arrived in four days. I came over Sunday morning with assorted tech bits so we could hook up the new Inspiron and to run Microsoft’s sweet Windows Migration Tool to get it into production. Popped open the chassis, added 4GB of memory, closed the chassis, connected the cables and hit the power-on switch.

Nothing happened. Nada. The PC would not power on in spite of trying different electrical sockets and AC cables. It was a 2015 PC Dead on Arrival.

We were sad but not completely surprised as these things happen — presumably very rarely because of the Dell costs to swap a DOA machine. So, we called Dell Tech Support to get started.

Tech Support: Call Triage
It took eleven minutes to wait on hold, enter the PC service tag, explain to the tech we had a DOA machine that we wanted to swap. The information requested included the service tag, serial number, name and address, and other bits of information — all of which is already stored in Dell’s order entry system but was nevertheless verified and keystroked again into the service system.

We made it through triage and onto tech support’s call resolution team.

Tech Support: Call Resolution Team
This call took eighteen minutes, with most of the time spent on hold at the end waiting to be transferred to Sales. The business-process problem with the call resolution phase is simple: the department is a separate information silo from call triage, and no call or problem data is shared.

Russ had to literally spell out the same answers to information questions including the service tag, serial number, order name and address, and other bits of information that had already been amassed at order-taking and call-triage. Besides boring the customer to tears, the process is a poor use of tech support labor.

Reassuring us that the four-day-old PC was still under warranty, call resolution rang off to run down the DOA return process. After seven minutes, we were told that Sales handled returns and “please hold while I transfer you to that department.”

Sales Support: Waiting for Godot
And we waited some more with occasional call-tree clicks that eventually ended with a recorded message saying “Sales is closed on Sundays, so call us during business hours tomorrow.”

Customer time to non-resolution of a DOA problem: more than 30 minutes. Russ was pissed. I went home to lunch.

Luncheon Epiphany
I often skim the Sunday newspaper advertising inserts to keep track of technology mainstream deals and product positioning. For example, Intel’s Broadwell and Skylake 14nm processors only recently started being featured in PCs at BestBuy, and are still not being advertised at Wal-Mart, Target, Staples, or OfficeMax.

That’s how I found the Staples ad for a Dell Inspiron 1300 desktop with a Intel “Haswell” Core i3 processor, 8GB of memory, and a 1TB hard drive running Windows 7 Pro. Price $300, marked down from $580, and $150 less than Dell.com’s almost identical DOA PC.

I telephoned Russ, he picked the PC up that afternoon, and the migration was well underway on Monday morning. The DOA machine goes back to the Dell factory tomorrow.

Dear Michael,
I silently applauded your taking Dell private because the mature PC industry in a slowing global economy does not need a quarterly spotlight on top of all its other challenges. I expected lots of value could be wrung out of the business with greater efficiencies and focus on key business processes. Dell has been a build-to-order online specialist for, like, thirty years.

So, I was disappointed that Dell’s DOA process involved so many steps across organizational and information silos that cry out for a rethink. I hope you’ll take this missive to heart. You know what to do about this.

No, It’s Not Just Dell and Lenovo …
HP has no laurels to sit on. Even Apple has disappointed me on more than one occasion. As this saga illustrates, the PC industry can do better on customer satisfaction.

The future of personal information technology is not one-size-fits all. It’s “buy what you need and want”. That’s going to take a holistic approach to online sales and service. You would have thought that would be old-hat going into 2016, but apparently not.

Follow @peterskastner on Twitter

Dell Inspiron 3000 Desktop

Enterprise Computing Jumps on the Supply-Demand Curve

The traditional enterprise computing server suppliers are in an ever-faster game of musical chairs with cloud computing competitors. Recent cloud price cuts will accelerate enterprise adoption of the cloud, to the economic detriment of IBM, HP, Oracle Sun.

Many IT executives sat down to a cup of coffee this morning with the Wall Street Journal opened to the Marketplace lede, “Price War Erupts in Cloud Services.” Cloud computing from the likes of Amazon, Google, and Microsoft is “changing the math for corporate executives who spend roughly $140 billion a year to buy computers, Internet cables, software and other gear for corporate-technology nerve centers.” This graphic begs the question,

50 Million Page View Web Site Costs“Gee, maybe my data-center computing model for the company needs a strategic re-think?” And while there’s a very active consulting business by the usual business-transformation consulting suspects, the no-cost answer is: yes, cloud computing is a valid model that most enterprises and applications should move to over time.

This blog post, though, is not about the nuances of cloud computing today. Rather, we need to take a look at how the supply-demand curve for enterprise computing must impact the traditional enterprise server business — hard. (And yes, I am breaking a vow made during Economics 101 to never mention economics in polite company).

Cloud computing is sucking the profits out of the traditional server business.

For over fifty years, in the case of IBM, the traditional server companies including HP and Sun sold big iron, proprietary operating software and storage, and lots of services at high margins. In the past two decades, Intel’s mass-market silicon evolved into the Xeon family that took away a large percentage of that proprietary “big iron”. Yet the Intel specialist firms such as NCR and Sequent never could beat the Big Three server suppliers, who took on Xeon-based server lines of their own.

Cloud computing is sucking the profits out of the traditional server business. IBM is selling its Xeon business to Lenovo, and is likely to considerably reduce its hardware business. Oracle’s Sun business looks like a cash cow to this writer, with little innovation coming out of R&D. HP is in denial.

All the traditional server companies have cloud offerings, of course. But only IBM has jettisoned its own servers in favor of the bare-metal, do-it-yourself offerings from Amazon, Google, and lately Microsoft.

Price-war-driven lower cloud computing prices will only generate more demand for cloud computing. Google, and Microsoft have other businesses that are very profitable; these two can run their cloud offerings lean and mean. (Amazon makes up tiny margins with huge volume). To recall that Economics 101 chart:

Supply-Demand Curve

The strategic issue for IT executives (and traditional-supplier investors) is what happens over the next five years as lower server profits hollow out their traditional supplier’s ability to innovate and deliver affordable hardware and software? Expect less support and examine your application software stacks; you’ll want to make migration to a cloud implementation possible and economical. The book isn’t even written on cloud operations, backup, recovery, performance and other now well-understood issues in your existing data centers.

Meanwhile, what are your users up to? Like PCs sprouted without IT blessings a generation ago, cost-conscious (or IT schedule averse) users are likely playing with the cloud using your enterprise data. Secure? Regulatory requirements met? Lots to think about.

Follow me on Twitter @PeterSKastner

Apple’s FY-2013: Where’s My MacBook Touch?

First, by the numbers for FYQ4-2012 reported this week:

Overall:

– Apple reported quarterly revenue of $36 billion and net profit of $8.2 billion, up from $28.3 billion and $6.6 billion year-over-year, respectively

– Gross margin was 40%, compared with 40.3% in the year-ago quarter

– International sales accounted for 60% of total quarterly revenue

– Apple closed the quarter with $121.3 billion in cash, an increase of over $4 billion

– For FY 2012 Apple generated $41 billion in net income and more than $50 billion in operating cash flow

Mac:

– Apple sold a record 4.9 million Macs, a 1% increase year-over-year (IDC puts growth of the global PC market at -8%)

– The Mac has now outpaced the rest of the PC industry for more than six years

– Portables made up 80% of the quarterly Mac mix

– This week announced an all new iMac, new Mac Mini and MacBook Pro 13-inch with Retina display

iPhone:

– Apple sold 26.9 million iPhones, up 58% year-over-year (IDC’s estimates 45% growth for the global smartphone market)

– iPhone sales in Greater China grew by 38%

– Working hard to meet iPhone 5 demand, which is not yet in line with supply — same good problem as iPhone 4S a year ago

iPad:

– Apple sold 14 million iPads in the quarter, up 26% year-over-year

– Sold its 100 millionth iPad

– iPad is now being deployed or piloted by 94% of Fortune 500 companies

– iPad sales in China are up 45%

iPod/Music:

– The iTunes Store generated a new revenue high of almost $2.1 billion in the quarter

– Apple sold 5.3 million iPods, compared with 6.6 million in the year-ago quarter

– iPod touch continues to make-up over half of the iPods sold, and iPod maintains 70+% share in the US, according to NPD

– Sold 2.1 million Apple TV units in the quarter, totaling more than 5 million for the fiscal year

iOS/App Store:

– There are more than 200 million devices running iOS 6 just one month since its launch

– There are more than 700,000 apps in the App Store, with more than 275,000 designed specifically for iPad

– Customers have downloaded more than 35 billion apps

– Apple has paid over $6.5 billion to developers to date

Retail:

– Apple retail stores generated record results of $4.2 billion in revenue, an increase of 18% year-over-year

– Opened 18 new stores in 10 countries in the quarter, including our first store in Sweden and second in Hong Kong

– Our stores hosted 94 million visitors in the quarter, vs 77.5 million in the year-ago quarter

– Apple retail stores sold a record 1.1 million Macs

What’s Missing From Apple’s FY-2013 Product Portfolio?

Apple’s fiscal 2013 first quarter is the holiday season of 2012. What’s missing from the newly enriched Apple product portfolio?

First, Apple has basically exited the workstation business by failing to keep the Mac Pro within a generation of Intel’s Xeon technology. There’s really no excuse for not keeping up, but like the xServe server product, when Apple is ready to exit a market, it strangles it first. A Mac Pro update to the Xeon E5-2600 generation would be a step in continuity.

Second, there’s now a significant divergence between the (old and frayed) Intel/Microsoft alliance and Apple. For the first time in five years since the first MacBook Air came out, Wintel offer more advanced laptops and all-in-one desktops. That’s because with Windows 8 laptops and all-in-ones can use a touch-sensitive display with gestures ala Apple iPad. In fact, new convertible laptops such as Lenovo’s Yoga can be either a tablet or a laptop depending on the mood or application of the user. Dell, HP, Acer, Asus are also in the touch laptop market with the Windows 8 launch, and they too are doing convertibles.

Reprising the 1980s, I want my MacBook Touch.

Third, Apple has dropped the ball on merging iPhone/iPad’s iOS with Mac’s OS X. Wanna run iPad apps on your Mac? You can’t do that. Apple has been asked by customers (and analysts) for four years to deliver apps on OS X, but has not brought the two OS’s together.

Why not allow iOS apps on OS X? Yes, the two operating systems are meant for different microprocessor architectures with different instruction sets. That’s a computer science problem that an ARM emulator or emulator in a virtual partition could solve on any current Intel processor, probably by a grad student with access to the source code. It’s not that difficult a technology problem. So, after all this time, I conclude that Apple doesn’t want to allow users to merge their iOS device and PC worlds. That’s a shame, and also an opportunity for everybody else.

Fourth, the new iPad Mini is just a first step. I expect significant business and education uptake for this 8″ tablet. In business, look to transaction workers who need to record observations, such as nurses and physicians in e-medicine. The 10″ full-size iPad is not a one-hand device and at 1.5 pounds, tiring. The Mini’s roughly half the weight, and thus easier for long walks around the business. In 2013, you’ll see the iPad Mini cropping up as a major business go-to technology. You’ll see variations on the Mini’s form-factor.

Dell Inspiron 15z Ultrabook with touch screen and Windows 8

H-P’s Apotheker: We Want to Split H-P Into Two Companies

H-P CEO Leo Apotheker has a very different set of talking points this week than he did last week in a hastily called teleconference after a trading halt which announced the halt to WebOS investments and the spinoff of the $38 billion Personal Systems Division (PSD). Analysts and Wall Street immediately started picking likely buyers of H-P’s PC product line.

But Monday’s interview with the Wall Street Journal tells a different story with a decidedly different outcome for shareholders. Quoting Apotheker:

What we’re really doing is creating two companies: One focused on the enterprise, and one which will be a highly-effective, end-user device business. It will be much more than PCs.

These businesses are ticking at different speeds, need to have different structures, and make different investment decisions. The device business [is] a fast moving consumer business. If you want to compete in this business you have to be much faster than a conglomerate can move in most circumstances.

The other side of H-P, the enterprise side, that’s where we acquired Autonomy. We have some great ideas for how we can scale that business.

Our default option is to see if we can spin this business off to our shareholders. That’s not the only option that we’re looking at. The board and management have been working on this for quite some time. If we really want to take the necessary steps, you have to involve a lot of people and once you inform a lot of people you need to inform the market.

We said it would take anywhere from 12 to 18 months to complete the spin, and it’s obvious that the decision will happen much sooner. The board will want to make the best decision for shareholders and our current hypothesis is that is by spinning the business to shareholders.

This different story — or Friday’s story told better — is a lot less suicidal than throwing PSD off the bus to the highest rapacious bidder. Motorola did this last year, spinning the personal devices company off from radios and public sector. So there certainly is precedent.

But what do we make of “one which will be a highly-effective, end-user device business. It will be much more than PCs?” My reading is everything consumer including phones, PCs, and printers. If Leo really wants to focus on medium and large enterprises, he’ll throw in transactional servers, storage, and maybe even the entire small-medium business (SMB) organization.

If the spinoff to shareholders looks like my sketch above, it’s not a bad strategy. Makes H-P kinda look like Samsung, which makes smartphones and oil tankers through highly decentralized business units.

Here are the concerns H-P shareholders face in considering a deal, once announced:

  • It’s all about execution. Slamming together PCs and printers does not ensure success. And even enterprise company sales reps sell PCs, or used to. The devil is in the details.
  • The independent, entrepreneurial culture does not exist at H-P. Where does the PC Newco innovation DNA come from?
  • By over-spending in a $10 billion bid for Autonomy, H-P has only $3 billion in cash. Where does PC Newco get the billions it will need for R&D and cash flow? Underfunded, the effort will quickly disintegrate.
  • Did the premature and botched announcement of the spinoff last Friday freeze PSD staffers like deer in headlights? Will the human capital disappear before PC Newco really gets started? Didn’t $5 billion in Palm WebOS investment get vaporized?
  • Can any big PC company — with the glaring exception of Apple — do much better than 6% margins in a fast-churn product rat race?
  • How will consumers react to PC Newco branding (let alone products)? When IBM spun off PCs to Lenovo, the valued ThinkPad brand went to Lenovo. take away the H-P name and logo, and the products won’t sell as readily. And Pavilion as a brand does not come close to the value of ThinkPad.

We’ll leave how the rest of the PC ecosystem might react to the PC spinoff to another day.

via H-P CEO Apotheker Defends Strategy – WSJ.com.

Apple Follows Sun Tzu, Knocks Off Competing Generals

Sun Tzu, the maybe historical Chinese general, is a favorite for tech motivational speakers, with a war-making philosophy that can be summarized as “avoid direct military conflict when other means suffice”. Real or imaginary, Sun Tzu would be proud of what Apple has done to its competitors.

I’ve had to copy my envelope-back to a genuine list of now-departed CEOs who failed to confront Apple with a strategy or products that suited said CEO’s board. Here’s the list of the departed as of the first day of Q2-2011:

  • Dirk Meyer – AMD
  • Gianfranco Lanci – Acer
  • Nam Yong – LG Electronics
  • Olli-Pekka Kallasvuo – Nokia

Motorola, Sony, Toshiba, Asustek Computer (Asus) and Lenovo are all in danger of being dragged off by the smartphone wave that is iPhone.

Hewlett-Packard (HP) and Dell have modest smartphone bases, and are for the moment defending their enterprise citadels from incursions by the iPad. But walled moats have not held forever in the innovative tech industry. Verticals like education and medical are taking up tablets at a rapid rate. The PC giants need a better solution, fairly soon.

As I keep saying, its not just about the hardware. The so-far impregnable juggernaught that is Apple is an ecosystem of hardware, operating system, apps, an app store, and vibrant developer community.

Great Wall of China

 

 

 

Gaming the Q1-2011 PC Numbers

With the end of the first quarter of 2011 at hand, this analyst sits with a cup of coffee and some thoughts on how the PC industry did in Q1. The short answer is: mediocre. The reasons are atypical and not apt to be repeated.

As a caveat, let me deny any knowledge of anybody’s numbers on the actual Q1. This piece is speculation, and you can play the game too.

I forecast PC and notebook processors grew at an 8% annual rate in the first quarter. That would be well below the going-in forecasts of the big PC numbers houses, IDC and Gartner. My own forecast for 2011 made last December is for 9% growth in 2011, negatively impacted from greater growth by macroeconomic conditions.

It’s a strange quarter for the following reasons:

  1. The Tablet Effect – there is no doubt tablets are eroding the low-end, “netbook” devices, evaporating what had been a 10 million unit emerging market a year ago;
  2. Sandy Bridge Anticipation – anybody with an Internet connection knew at the start of the quarter that Intel’s about-to-be announced Sandy Bridge offered much better performance at the same price than last year’s processors. So, both hardware OEMs and customers held off early-quarter purchases while “waiting for Sandy Bridge”. What no one anticipated was the …
  3. Sandy Bridge Chipset Hiccup – the late January recall of Sandy Bridge chipsets by Intel was the single event that screwed up the quarter. OEMs had to recall shipped motherboards and desktop PCs, and to stall their factories for weeks waiting for updated chipset silicon. Importantly, the industry’s Sandy Bridge notebook announcements were postponed while everybody sorted out whether it was OK to use faulty chipsets in notebooks that were never going to use the faulty ports anyway. Which was compounded by the OEM fear that customers would forever feel cheated if they got a perfectly working but otherwise flawed chipset. Discretion said “wait for the B3 stepping”, and that’s largely what happened.
  4. Getting Back to Normal – the complicated process by OEMs of phasing out last years’s products and ramping up Sandy Bridge products and inventories was disrupted by the chipset hiccup. Then, the Japan earthquake hit three weeks from the end of quarter. While there are scant facts about actual electronic supply outages as of today, my channel checks indicate some internal cannibalization in order to maintain critical parts inventories (e.g., shunting NAND flash chips destined for $49 iPods to the $829 iPad 2-wireless assembly line).

Of the above factors, tablets are without doubt an ongoing drag on PC sales. And the mongoose-on-cobra focus of the desktop and notebook suppliers. Another story for another day.

The Sandy Bridge anticipation and chipset hiccup are one time factors. Intel expects good things from Ivy Bridge, next January’s new processor line, and it can be expected to plan better for success. It goes without saying that many heads will roll if there is another chipset problem, or any silicon QC problem anytime soon.

Getting back to normal is ongoing for at least eight more weeks into Q2, but my crystal ball says no industry-wide supply impact will ultimately come from the Japan earthquake.

I see Q2, a seasonally better quarter than Q1, getting wind in its sails due to postponed Sandy Bridge sales being consummated. Moreover, the release in Q1 of Sandy Bridge for business (e.g., vPro chips) and Microsoft’s Windows 7 service pack 1 — on top of improving global economic conditions — unleashes a long-overdue cycle of enterprise PC upgrades.

Dell computer factory

Your Smartphone is About to Become Your Wallet

A flurry of news over the past couple of months points to 2011 as the year new smartphones learned to replace your credit card and identification at retail checkout:

  • Google Inc. is teaming up with MasterCard Inc. and Citigroup Inc. for Android phones. Google believes retail is a huge advertising opportunity;
  • Persistent rumors that Apple’s iPhone 5 will be a player for payments and for unlocking cloud-based data files;
  • Microsoft and RFID vendor Sirit have announced plans to collaborate on adding proximity technologies to Windows Mobile;
  • Deutsche Telekom, the parent company of T-Mobile, said it will launch an NFC service known as “mobile wallet” in Europe this year, with a planned roll-out in the U.S. and beyond next year. The provider will reportedly release NFC devices from Apple, Samsung, RIM, and LG this year;
  • Wireless carriers Verizon Wireless—a venture of Vodafone Group PLC and Verizon Communications Inc.—AT&T Inc. and T-Mobile USA said last fall that they would team up on a venture, dubbed Isis, to enable customers to pay for goods with their smartphones. Discover Financial Services Inc. will process those payments, potentially eliminating the need to carry cash, credit and debit cards, reward cards and transit passes;
  • Research in Motion co-CEO Jim Balsillie confirmed that the majority of new BlackBerry devices this year will include near-field communication (NFC);
  • Bank of America has started inviting select customers to trial its new Mobile Walletpayment service program based on NFC technology;
  • Coupon.com and other coupon sites are also jumping on the bandwagon, since a smartphone is an effective wallet for digital coupons;
  • On the Point-of-Sale side, VeriFone Systems Inc. will roll out more so-called contact-less devices, or readers that enable consumers to pay with an “air kiss” wave or tap of a credit or debit card — or smart phone. Verifone is to include near field communication technology in all its new point-of-sale hardware.

The above spells a genuine technology movement.

NFC is a short-range transmission standard that, unlike Bluetooth, requires no previous setup, and allows devices to find one another instantly, over a distance of about 12 inches. Promulgated by the NFC Forum, it extends the ISO 14443 standard for RFID-based proximity cards, combining the functionality of an RFID reader and a Smart Card into one device.

NFC requires a new smartphone radio that is able to communicate when placed very close — inches — away from the POS device. The transaction is completed in seconds when an application sponsored by your bank’s (e.g., Visa, Bank Americard, Discover) is enabled. Because NFC requires very close proximity to POS devices to trigger a transaction, banish the thought of walking through a store racking up unintended charges. However, you’ll have another important reason not to lose your phone.

NFC is not new. It is already widely used in Japan, where commuters commonly use it to quickly purchase train tickets or pay for parking by waving their phones in front of sensors. About 30 percent of all phones shipped globally will incorporate NFC by 2011, according to an NFC study reportpublished in January by ABI Research.

NFC-enabled POS will save time, which is money to retailers and convenience to shoppers, who will no longer have to sign the digital pad to complete the sale.

Both sides of the retail transaction require new equipment, which means nationwide roll-out will take years to complete. Consumers will have to buy a new smartphone with NFC capability. And notoriously stingy retailers will have to install a new generation of POS terminals.

The market for mobile payments is expected to grow significantly in the next several years, reaching $618 billion by 2016, according to a report by consulting firm Edgar, Dunn & Co. and sponsored by MasterCard.

The NFC Forum is a non-profit industry association advancing the use of near field communication (NFC) technology. HP recently joined MasterCard International, Matsushita Electric Industrial Co., Ltd., Microsoft Corp., Nokia, NEC, Renesas Technology, Royal Philips Electronics, Samsung, Sony Corporation, Texas Instruments and Visa International, receiving a seat on the NFC Forum’s Board of Directors.

As I add it up, the major smartphone, smartphone operating system, wireless network, and POS terminal manufacturers are all rolling out NFC-enabled technology in the near future. This is a done deal.

BenQ NFC-enabled Phone