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

Advertisements

Why Would IBM Sell Off Its X86 Server Business?

The Wall Street Journal reports that IBM is in advanced talks to sell of its X86 server business, which generates about $4,5 billion a year, to China-based Lenovo. IBM sold its PC business to Lenovo in 2005.

X86 servers are the Intel Xeon or AMD Opteron workhorses of almost every data center. Even shops with massive investments in IBM Z series mainframes or Power-based servers surround the back-end with X86 server racks handling Internet loads, or many other diverse workloads. Moreover, X86 workloads are expanding while proprietary (aka “rest of IBM”) hardware is declining in the total server market.

I’m throwing my hands in the air. I can see no strategic benefit coming to IBM from divesting X86 servers. True, margins on X86 servers are slim and getting slimmer due to Open Compute-like initiatives that are commoditizing X86 hardware and everything in the racks. IBM has shown in the past (i.e., PC business) that it will exit businesses that do not generate adequate operating margin.

IBM’s strategy for the past decade has been to surround hardware sales with IBM software (very high margins) and services (pretty good margins). Importantly, IBM is one of the few companies in the world where you can big a complex but problematic business process and say “Can you fix this for me, IBM?” The solution typically involves IBM hardware, software, and implementation services following on to IBM transformation services. IBM does transformation exceedingly well.

So, I ponder, if IBM no longer has X86 servers as an ingredient to its transformation engagements, is the company reducing its effective engagement footprint, perhaps sharply? I doubt IBM’s customers will be quite as excited if the message becomes “no X86 solutions from us any more”.

Alternatively, IBM could be setting up Lenovo and other preferred partners for transactional X86 sales to IBM transformation customers, with IBM taking a fee and no longer having to bother with pesky X86 R&D, break fix, inventory, training, and other costs.

This deal could definitely happen, which is why I am writing about it. The question to ask if it goes down is “how are IBM customers now going to get X86 servers?”

Follow me on Twitter @peterskastner

IBM X-series

IBM X-series

Is Intel’s Tick-Tock About to Stutter-Step?

A widely reported story at TechSpot that a flaw in the forthcoming 2013 generation of Core microprocessors for PCs and notebooks (codename Haswell) led to speculation that Intel would delay some but not all Haswell chips until a fix in silicon could be made subsequent to a June launch. Now all of this is unconfirmed by Intel, so take the following analysis in this blog post with a grain of salt.

The reason I’m writing anything is that Intel can ill afford a delay in its mainstream processor delivery schedule for clear business reasons that I’ll outline below. And waiting on another stepping of Haswell would clearly cross a dateline that leads to all sorts of follow-on inefficiencies ad infinitum. However, a stutter-step in production timing might get everything back on track in 2014.

The Ideal PC Annual Launch Schedule

The PC industry has a cadence which Intel has fine-tuned with its microprocessor launch and production schedule. My stylized version looks like this:

  • Year – 1: all the testing and sharing with partners for design purposes
  • Year – 1, December: begin shipping revenue units for partner’s early production and demo units. This looks good when reporting Q4 results to Wall Street in mid-January.
  • January: launch the years’s generation of technology at, say, the Consumer Electronics Show. This gets loads of press attention and helps to freeze technology purchases until the products ship. January automobile shows serve the same purpose.
  • February and March: partners begin shipping hero products aimed at enthusiasts and thought-leaders, but not in high volumes. Also, get evaluation units into the hands of IT departments. The chip fabs are ramping efficiency now.
  • April and May: IT departments select the year’s PC and notebook standards and begin an annual refresh cycle by July.
  • By June: mainstream chip launch and the partner’s fall product roll-out. Collect orders from retailers.
  • July and August: Asia makes volume PCs and notebooks and ships them into retail.
  • August – September: Back-to-school is a major consumer refresh period, where the new products are on display and students, in particular, look for retail new tech purchases.
  • October: Asia PC manufacturers gear up for the holiday selling season. By now, the Intel fabs are running like clock-work, at high yields. The third major chip product launch of the year, typically Xeons for servers (but it could be Atoms for mobile devices in the future) occurs now.
  • November – December: Holiday tech purchases is the largest volume selling period of the year. And repeat the revenue shipment for the next year’s products before January.

We’re Not on the Ideal Launch Schedule

Haswell has not been launched yet, and probably won’t until June, not January 2013. How did this happen? That’s not the topic so I’ll spare you the drawn out details. The synopsis: Sandy Bridge in 2011 had a chip set flaw, which halted shipments in January and slowed that year’s roll-out by a quarter, so that in January 2012 the industry was not ready (e.g., had inventory and equipment to write off) for Ivy Bridge. In late 2012, a PC industry slow-down left everybody with inventory that they wanted to burn off before starting with new kit for Haswell, which requires a new motherboard not compatible with Sandy or Ivy Bridge. So that’s how we got here.

Refer back to the ideal launch schedule. By June 30th, the industry needs to have introduced all of its performance and mainstream products, taken orders, and contracted Asia to produce the tens of millions of units needed for a successful back-to-school and holiday selling period.

That’s not going to happen in 2013. A big bang of products and production by the PC industry starting in June to catch up with August back-to-school is too risky a business move to contemplate. The industry would not move as one. Problems and finger-pointing. On top of that scenario, throw on the blog lead with a possible Haswell chip flaw that, at minimum, Intel wants fixed but may not delay the Haswell launch for the fix.

So, what’s the second half outlook for the PC industry?

Status Quo or Stutter Step?

Here are the three scenarios I see for the second half:

1. Launch Haswell in June with a big bang.  Try to get the new products into retail by August in depth and in volume by compressing the introduction and production calendar. This is the least likely and highest risk scenario.

2. Launch Haswell in June. Pretend June is January on the ideal calendar, and ramp Haswell in the second half alongside refreshed Ivy Bridge (i.e., Third Generation Core) products. Creates consumer confusion with two generations on sale at retail at once, but that’s been the reality anyway. Leaves the merchandising problem to the retail channel. This scenario is the low-risk, low reward bet.

3. A Stutter Step in marching is a quick step or skip that gets an out-of-step marcher back in cadence. In this scenario, Intel would ramp Haswell in the second half alongside refreshed Ivy Bridge as in Scenario 2. Haswell is the Tick in Intel’s Tock-Tock cadence, with a tick being a new architecture and the tock a shrink of the architecture. The stutter-step in January 2014 would launch the 14 nm shrunk version of Haswell, code-name Broadwell:

  • Bringing on Broadwell in  January would get Intel and the industry back on the ideal schedule. The assumption is that Intel is ready for 14 nm, and I have heard nothing to dissuade me from that assumption.
  • The ideal schedule is the lowest annual risk and the highest profits for the industry.
  • The status quo is a time-bomb waiting for the next flaw. As discussed above, June is already a crap shoot for a big bang launch into the holiday season. Any future delay (and I think the complexity of today’s chips favors flaws and delays) would likely overlap the biggest selling season with the newest technology launch. Ouch, cognitive buyer’s dissonance.
  • Since Haswell and Broadwell are interchangeable at the motherboard level, risk is mitigated because a 14 nm fab hiccup could be remediated with Haswell chips.
  • Any move to speed up the annual cadence adds risks, and the stutter-step scenario cuts the economic life of Haswell to six months-plus, not twelve-plus. However, 14 nm in volume is double-digits percentage less expensive to manufacture, lowering chip costs and improving margins. Gentlemen, start your net-present-value spreadsheets.
  • Delaying 14 nm production until mid-2014 puts a huge crimp in Intel’s mobile strategy, which desperately needs to get ahead of the technology competition the sooner the better.
  • There are plenty of remaining uses for the idle 22 nm fab equipment, including Ivy Bridge, remainder Haswell, and 22 nm Xeon and Atom products yet to launch in 2013.

Send your comments to Twitter: @peterskastner

Haswell

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

How the Ivy Bridge Transition Will Be Different

For the IT planners and trade-press reporters who are looking for the secret to the transition from today’s Sandy Bridge Intel Core processors to next year’s Ivy Bridge processors, I’ll give you the key: watch the chipsets not the processors. 

Every year, Intel rolls out another mainstream processor line. It’s usually fairly easy to foresee and plan for the transition leading to an IT migration from one year’s product generation to the next. This year was different, and impacted next year as well.

Just after launching Sandy Bridge in January 2011, Intel discovered a bug in silicon that halted the production product rollout for Q1. Most of Intel’s OEM customers delayed their formal Sandy Bridge product introductions until Q2 in order to recall flawed inventory and avoid shipping any more problematic product.

Factor #1 in the Ivy Bridge transition is understanding that the OEMs would like to have a full four quarters of Sandy Bridge sales in order to spread their generational product costs over more volume. So it comes as no huge surprise that the Ivy Bridge volume launch is expected in early Q2 of 2012, a year after Sandy Bridge actual volume ramp.

The second factor is compatibility. There is socket-level compatibility between Sandy Bridge and Ivy Bridge computers. A Sandy Bridge processor in an Ivy Bridge motherboard will work just fine (as a Sandy Bridge). (And an Ivy Bridge processor will work like a Sandy Bridge in a Sandy Bridge motherboard if the BIOS is updated and the OEM makes it happen. But that’s not today’s blog story).

The critical third factor is the chipset, a piece of silicon sold with every Intel processor to handle I/O and management functions. Most Ivy Bridge chipsets, Intel says, will support either a Sandy Bridge or Ivy Bridge processor. With the Ivy Bridge chipset, PC OEMs can stage their transition to the Ivy Bridge generation with a smooth supply chain as customers and market demand dictate. And the OEMs will do just that.

At its Q3 earning call with financial analysts in October, Intel said that Ivy Bridge was shipping for revenue production in fourth quarter. So, all the ingredients are now in place.

I expect to see Ivy Bridge-compatible motherboards from ODMs like Asus and MSI in the next few weeks. The major PC OEMs such as H-P, Lenovo, Dell, and Acer will begin slowly transitioning to PCs made with Ivy Bridge chipsets and Sandy Bridge processors — for those end customers that allow or don’t care about the substitution.

For this year only, I’d recommend that IT planners do an early qualification of Ivy Bridge motherboards with Sandy Bridge processors. Normally, there would be genrational incompatibility issues or it would make sense to wait until all the pieces are in place.

In Q2-2012 of my recommended scenario, IT will have a shortened qualification for the Ivy Bridge processors on the already qualified Ivy Bridge motherboards. With this plan, IT will be able to buy either Sandy Bridge or Ivy Bridge processors well into 2011 depending on price and availability.

So, motherboards with Ivy Bridge chipsets will be the harbinger of next year’s transition.

Ivy Bridge Ultrabook Samples Shown at IDF 2011

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