Internet Business Analysis:
Dell.com

 

 

 

 

 

 

 

 

 

Prepared for

Dr. Richard D. Manning, Ph.D.

Faculty in Masters Program

Nova Southeastern University

 

 

 

 

 

 

 

 

 

 

 

Prepared by

Derek J. Sedlack

Graduate Student, Nova Southeastern University

School of Computer and Information Sciences

 

 

 

 

 

 

 

 

 

 

August 5, 2003


CONTENTS

 

List of illustrations................................................................................ iii

Executive Summary............................................................................. iv

Introduction......................................................................................... 1

Purpose, Scope, and Limitations.............................................. 1

Sources and Methods.............................................................. 2

Site Technology................................................................................... 3

Site Technology....................................................................... 3

Infrastructure........................................................................... 4

Security & Privacy................................................................... 7

Usability.................................................................................. 8

 

Advertising.......................................................................................... 9

Internal.................................................................................... 9

External................................................................................... 10

Television.................................................................... 10

Internet........................................................................ 10

 

Strategy............................................................................................... 10

 

Conclusion.......................................................................................... 13

 

Sources............................................................................................... 14

 

Image Sources..................................................................................... 16

 

Appendix A: Dell web site map............................................................ 17

 


LIST OF ILLUSTRATIONS

 

Figure………………………………………………………………Page

1)      Partial view of the Dell home page source code.............................. 3

2)      Traditional three-tier architecture for E-commerce web sites........... 4

3)      Dell Multi-tier model for infrastructure computing............................ 5

4)      Dell online layout........................................................................... 8

5)      Help button................................................................................... 8

6)      Dell advertisement ........................................................................ 10

7)      Factory production workflow at Dell’s manufacturing facilities......... 11


EXECUTIVE SUMMARY

 

Purpose of the Document

 

This document will acquaint the reader with Dell’s Internet site through

Site layout, design methodology, security and privacy notices, and usability

3-layer Infrastructure including basic overviews of each layer

Touch on corporate advertising, internal and external, and some long-term strategies

 

Site Technology

 

The Dell E-Commerce site does not employ the most sophisticated methods of advertising or sales like Shockwave or Java applets, only the most efficient and effective that includes both static and dynamic pages. Dell has developed an internal HTML generator called the “Lightning Storm engine” to ensure a consistent look and feel that returning customers will find familiar.

 

The company standardized on Dell hardware and employed a refined 3-tier architecture to ensure the rapid delivery of requests and 24x7 uptime for confirming orders. The tier-1 appliance servers, consisting of caching servers, load-balancing servers, and web servers that are both inexpensive and scalable. The application servers, tier-2, are optimized to perform e-commerce services. And the tier-3 database servers and storage units handle most of the real work taking place on a web site the produces over $30 million in sales each day of the year.

 

Security & Privacy

 

Dell posts that “[the customer’s] right to privacy and data security is a primary concern” and a lack of publicly reported break-ins, like those at the University of Texas, enforce that statement; although, Dell does automatically check boxes during electronic purchasing that will add the customer to mailing lists if not removed. The most important aspect of Dell’s security and privacy is their open policy; listing everything on the Internet along with definitions and explanations so that even the most notice web user understands how their purchase will work. The usability of the site, while experts will label it as complex, is very intuitive and can be navigated very quickly. Secure transmissions take place when they should and no time of day experienced a delay in transmission rates.

 

Advertising

 

How does a company spend money on advertising when, according to John Wanamaker, half of it will be wasted? Dell does not lease advertising space on its own web site, but they have definitely found a solution for external spending. Poor tons into electronic communications, such as catchy television ads like “The Dell Guy,” and search-based advertising, which grew 500 percent since 2001 and revenues returned even higher rates. Dell blasted European surfers to the tune of 6,000,000 in October 2001 alone, equaling about 40% of the United Kingdom’s web users.

 

Strategy

 

Dell has developed a large number of strategies that have led to their usurping the top position of global PC manufacturer including: technology, infrastructure, and supply chain management. Dell receives all faxes electronically so that information can be readily entered into the ordering system with far less mistakes than human interaction. They have also standardized on corporate hardware, reducing labor costs, manufacturing costs, and increasing uptime. They expanded on the basic 3-tier architecture in developing their web site, reducing wait-time and increasing efficiency. Lastly, Dell has perfected just-in-time inventory that has allowed negative working capital and opened the door for supply chain improvements. Dell has established mutually beneficial relationships with business-to-business (B2B) companies that have reduced paperwork, inventory levels, and cost of purchased goods by forcing ownership onto the suppliers.

 

Conclusion

 

The Internet has allowed individuals to become entrepreneurs, small business owners to grow without a large advertising budget, and large companies to reduce inventory and supply costs, thus becoming even larger. Dell has employed their own hardware as a strategic move pinning their reliance on their own success instead of an external entity. They have also increased their advertising budget and immersed themselves into search advertising, a very effective and profitable medium for companies with big budgets. Their web site is easy to navigate, posts a plethora of information about privacy, and employs secure socket layer (SSL) encryption to ensure that customers are safely transacting purchases online. Dell even lists a “secure shopping guarantee,” offering to reimburse customers for up to $50 from any fraudulent purchases that are made toward the Dell web site on their credit cards. Dell has created powerful supply chains and manages much of the relationship electronically, driving down costs and increasing market share. Dell’s infrastructure and just-in-time inventory will continue to lead the way for any company that requires some fashion of inventory. The technologically simple, yet very effective web site should also be a model for burgeoning companies for many years to come.

 

 


INTRODUCTION

 

Dell is not the largest company on the Internet, but with sales surpassing over fifty million dollars each day in Internet revenue for 2001, it is arguably the most influential and replicated E-commerce venture around the globe. Dell has fueled its success with partnerships like Microsoft and personalized customer pages called Premier pages that not only help Dell sell more systems, but they also help their clients purchase them more efficiently. Although Dell maintains legacy systems that require manual data entry, they also employ their own cutting edge servers, web appliances, and proxy servers that allow the web site to run 24-hours a day, every day of the year, without interruption. The web site, while regionally customizable, is designed to maximize sales and minimize technical support assistance. As Dell continues to expand its market space and segments, it will continue to set the standard by which all other businesses endeavor to emulate.

 

Purpose, Scope, and Limitations

 

The purpose of this report is to analyze and discuss the Dell Computer Corporation E-commerce web site and decisions that led to its development. Included will be an overview of the technologies, infrastructure, advertising, and competition. Dell.com changed their web site frequently and the design might change drastically after the writing of this report. The technologies employed may also be modified or removed at any time since Dell continues to employ the most effective methods to return invested income. Internet links used may not be valid after the initial date printed on this report due to archiving, removal, or other methods.

 

Sources and Methods

 

In preparing this report the Internet was exclusively used to determine comparisons, infrastructure, and usefulness of the Dell.com E-commerce site and its’ competitors. Most searches were through www.google.com.


Dell E-Commerce Site

 

Many people have heard of Dell Computer Corporation and anyone who was involved in technology during the latter half of the twentieth century knows about their E-commerce dominance. Unlike Cisco Microsystems, the Dell web site does not have a site map and requests for such a map were unsuccessful, but the author has developed a rudimentary map from navigating the site that can be found in Appendix A. The Dell web site does not employ the most sophisticated methods of advertising or sales, only the most efficient and effective.

 

Site Technology

 

 

A quick search through the Dell web site quickly reveals a massive number of web pages containing both dynamic and static content available to consumers, but even that static content, such as model types and components would have to be maintained weekly if not on a daily basis. Developing and maintaining this amount of web pages by hand in such a volatile market would require an enormous amount of manpower; driving expenses beyond the accustomed manageable level this market leader has established. The use of a CASE tool might reduce the workload, but would not address the issue of consistency; each line of business following a distinct look and feel that customers have become familiar with. The Dell web site is built and configured using a proprietary HTML generator called the “Lighting Storm engine”, displayed in Figure 1, as found in most of the site HTML files using the “view source” option on any Internet Browser.

The web site, according to Lynch and Horton (2002), is arranged in a web-like basic organizational structure making it both complex and a non-linear hyperlinked design and while Lynch and Horton believe that this makes a web site more suitable for educated audiences, but the award winning layout[1] provided by Dell allows customers to select custom system features, access comparative tables, and even view refurbished systems with a minimal amount of searching.

 

Infrastructure

 

Dell’s online infrastructure has changed over the years as new technologies and ideas became available, but that is the only way to remain in business with modern Internet breakneck paces set forth by innovation. “Typically, an e-commerce Web site can be divided into three tiers: data, business, and user services (see Figure 2)”  (Lee, 2000). While the same structure holds true today, Figure 3 shows a much more refined configuration of the same architecture developed three years before. Dell holds a number of patents relating to online ordering, http://www.dell.com/us/en/gen/corporate/patent_operations-online.htm, and supports the use of Dell hardware to run the billion-dollar service being offered to surfers around the globe.

The front tier is made up of “appliance servers”, or “a specialized server that is designed for ease of installation and maintenance...so all applications are pre-installed.”  (Webopedia, 2003) PowerEdge caching servers, load balancing servers, and web servers make up the front end of the design. Caching servers store frequently accessed static web pages that have already been retrieved by previous clients. Setting the refresh rate will ensure that the latest information is always available. Load-balancing servers actively monitors traffic between the active servers and optimized performance by directing clients to the most available caching server or web server. If an appliance fails the load-balancing server will detect the fault and adjust distribution accordingly. Web pages that are not dynamic, such as XML or images, and do not require database information, are served up by the web server appliances – also called content management. Dell also places the firewall server and any corporate routing that take place in this category, but there may be argument to segment this model into four tiers.

The second tier, consisting of application servers optimized to perform e-commerce services such as load and list shopping cart information, display product information, product specifications, product pricing, and anything else that may have to be retrieved from a database. This server “creates and drives the virtual online stores.”  (PowerApp, 2003) Figure 2 referred to this tier as business logic, or business services, which in a broad sense does cover the functionality of the more specialized hardware used today.

The third tier is where most of the real work takes place. The database servers and storage units hold all of the valuable information you want customers to see and competitors to marvel. What makes this configuration so powerful is that the database servers are dedicated to data storage and retrieval. When information is requested that is unavailable through tier 1-2 the database server will search the database for, and return up-to-date information that allows companies to offer customers precise pricing at any point in time. Orders are recorded in the database and retrieved through another business unit, seamlessly integrating the online store with the manufacturing center or warehouse. Lee’s idea of data services holds true in the most liberal interpretation of the bottom tier in e-commerce.

Notices or advertisements of a portal or Internet Service Provider were not present on any of the Dell web pages, or in the notices at the bottom of the home page and Internic lists all of the name servers as NS1…NS5.US.DELL.COM; leading to the conclusion that Dell is its own hosting service.

Security & Privacy

 

Dell maintains that “[the customer’s] right to privacy and data security is a primary concern”, but some may question the integrity of that statement when the policy also contains the verbiage “information submitted solely in a business capacity is not covered by these guidelines” and has not been updated since February of 2000  (Dell.com, 2000). Few E-commerce ventures appear as open to potential customers than Dell. Dell openly posts policies on virtually every aspect of their client’s Internet transactions, employing secure socket layer (SSL) encryption for purchases, enabling positive, pre-transmission Dell Store identification by browsers, and even posting a “secure shopping guarantee” which states that any consumer held liable for fraudulent Dell charges will be reimbursed for up to $50  (Dell.com, 2003c). Test transactions on the notebook, desktop, and workstation sites all began with a shift to the secure portion of the Dell web site during the “Checkout” phase and required account registration. Several other areas that request, or require registration are Support, Solutions, Upgrades, and Reference – without registering it is not possible to distinguish a difference between this page and the link leading from Support. As of this report date, no national news sources have reported of any account information being stolen from secure Dell servers. The web site appears to be very thorough, including a link on their privacy page allowing consumers to “opt-out of receiving further marketing from Dell,” even though the site ensures the user that mailings will only come from the company  (Dell.com, 2000). It should be noted that during the “Checkout” phase the author noted a checkbox, default checked, authorizing the receipt of specials and offers from the company mailed out by the millions. Perhaps this is why Dell sells over $30 million on their web site each day and continues to post record profits from growing sales figures.

Usability

One of the most remarkable aspects of the Dell web site is the ease which novice users can find all available products and services, privacy information, support information such as documentation or drivers, and order status check or verification. While Lynch and Horton may categorize the Dell web site as complex, the overall layout, shown in Figure 4, as quite simplistic. The main site menus are almost always available at the top of the page and include a link to the main site, information about the company, support, and order status, allowing the consumer to quickly navigate any number of different features. The radio buttons used in the system configuration tab have so many options that it was very easy to purchase a fully loaded system that many small companies could use to replace servers. For every system component available, a help button, illustrated in Figure 5, allows the customer to decipher the complex language of computers with an overview, details, and glossary. The web site was also very fast during the morning, mid-afternoon, and evening timeframes. For those consumers who like personal interaction, a toll-free telephone number was never far, listed smartly in the top left corner of each purchasing page.

 

Advertising

 

“Half my advertising is wasted, I just don't know which half.” – John Wanamaker

            Some companies like the restaurant chain Houston’s rely on person-to-person communications to create business growth, but most invest heavily in advertising through newspapers, radios, and especially television. The art of advertising             is a fine line between brilliance and wasted capital. Many companies continue to spend sizable amount on advertising trying to figure out the answer to Wanamaker’s riddle, including Dell.

Internal

            The Dell E-commerce site may be one of the most visited on Earth, but they do not lease advertising space to any external companies as found by perusing the site. They do have published white papers for companies that have either employed Dell’s product with a monumental solution, or companies that have helped Dell save a tremendous amount of cash through a unique, or perfected process. Dell once tried to launch it’s own portal, Dell.net, where customers could personalize or brand their own sites, but the hosting company Snap.com was purchased by NBC and essentially disappeared.

External

            Just-in-time inventory may have helped Dell become the largest computer retailer on the planet, but shrewd marketing and advertising are making an equal impact during a recession. According to Kanellos (1998) Dell was not very active in television advertising before 1998, but recent years have proven otherwise. A television campaign featuring “The Dell Guy,” a Bill and Ted knockoff, helped raise Dell’s market share by 16.5 percent during 2001 even while personal computer sales were down 31 percent  (Carroll, 2002, ¶ 1). Reid Carr (2003, ¶ 2) found that television is not the only means of distributing the powerful brand as search-related advertising spending has risen 500 percent since 2001 and revenues from searches have risen at an even higher rate! Searches, not banner ads (see Figure 6) or high-impact ads, account for between 60 and 70 percent of the revenue that was derived from Portal related sales. How successful is this Internet related sales campaign? Silicon.com reported that Dell’s October 2001 Internet advertising campaign was seen “by more than 40 percent of [United Kingdom] [Internet] users” equaling about 6,000,000 people  (Rabbitte, 2001).

 

Strategy

 

            Dell has developed into the preeminent computer hardware company, but this market is constantly changing and margins drop hourly. Dell has standardized on their own equipment in both desktops and servers, reducing the requirement on any external company for operations. Dell is also taking advantage of high technology when it comes to faxes. While orders continue to be filled manually, the fax orders are received electronically and distributed to the proper segment using a fax server (Microsoft, 2001). Order information is then input into a SQL server where management and retrieval becomes routine and almost instantaneous. Internet sales are over $30 million a day and new market segments are being penetrated each year as the recent arrival of personal digital assistants (PDAs) and printers have shown, but the product does not differentiate the company, nor will it drive the business through the twenty-first century. The perfection of just-in-time inventory is what made the company lean and effective, creating negative working capital, or cashing customer checks a full seven days before having to purchase the inventory required to fulfill orders. Two other aspects of Dell’s business will prove to be very strategic, just-in-time supplies and their supply chain.

            The supply chain and how orders are fulfilled are intimately bound processes, but separated by important factors. The trucks that deliver parts to Dell, illustrated in Figure 7, do not actually transfer ownership until the pallet is wheeled off of the truck. The supply company is forced to assume most of the cost associated with parts deliveries, driving down Dell inventory costs even farther. Nasdaq retains corporate financials for Wal-Mart, Dell, and any other company listed on their exchange. The January, 2003 financial ratios for Wal-Mart boast an inventory turnover that exceed 900%, a superb ratio considering that food is a substantial percentage of their inventory. Dell’s last financial report, January 2003 also, listed Dell’s inventory turnover well over 11,000%. Considering that Dell does not sell perishables, their cost for inventory is a non-factor and as their turnover continues to rise, their other rations are appropriately dropping.

            The Dell supply chain is another strategic cog in Dell’s E-commerce assault. Companies that want to sell massive amounts of inventory to Dell have to fit into their business-to-business (B2B) methods, which require electronic ordering, electronic notification, and electronic payment. Dell forces its partners to become more efficient so that they themselves can continue to drive down costs and continue to churn a huge profit, 44% after-tax ROE according to their January 2003 financials.

 

Conclusions

 

            The Internet has allowed individuals to become entrepreneurs, small business owners to grow without a large advertising budget, and large companies to reduce inventory and supply costs, thus becoming even larger. Dell has employed their own hardware as a strategic move pinning their reliance on their own success instead of an external entity. They have also increased their advertising budget and immersed themselves into search advertising, a very effective and profitable medium for companies with big budgets. Their web site is easy to navigate, posts a plethora of information about privacy, and employs secure socket layer (SSL) encryption to ensure that customers are safely transacting purchases online. Dell even lists a “secure shopping guarantee,” offering to reimburse customers for up to $50 from any fraudulent purchases that are made toward the Dell web site on their credit cards. Dell has created powerful supply chains and manages much of the relationship electronically, driving down costs and increasing market share. Dell’s infrastructure and just-in-time inventory will continue to lead the way for any company that requires some fashion of inventory. The technologically simple, yet very effective web site should also be a model for burgeoning companies for many years to come.

           


Sources

 

Carr, R. (2003). Sounds like contextual advertising to me. Red Door Interactive. Retrieved on August 2, 2003 from the World Wide Web: http://www.reddoor.biz/intelligence/advertising.cfm

 

Carroll, J (2002). Dude, Meet the Dell guy. CNN.com. Retrieved on August 3, 2003 from the World Wide Web: http://www.cnn.com/2002/SHOWBIZ/TV/01/31/dell.guy/

 

Dell.com. (2000). Dell’s Privacy Policy. Dell – Dell’s Online Policies. Retrieved on July 29, 2003 from the World Wide Web: http://www.dell.com/us/en/gen/misc/policy_000_policy.htm

 

Dell.com (2003b). Multi-Tier Model for Infrastructure Computing. Dell Internet Infrastructure Computing. Retrieved July 29, 2003 from the World Wide Web:  http://www.dell.com/us/en/esg/topics/products_infrastructure_arc_pedge_000_internet-infra.htm

 

Dell.com. (2003c). Security. Dell – Dell’s Online Policies. Retrieved on August 1, 2003 from the World Wide Web: http://www.dell.com/us/en/gen/misc/policy_006_policy.htm#secure_shopping

 

Kanellos, M. (1998). Dell see growth, service shift. CNET News.com. Retrieved on July 30, 2003 from the World Wide Web: http://news.com.com/2100-1001_3-210034.html

 

Lee, C. (2000). Building a Highly Available E-Commerce Site with Windows NT. Dell - Building a Highly Available E-Commerce Site with Windows NT. Retrieved April 17, 2003 from the World Wide Web: http://www.dell.com/us/en/esg/topics/power_ps2q00-lee.htm

 

Lynch, P., & Horton, S. (2002). Web Style Guide. Retrieved on July 29, 2003 from the World Wide Web: http://www.webstyleguide.com/about/copyright.html

 

Microsoft. (2001). Knowledge Management Solution Gives Dell a Positive Outlook. Microsoft Servers. Retrieved July 29, 2003 from the World Wide Web: http://www.microsoft.com/servers/evaluation/casestudies/dellkm.asp

 

PowerApp. (2003). How Does the Dell Infrastructure Work. Retrieved April 17, 2003 from the World Wide Web: http://www.dell.com/html/us/products/demos/pwrapp/start.html

 

Rabbitte, S. (2001). Dell advertising plagues web users. Silicon.com. Retrieved on August 2, 2003 from the World Wide Web: http://www.silicon.com/news/500019/1/1029524.html

 

Webopedia. (2003). Server Appliance. Retrieved April 17, 2003 from the World Wide Web: http://www.webopedia.com/TERM/S/server_appliance.html


Image Sources

 

Dell.com. (2003a). Dell. Dell – US Home Page. Retrieved on August 1, 2003 from the World Wide Web: http://www.dell.com/us/en/gen/default.htm

 

Dell.com. (2003b). Multi-Tier Model for Infrastructure Computing. Dell Internet Infrastructure Computing. Retrieved on July 29, 2003 from the World Wide Web:  http://www.dell.com/us/en/esg/topics/products_infrastructure_arc_pedge_000_internet-infra.htm

 

Dell.com. (2003d). Select System Components. Dell – The Dell Online Store: Build Your System. Retrieved on August 3, 2003 from the World Wide Web: http://configure.us.dell.com/dellstore/config.aspx?cs=19&oc=XPS&m_22=WPO11&m_1=MP288H&m_29=S3OS&c=us&l=en&s=dhs&kc=6V413

 

Lee, C. (2000). Building a Highly Available E-Commerce Site with Windows NT. Dell - Building a Highly Available E-Commerce Site with Windows NT. Retrieved on July 29, 2003 from the World Wide Web: http://www.dell.com/us/en/esg/topics/power_ps2q00-lee.htm

 

NexTag. (2003). Dell banner advertisement. Retrieved on August 5, 2003 from the World Wide Web: http://ad.doubleclick.net/ad/N296.nextag/B1205743.3;sz=120x600;ord=1060122249529?

 

 


Appendix A: Dell web site map



[1] Computerworld Smithsonian Program's 21st Century Pioneer Award in April 1998