Innovation @ Dell Inc. – Customer Driven innovation at the forefront

Michael Dell built Dell Inc. not on the basis of product innovation but on the basis of the process innovation and adding value to the customers by offering them an easy and affordable way of buying a personal computer. It boiled out down totally to execution where in Dell executed a unique strategy of assembling personal computers using components sourced from multiple suppliers, marketing and selling hard, buying at lower prices and building low priced personal computers for the customers who were buying computers in large numbers and are looking for more powerful machines that was very new at that time. Dell was built not on the platform of innovation but the core focus was assembling and selling personal computers at low cost and price and Dell soon became a multibillion dollar company and largest maker of computers in the world. Since Dell was not innovating, the company relied on its suppliers like Microsoft, Intel, etc. to innovate in terms of the components that are being used by Dell to assemble personal computers. But things started to change in the personal computers industry when major players in the industry like IBM till it sold its PC business to Lenovo, Hewlett Packard, Apple, started innovating new models and products in the personal computer industry and Dell was also forced to start innovation within their company too.

Michael Dell in a 2010 interview published in Times of India highlighted that Dell drove a fair amount of innovation in the computing industry throughout its history and these innovations by Dell have certainly helped define what the company really is and also more importantly have helped millions of customers achieve their own goals. Dell is an internet pioneer and they have influenced the ecommerce industry in 1990s through Dell.com and even today they are using internet to listen , engage and respond to customers through social networking sites that give valuable insight into what they need and how Dell can help. Dell has also revolutionized the mobile computing industry when they were the first company to introduce a longer-life battery option with Lithium-ion technology in Dell laptops that allowed customers to use their laptops for the longer duration. Dell is further adding innovative features into mobility computing solutions like shock absorbers that prevent data loss to backlit keyboards to help users be productive at night to creating the world's thinnest laptop. Dell has driven key innovations is in cloud computing and virtualization.

Innovation Approach @ Dell

Innovation at Dell is customer driven innovation wherein they adopted a time-tested process that puts the customer first. It is aimed at producing easy-to-use products, services and solutions that address [the customer's] needs. Dell's research and development (R&D) efforts now span the globe, driven by some of the industry's foremost product designers and engineers. Dell gather requirements directly through tens of thousands of customer interactions daily, organized events, social media venues and customer panels and along with partnerships with a wide variety of key industry software, hardware and component suppliers the company has complete view of the brad computing industry landscape and the changes that are happening in the industry. Most of the company’s innovations begin in-house, led by a global team of top engineers, product designers and technical experts and for other innovations Dell teams up with strategic partners with a mission is to deliver innovative and cost-effective solutions that meet real-life customer challenges and work seamlessly in existing environments and with other products. Dell maintains strong internal development capabilities and uses partnership strategies rather than competition strategy with top industry technology suppliers and original development manufacturers.

Dell also enables building industry standards and technologies through industry groups and strategic partners. Dell's industry leadership places it in a unique position to help establish the core building blocks for the future innovation — in the home, the office and the enterprise. Dell influences the development and certification of industry-standard technologies through participation in various boards and technical working groups of key standards organizations, including these groups like Digital Living Network Alliance (DLNA) a wired and wireless interoperable network of PCs, consumer electronics and mobile devices enabling a seamless environment for sharing and growing new digital media and content services, Distributed Management Task Force, Inc. (DMTF), is the industry organization leading the development, adoption and interoperability of management standards and initiatives for enterprise and internet environments, The Free Standards Group (FSG) is an independent, nonprofit organization dedicated to accelerating the use of free and open source software by developing and promoting standards, The InterNational Committee for Information Technology Standards INCITS is the primary U.S. focus of standardization in the field of Information and Communications Technologies (ICT), encompassing storage, processing, transfer, display, management, organization and retrieval of information, etc. Other groups include Internet Engineering Task force, InterNational Committee for Information Technology Standards, Information Technology Industry Council, Storage Networking Industry Association, and Wi-Fi Alliance.

The Dell Think Tank program brings together industry leaders who are particularly vocal in social media to discuss trending topics impacted by technology. The goal is to create an open and honest forum that fosters collaboration and reveals unique community needs and opportunities for technology to play a larger role.  For Dell and their partners, the social think tanks are an opportunity to listen firsthand, discuss business needs and foster relationships with participants and their respective communities. It also gives Dell and co-hosts an opportunity to capture meaningful feedback to better serve our various audiences. Since 2011, they have held think tanks on topics including education, healthcare, entrepreneurship and the changing mobile workforce. Events are in person and extended online for virtual participation on Twitter and via Livestream. Also the Dell Fellows program recognizes engineers who are top innovators in the engineering community and who innovate through ingenuity, intellectual curiosity and inventiveness in delivering technology solutions to customers for their outstanding and sustained technical achievements, engineering contributions and advancement of the industry.

Many technical initiatives have been launched by Dell in green Computing, Cloud Computing, Virtualization, etc. and most of these technical initiatives are focused towards Dell Business Customers or corporate customers wherein Dell is a very important player in the servers and storage market globally. Dell five years back launched 'Simplify IT' strategy wherein Dell committed to reducing complexity and costs for its enterprise customers and turn their IT investment into a significant business driver. In a typical IT spends, about 70 per cent goes into maintenance, and only 30 per cent is for innovation. Dell had been committed to reversing this ratio-- not just driving innovation within Dell's own products and services, but also facilitating innovation for customers with Dell solutions. Some of the most significant Dell innovations have been in the enterprise space, especially with its energy-efficient and scalable enterprise solutions through its highly energy-efficient PowerEdge servers and Dell's industry-leading work in bringing virtualization into the mainstream for storage and server consolidation also have played a significant role in creating energy-efficient data centers.

Innovation is back at the forefront of Dell survival strategy as the company is facing trouble due to the falling personal computer sales and customers shifting their buying towards the mobile devices like tablets and smartphones that help them to browse and stay updated on internet that is slowly killing the personal computing market both the desktops and laptops which is the core business of Dell Inc. Recently the leveraged buyout proposal by Michael Dell, the founder of the company involves innovating new products and services that will help company to overcome the sift in the technology preferences and also built new product and service offerings. According to Cindy Shaw, analyst with Discern Group Inc., Dell must innovate, but this innovation is most likely to occur in the business model, not technology. “That is the lower-cost way to innovate, and that is what Michael Dell knows how to do.” It could combine its assets, including Quest Software, with Microsoft products such as the Azure cloud to create simple, easy to implement cloud services for its customers. “People need help, and Dell could innovate around services that make things easier for the customer,” Shaw said.

Outcome based pricing adoption in Finance, Accounting & Insurance BP0 2013

Outcome-based pricing is a BPO pricing model in which the service provider is paid by the buyer when a specific business outcome is achieved, which is totally different when compared with the traditional BPO wherein billing is done for the number of hours worked and number of people employed on a project. Outcome based pricing model is based on standardizing the processes, incentivizing and rewarding the BPO vendor for increasing the business outcomes for the client beyond the contractual expectations and agreements. This model becomes relevant when the objective of the outsourcing relationship goes beyond cost, both the client and BPO vendor interests are aligned, outcome is process-oriented, rather than business-oriented, and when the outcome is based on meeting SLAs, deliveries, and deadlines. Some of the prerequisites for this model are accurate baselines, well-defined, trust between the vendor and client, measurable service levels, clear costs, risks involved and performance goals and implementation of the BPO Vendor technologies and integrating them with the overall client organizational policy and strategy. The model is perfect for use in BPOs where payment is based on number of calls successfully converted, mortgage loan originations and insurance policies back office administration will be priced per policy or loan. According iGate CEO, outcome-based pricing works best for operational type work not IT tasks. The CEO adds outcome-based pricing works best when the service provider controls the process end-to-end such as: mortgage application process, insurance policy administration process, Reference data and Procure-to-pay.

Most of the BPO contracts start initially on Full Time Employee (FTE) pricing as there will not be clear picture of costs involved and their impact but over period of time when both the BPO vendor and clients understand the processes and cost involved they may take a decision of moving to the outcome based pricing model. Dennis Winkler, head of the BPO practice for Alsbridge says today’s new contracts often include a conversion clause to allow the buyer to move from FTE-based to outcome-based pricing at a later date. “This allows the client time enough time to determine their internal cost per policy and then they can compare costs to see if outcome-based pricing is indeed a good deal,” he says. He also says process automation and internal technology platforms allow the service providers to bear the additional risk of outcome-based pricing and still remain profitable. Outcome based pricing model is costly requiring significant investments both financial and human and when compared to traditional FTE based pricing but this model is highly beneficial for those clients who are looking for applications and offerings to increase revenue or customer stickiness and also improve customer satisfaction according to iGate CEO. This model encourages and empowers BPO vendors to engage in collaborative and creative problem solving as they work with the client organization towards achieving mutually beneficial business goals. Particularly this model is best suited for Finance and Insurance companies that outsource their processes to third party vendors as they have a clear picture of costs involved and since vendors too actively commit themselves to further reduce cost without impacting the quality of services and customer satisfaction, they can lower their costs and offer services at competitive prices to their customers which will be a big competitive advantage.  

Software Testing Services Outsourcing Market expected to continue growth in 2013

The worldwide software testing outsourcing market is forecasted to reach US$ 50 Billion in revenues by 2020 form 2010 revenues of US$ 30 billion and India is expected to capture major chunk of this growth according to a NASSCOM report on the testing industry. India is estimated to account for US$ 13-15 Billion by 2020 and US companies outsource software testing worth US$ 10 billion every year. Indian Software vendors like TCS, Infosys, Cognizant Tech, Wipro, HCL Tech, etc. have significant part of their revenues contributed by software testing services and according to NASSCOM estimates in the year 2012 software testing revenues earned by Indian companies is about US$ 3.2 billion. According to analyst Nelson Hall, the global testing services market was US$8.4bn in 2011, and predicts an average 9% growth every year until 2016 even though the growth is flat in 2012. India has close to 180,000 testers available who are well trained and Nelson Hall predicted Indian-offshore based delivered testing services grew by 8% in 2012 while onshore-delivered testing services declined by 5%. Forrester Research estimates that the demand for outsourced software testing will account for 28 percent of IT budgets in Europe and the U.S. within two years. Cost savings and need for professional testing services are the major growth drivers and requires significant investment in terms of tools, people recruitment and automation. Testing is a human resource-intensive activity and despite of automation work, people are required.

Business Organizations across the globe rely on applications both internet and mobile based to provide services to their customers and also sell their products to the customers. Applications have to be tested for reliance and functionality before launching them for customer use as any failure of such applications will drastically affect the business. Business critical applications have to be tested preferably by third party software vendors with both onshore and offshore capabilities that help to reduce the high costs associated with software failure and without the huge investments needed for rigorous in-house testing processes. Software testing is one of the most important tasks for 91% of IT departments and almost all believe it is crucial to outsource this activity, according to a recent report from analyst company Pierre Audoin Consultants (PAC). In a typical project, 70% of the budget will be for development and 30% will be for testing. “The conventional model for procuring testing services is for the customer to provide a request-for-proposal, then a bunch of sales guys call them up, a lot of presentations go back and forth, and there’ll be negotiations and finally a contract,” explains Sanjay Seth, Manager for Wipro’s testing services. “This entire process can take anything from 90 to 270 days. That’s fine if you are doing a multi-year engagement and it is a transformational deal. But there are many kinds of testing that can be done in days or weeks, so you don’t want to go through a nine-month sales cycle.”

The market for software testing services is expected to continue its growth and Indian software vendors definitely have an advantage as they have continuously delivered high quality services, achieving the defined user standards and increased adoption of differentiated growth strategies by testing vendors have helped them in keeping up growth. According to Dr. Bharti Rao, Global Head, Independent Testing Services & President, Blue 7 Solutions (JV Company of Blue Star Infotech), “the face of testing services is changing for the past few years. The ratio of Basic Functional Testing to specialized testing services was 80:20 percent in the past. This is rapidly changing to 60:40 and further expected to change to 40:60 in the coming years. For e.g. If we consider testing of a travel application then, in addition to traditional functionality testing, we also need to cover - Usability Testing for ease of navigation, visually appealing UI and simplicity of overall design, Compatibility Testing for validation against different browser-OS combinations, Performance Testing to verify application response under Load and Stress conditions, Integration Testing to check seamless integration with external components like social media, Security Testing to make the system full proof for some critical components like payment Gateways, Mobile Testing if the application is to be supported on multiple mobile platforms, Automation Testing to increase the overall productivity and accuracy of the test executions.”

But the Software testing market is also changing with the advent of new technologies like Social Media, Mobility, Analytics, Big Data and Consulting. Particularly Indian vendors have to build capability in the mobile application testing segment due to the rapid growth in the number of mobile phone applications. Also big Indian vendors their focus and providing cloud based testing; testing-as-a-service; automated testing and testing in domain-specific niche services. The industry is still suffering from lack of highly skilled testers and both the industry and government have to work on this together by developing the educational and training systems required. “With prosperity come challenges. Increasing offshore salary costs are fast diminishing the labour arbitrage.  Organizations have to think out of the box such as process improvements, re-use, automation, risk based testing, etc.  Many have turned towards harnessing non-engineering graduates towards testing work, such as BSC and B.Com.  Along with the relatively lesser labour costs, this has an added advantage of domain specialization which a non-engineering graduate typically brings to the table, “according to Dr. Bharti Rao. India also has to worry about the other low cost destinations like Philippines, Poland and other eastern European countries that are becoming more low cost compared to India and Indian vendors are overcoming this by setting up development centers in the above mentioned countries. Clients are looking at testing service providers to contribute to their business outcomes, have domain understanding of the client businesses and accept the accountability and responsibility. Most of the Indian vendors have realized this fact and have set up large testing service departments that also serve as “Centers of Excellence”, and focus on innovation, training and competency development specific to testing.