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‘Competition Can’t Touch Us In Expertise’
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Six months after Dell acquired perot Systems, everything seems to have changed for the company. Healthcare has become a major vertical for Dell Services, and healthcare services are being bundled with hardware. Small and medium-sized businesses (SMBs) and packaged solutions is the new thing for the company. James Champy, chairman of Dell Services’ Consulting Practice, who was earlier chairman of consulting at Perot Systems, spoke to BW’s Sunny Sen during his recent visit to India for the Nasscom IT leadership summit. He spoke about the need for modified and better processes and how Dell is integrating services to move up the value chain. Excerpts:
Why did Perot Systems sell out to Dell?
Scale and global presence! Eighty per cent of our (Perot Systems) business was in the US. We were not as active as we were needed to be and we were not present in other markets. We had presence in some, but it was limited to one or two clients. In India, we did not have a hundred clients the way Dell has. What Dell offered was a huge channel to market. We were a $3-billion firm. IBM Global Services is $48 billion. There were customers that would not talk to us because they thought we were too small. That has changed after the acquisition. Now we are Dell Services with $8 billion and a global presence. Dell is a good partner and there are not enough partners out there. It seemed that they needed us. If we came to Dell, they would not fire half the people.
Would you have got a better value had you sold after the slowdown?
All I can tell you is the valuation was very fair for the shareholders. There was a premium that they paid. But from Dell’s perspective, it was still very affordable.
How is Dell leveraging the Perot acquisition and going up the value chain?
The initiative with Dell is to build a very substantial enterprise business. We already have a combination of Dell Services and Perot Services at $8 billion. Over a third of our services team is in India and our intention is to grow that part of Dell’s business. India is a region that will continue to grow as will services from India, particularly for the Asian market. We also think India represents an under-developed market for services, so we will build our services capability here and start with healthcare. That is the strategy — to grow the services business and offer to the market an integrated set of services (hardware and software services) under the Dell brand. We have a lot of work to do with strategy, and certainly a lot of work to do with execution. Our intention is to build a large services business.
What structural changes have you gone through after the acquisition?
That is not happening in our case. But you are right — that happens. Dell has been in the services business. The services that Perot has been providing is consulting and outsourcing services; very different from Dell’s. So what Dell did is very encouraging — it took its services business and wholly moved it to a management structure headed by a Perot person. So, the person who heads all the Dell services is a former Perot person. The next level of management is former Dell and Perot people. And there is no need to force integration because the underlying businesses are different. Now what we have is aligned businesses that come from both Dell and Perot with little redundancy — that is unusual in mergers and acquisitions. There was no overlap.
BS (1963) and MS
(1965) in civil
JD Degree (1968)
from Boston College
Dell acquired Perot
September 2009 for
Revenues (Dell Inc.)
(Feb 09-Jan 10)
As a player in the healthcare space, how do you see the rising competition?
There is always competition as IT firms see healthcare as a growing market. We are not the least concerned or afraid of the competition. In the US, Perot is the largest provider of IT services in the healthcare industry. We have more expertise in healthcare than IBM, HP and all the big players. We run more managed hospital infrastructure than anybody else, but that’s in the US. But we have that expertise and the opportunity in the healthcare sector; we are seeing it at Dell.
In countries such as India and China, there is a need to build healthcare infrastructure and people are investing in building hospitals, new facilities, whole new businesses that need a physical hardware infrastructure, so we are seeing an increase (in business). Even as we declared that we are Dell, we have started seeing an increase in hospital operators coming and telling that they need the technology for hospitals. In the long run the opportunity for Dell is in the electronic healthcare records. That’s why all IT firms see something in this marketplace. But the truth is, you need immense amount of healthcare experience.
When I look at competition, I don’t think the competition can touch us in terms of expertise. I’ll take them on anyway.
In your new marketing strategy, are you taking a bundled approach — both hardware and software?
As we are only four months old, we are actively marketing hardware, services and healthcare. We have already developed a new hardware-software integrated package for small- to medium-sized hospitals. We operate that principally out of the US, but it is very transferable to India. It runs on a platform called Meditech. (The company) Meditech is the largest supplier of software to small to medium-sized hospitals. Three years ago, Perot acquired the principal integrator from Meditech. Large hospitals require a lot of customisation. To install an electronic medical record in a large hospital with several beds costs $80-100 million. It is very expensive, because the systems are very sophisticated. It is a huge system’s project. Those have to be customised.
Healthcare is less than 5 per cent of the BPO revenues. Are you also looking at healthcare from a business process point?
Whatever we do in the processes side is more in the insurance, the payer part of the business. So I see that increasing. The process in medical claims is a very complex process. I think we need to build a campaign to go after that business — the revenue cycle business. In the US, we have a capability called the revenue cycle management basically for billing and collection — a very complex process. I don’t know how the number looks in India, but in the US, hospitals collect only 70 per cent of what they bill. Can you think of running a business where you write off 30 per cent of what you bill? As mediclaim services in India evolves, this kind of process picks up.
What are the challenges you will face apart from the fact that you have to grow the business?
I would rather see it more as an opportunity than a challenge. The market will move towards packaged services and to deliver technology services at dramatically reduced costs. The cloud is there already. You can buy computing and a commercial cloud for a fraction for what that compute might have cost you. You buy only raw compute power. I would like to sell to a company all the compute power and the applications needed on a transaction basis — a different business model. The challenge is to develop different business models. But nobody has figured out how to do that. We figured it out in niches, but will operate it more broadly, and across multiple industries.
(This story was published in Businessworld Issue Dated 29-03-2010)