Q&A with Dell's Kevin Rollins

In April, Dell COO Kevin Rollins spoke during the Private Sector Program Annual Meeting. During his keynote address, Rollins answered questions posed by moderator Rob Pennington as well as questions from the audience, addressing topics from R&D to Internet security to outsourcing.

ROB PENNINGTON: Thank you very sincerely for coming to see us. This is quite an honor and we're looking forward to the discussion. Many of us know you only as Dell's chief operating officer. Can you give us some idea about your career history—what's your background?

KEVIN ROLLINS: Thank you very much for hosting us and allowing us to come and share some of our knowledge and experience. It's just a pleasure to be with this group.

My background is a little different, which I think embodies the kind of different way Dell sees the world. My background is in consulting. After receiving an education, I worked for a strategy consulting firm in Boston, Bain & Company. I was a partner and director there after about 13 years of work and consulted with Michael and Dell in a period of time that was pretty challenging in our company's history, back in 1993 through '96. We had a little turnaround going on at that point in time. And then in '96 I joined Dell as president of the Americas region, moved from there to vice chairman and now president and COO of the company worldwide.

ROB PENNINGTON: Many of us here at NCSA and the university are successful because of a shared R&D model. What is Dell's attitude toward collaborative R&D? Is there a sense of "not invented here," or is Dell open to a shared development model?

KEVIN ROLLINS: Again, we're somewhat unique in the industry. We spend about a half a billion dollars a year in internal R&D and have over 3,500 engineers around the globe working on our products at any point in time. But we believe that the industry is really too large for one company to try to control all of the R&D. In essence, if you do that a couple things happen. One is you end up falling into the proprietary technology trap, which means that you're sure that your technology is the only and the best, and you miss out and don't provide technology for customers that's coming from a broad range of sources around the globe, with billions and billions of dollars spent on R&D.

Our model is to use our R&D dollars to integrate the best technologies we can find on behalf of customers so that they have an easier time using those technologies. We focus on promoting open standards so that we can find those best technologies, make them available to the mass computing market, and then bring the very best technologies to bear for customers in a very low cost, efficient and high quality way. We believe in that collaborative R&D model and have numerous partners.

ROB PENNINGTON: One of the things noted earlier was the spirit of the Dell team and the entrepreneurial attitude. How has a company this large grown and maintained that attitude?

KEVIN ROLLINS: First of all, we have very good people so we're really pleased that they would work with us and participate. I'm pleased they exude that entrepreneurship, which is really part and parcel of the company. It really emanates from Michael's original philosophy. Michael is a profound entrepreneur himself and really is very excited about new opportunities.

We have a culture in the company now, which I characterize as never allowing the cement to dry; makes it constantly malleable, constantly changeable. And in an organization where you have a high degree of change, you have a non-bureaucratic organization which allows for that entrepreneurial spirit to flourish, obviously within controlled limits. We're a large company and we can't have quite that much entrepreneurialism or every single day we'd have chaos.

We encourage the entrepreneurial spirit because we believe it stimulates new ideas. We believe it will allow us to continue to break the mold, break the model and then revitalize it every day and bring those best ideas to customers.

QUESTION: Do you have any given processes around your entrepreneurship, your innovation? Do you manage it at all or is it more just an attitude?

KEVIN ROLLINS: We combined what we believe is the best of technological entrepreneurship with the best of kind of economic and business entrepreneurship. Obviously, technologies are very exciting, but we have to balance that with what's economically feasible and also with a group of shareholders who expect a return on their investment.

And so within that spirit we have a product development process which allows us to channel and find new technologies and bring those into the development process very early on. In fact, during the dot-com era, which is now thankfully behind us, there was almost an explosive plethora of technologies in search of a problem. What we found now that it's settled back down, and with our scale and volume around the globe, what happens is these best technologies need an outlet. They need to get to the market quickly. We've been a good source of integrating the best technologies and bringing them to market to scale.

We have an entrepreneurial spirit to test the boundaries of every dimension of technology, but we find that those technologies come to Dell quite regularly. Some we invest in, some we just utilize, but there's a constant flow of those new ideas, new technologies coming to us because we are an open architecture company and don't have a competing R&D model that puts us at odds with a lot of these new technologies. We actually almost get a first right of refusal, and look at these as part of our process of development. Michael and I have almost monthly technology reviews where we look at the leading edge of various technologies from products for consumers all the way to the enterprise and high-performance computing. And we assess those technologies in that formal setting with all of our leading engineering staff and decide which ones are worthy of continued pursuit, which ones are a little too early in the process to be baked and then which ones are progressing right into development for products. It's a fairly structured process, but we allow an open sieve in terms of bringing those products and those new technologies to bear, whether it's internal or whether it's external.

ROB PENNINGTON: How do you maintain the balance between the internal technology development and the external? How do you encourage the internal growth?

KEVIN ROLLINS: The internal growth really comes from having exciting projects to work on. As engineers will realize and know, if there's something very exciting, very new, on the forefront, they want to work on that. And so we make sure that our very best engineers get the first crack at the most exciting, new, cutting-edge technologies.

QUESTION: Dell's stance on the market is very wide. You go all the way from the fourth biggest machine on the top 500 list of supercomputers down to laptops and consumer level products. Do you see Dell as maintaining that very wide stance or is that going to shift?

KEVIN ROLLINS: We're a fairly diversified IT house and so, as you correctly stated, we have products and services from the consumer, which we are all part of, all the way up to the high-performance computing environment and the data center environment.

Our strategic priority, however, is in enterprise computing with servers, with storage products, with services for the data center environment. We do have other customer segments in the marketplace that we participate in, but only about 15 percent of our worldwide volume is in the consumer product arena.

Most of the R&D and the access that we have to technology is to flow into those data center, large corporate research, government, education environments, and we'll continue to do that. Those technologies over time then flow into consumer products quite often, and there are certainly some technologies, like wireless, which have application not so much in the data center but with the client at the edge of the IT environment. We pursue those, too.

QUESTION: We all know at the present time there's a major problem in Internet security. Viruses and worms, intruders of various kinds, hackers. In fact, if the problem gets worse than it is now the entire thing might even stagnate. The traditional way of solving this problem is at the software level and Microsoft, of course, is putting an enormous amount of attention onto this problem. To what extent in the future do you see a hardware solution to the problem which will cause a complete restructuring of your product line? Is this a concern to Dell that to prevent intruders and to prevent viruses that the hardware now being sold will have to be redesigned?

KEVIN ROLLINS: We're very concerned with the impact that viruses and Internet intrusion particularly have on large IT, global IT, as well as corporate infrastructures. It's costing business and the government and the world a tremendous amount of money. One of the benefits of IT and of software and of the Internet is it's been an open architecture so it's something we've all had access to and been able to use, but obviously when you operate in an open environment like that you allow the small minority of the population who wants to foul things up to participate, too.

The best solutions so far have been software solutions. We have not spent as much time on trying to get a hardware solution because most of the viruses are software related and so the solution is generally software related as well. What we do believe though is that this is going to be a continual problem, and for every solution there's a new problem. And, as smart as people are at finding ways to stop it, there are smart people trying to find ways to break it.

I'm afraid that the best solution is going to be to continue to outrun it and continue to upgrade, continue to check and to be as vigilant as we can be, because I think in an open society we're going to have this with us for a while.

QUESTION: What is the best way to approach Dell with new technology that seems like a good match for you?

KEVIN ROLLINS: It's really to come through our product development teams. We have not only our core development teams, which are developing products that are moving into the market, but we also have an advanced technology group that assesses new technologies. We also have an investment arm that will assess technologies, though it's small at this time.

QUESTION: I'd like to know what Dell's stance is on the Windows platform. Do you see the Windows platform winning in the long run, or will competitors like Linux and AMD take over this platform?

KEVIN ROLLINS: We believe in open standards and we believe that customers are the ultimate deciders of the technologies that will win. Customers have expressed great interest in Linux as well as in Microsoft. We are not a UNIX advocate. We believe that Linux and Microsoft over time will erode the whole UNIX base and infrastructure. UNIX is not going to go away, but we believe it's going to continue to shrink. And so we provide our customers with solutions surrounding both of those operating system platforms.

To date we are still fundamentally an Intel shop. We evaluate AMD products on a regular basis. They have some very good products. Most recently we've kind of gotten closer to evaluating and assessing and understanding Opteron Athlon products. I've not moved toward using those in our technologies yet, but they get better every day. And as customers demand some of those products, then we move our strategies based on customer desire, customer need, and obviously overall economics.

We think Linux is a good technology. Just to give you some basis though, on the servers that we sell, Linux is still loaded on about less than 20 percent of them. Microsoft is still by far the overwhelming choice, but I think that there are some things changing in the industry. The recent alliance settlement of a suit between Sun and Microsoft may hold some new opportunities or portend new ways that Microsoft and others may participate in a more heterogeneous environment, which I think is what most customers would like to see.

QUESTION: You talked a lot about technology development and technology assessment but in a recent Texas Monthly magazine interview with Michael Dell, I was struck at how oriented he said the things you do are toward user assessments and user needs. How do you structure that portion of your company to really go down and figure out what it is you're going to do now either with your technology or in making future decisions?

KEVIN ROLLINS: This was the balance I talked about before. Certainly there are really exciting, fun technologies to develop and you can work on them in the lab for a long time and they never make any money. We have to balance that with the economic needs of the company and our shareholders.

The way we do that is through our Dell direct business model. We're direct. We don't go through an intermediary to get to our customers. And so we hear from thousands of them every day in our interactions with them.

Next week, for example, we'll be meeting with what we consider our Platinum Council, which is a group of sounding-board customers on the corporate market side and also institutional and government side. We'll share with them our next generation, next leading technology roadmaps for all of our products. They will give us the feedback as to whether those products are going to meet their needs and whether or not we should modify some of the plans we have. And we give them a pretty long outlook on how those roadmaps are settling in, what technologies will be included in almost every product category from desktops, notebooks to servers to wireless applications to software to storage. And that will be a watershed event. We have those globally and then we have additional technology summits with customers on a regular basis. I would guess I spend 40 percent of my time, as does Michael, meeting with individual customers. And in those customer settings we get feedback. And it's not all good, but it's all useful, because when we hear from customers, either good or bad, we know where we need to modify or where we're on the right track.

Our model, by definition, puts us in constant communication with customers to allow us to find our way through product roadmaps and technologies to meet their needs.

QUESTION: What do you consider the most critical unmet needs in the corporate marketplace?

KEVIN ROLLINS: There are a lot of them. With technology evolving so rapidly, we're constantly on the cutting edge if you want the best and the highest performance. And that cutting edge is often a little ragged. And so the notion of service and support, of stability, is a constant challenge for us. Security, manageability is always a challenge.

Right now what we're seeing and what we're looking at and working on with our business partners is how do we provide for more manageability of heterogeneous environments in the data center, more manageability across multiple platforms for storage, for networking, for server farms. We'd like to be able to get to the point of having one user interface for all of those platforms so you could manage those either remotely or on site, rather than having to have a management system for every one of those various technologies within an institution or corporation. That's one of the next great milestones within technology, the notion of how you manage the complexity, and there are so many new competing technologies.

It's a challenge inasmuch as there are many flavors of the management layer. Unlike operating systems, which have really boiled down to a few now, you have many unique management tools and capabilities, and they haven't standardized yet. That means cost, that means complexity. I think one of the things we've found working here with NCSA is that with moving from proprietary platforms to standard Intel-based technologies, the cost of getting huge computing power versus what it used to be is just a mere fraction. So universities and organizations can afford now to get this huge computing power, put it in place and do huge computational research, which was before available to only a very, very few. Standards will allow costs to come down—that's next for manageability.

QUESTION: Do you think that you're going to continue to operate at least in the consumer market as a large mail-order company, or are you going to go through other distribution outlets?

KEVIN ROLLINS: As I mentioned before, consumer globally for us is about 15 percent of our revenue, so it's fairly small. Most of our research, most of our development, most of our people are focused on corporate and institutional needs. So on the consumer side, we're pretty much sticking to the knitting on our business model. Even in the U.S. we're now No. 1 in the consumer market with about 30 percent market share still going through the direct model, which is usually Internet- or phone-based. We have not found a limit to that, meaning we don't know how large a share we can get and whether or not it can become the predominant way people buy all of their consumer electronics. I happen to think that it can be the predominant way because it's simply so much more efficient.

QUESTION: Outsourcing has been a controversial issue of late. On the one hand, companies say that they have to look at all possibilities in order to stay competitive but, of course, other people argue that companies are pursuing profit at the cost of job loss in the U.S. So from your view, is it possible to make this a "win/win," that the company can stay competitive but the U.S. job market will not just go down the drain?

KEVIN ROLLINS: As an employee in the United States, I hope we don't all go down the drain.

Our take on this is a little different. My personal belief is that the outsourcing debate is highly politicized right now. And if you look at what has happened historically, there has always been what I will call a non-U.S. bogeyman somewhere. When I was growing up it was Japan and then it was Taiwan and then it was Mexico. So there's always been someplace that's taking all the jobs. What actually happens is jobs move, new opportunities arise, and somehow the U.S. economy continues to churn along and be the most productive and the largest in the world.

At Dell we take a little different view. We're growing as a company and the fastest growth markets for us are outside the U.S. We're still growing in the U.S., but a third of the world's population lives in China, and … from a growth opportunity over the next five or six years, the China marketplace is going to be very, very large. The same can be said about India, which are two of the nations that are getting most of the flak right now on job outsourcing.

I just came back from a trip to Asia, and I traveled throughout China. One of the opportunities we have is not only the use of the talent in those countries—right now I think China graduates about 10 times the number of engineers that we are in the U.S., so there's a plethora of talent there—but there's also a huge demand.

And so we have a growing employee base. We've been hiring over the last two years in the United States, our employee count has gone up, but we've also been hiring in China and in India and in France and in Germany and countries all over the globe as those markets grow.

What we've concluded is it would be unlikely for U.S. technology to be able to be sold into China and India if we had no employees there. So we believe we need to have employees in those countries to be able to take care of those countries.

As we bring jobs into those countries, what happens is the standard of living improves, and the people there have money to spend. What do they spend their money on? They spend it on U.S. technology. They buy more computers. And so the opportunity to develop those markets is good for those markets, it's good for those people, and it's good for the good old U.S. of A as we can then expand and grow globally.

We believe that kind of technology growth, particularly with improvement of jobs around the world, is going to do nothing more than improve the overall capability and the ability to sell. Frankly, I personally believe it will result in more jobs of a higher quality in the United States. It certainly has in our case. We're still on a hunt for more engineers. We're on the hunt for more call centers in North America, we're on the hunt for more factories in North America. It has not resulted in a reduction, but it's resulted in an increase in U.S.-based jobs. Not all companies are the same, but I think that most will find that is their result.

QUESTION: I have a follow-up question to your earlier comments about the importance of understanding customer needs. Certainly that's true, but there's another side of the coin it seems and that is anticipating the long-term trends that customers are not even thinking about now. Boeing had a good reference yesterday where they quoted a Pentagon manager who once said that if the U.S. Army did all their own R&D, they'd still be figuring out how to breed bigger horses for the cavalry. I think you'd probably agree that customers are not particularly good at anticipating those long-term trends that could disrupt your business. So my question is, how do you anticipate those trends and make sure that you're ready for the next big thing that nobody else is really thinking about yet?

KEVIN ROLLINS: That's a great point. CIOs are a fairly conservative group of people because if you get a little too far out on the ragged edge and the company's IT infrastructure goes down, you lose your job. By nature, it ends up being a fairly conservative status quo, legacy-oriented group of folks.

We have a difficult balance between what we can show the companies with regard to where the technology is going. And there are some companies that excel at vision setting but then never sell anything. So we have to balance that with where their company is going, where the technology is going, and where does it intersect with the vision. For instance, today I have to run something, today I have to reduce costs, today I have to operate more effectively; thanks for the vision but I've got a problem today. And we then want to make sure that the technology that we bring to you is something you can implement today, with an eye on the future as well. And so our best solution is to share those technologies we've found with customers, tell them what we think is going to be needed, what it can do, how it can benefit them and then get feedback from them on how realistic it is for them to implement that technology now and in the future.

That balance is a bit of a push and pull to make sure that we're not getting so far out in front that we're investing in technologies that no one can use for a long, long time. Then we go out of business while we're waiting, but also we need to stay on the leading edge and work with customers to know where they want to go.

A prime example is wireless technologies for many companies. It certainly improves productivity because you have more data, more access, more ability to compute in more locations than you had with a fixed computing environment. However, there are edges to technologies, there are security issues, there are data issues, there are connectivity issues. And so many corporations say, look, we're just not ready yet, I don't want those risks in my organization yet, even though that technology is available. And so we basically get into kind of a push/pull and find a settling ground ... and move step by step with our largest corporate customers into those kinds of technologies.

It's a complex question, but we find the best thing to do is to share and be open and to share best practices. We're note only a technology seller, we are a technology user. We just completed our last fiscal year at about $42 billion worldwide. We have almost 50,000 employees. We have millions and millions of transactions per day. So we're a heavy user of technology and transactional computing capability. We are the doctor that has to take its own medicine and figure out how those things work for our own company. Our CIO has to balance the technology that's available with the security and the sustainability and the reliability, and he and that team are probably the best advocates in meeting with companies to tell them about finding that balance. It's not a simple equation, as you all know.

QUESTION: You mentioned open source earlier. What are your views of SCO's intellectual property claims against Linux and how do you think those will impact your implementation of open source software?

KEVIN ROLLINS: That's an interesting debate that's raging right now. The jury literally is still out until SCO decides to go after someone and we find out if those claims are actually going to be upheld. So that's kind of one of the things we're waiting and watching for. For the time being, we're continuing to sell customers what they want because they will get it one way or the other. If it's not from us, they'll get it from one of our competitors.

For the time being we're continuing to sell Linux. If SCO decides to sue customers, we'll have to see if that's a successful strategy. For the time being there are not too many of our customers that are shying away from implementing the technologies.

QUESTION: Earlier you mentioned you're constantly looking for engineers. Would you address Dell's efforts to give back in the U.S. in the K-12 range with regard to what you're doing to help grow our own engineers?

KEVIN ROLLINS: What we're doing in a direct way is starting early through a program that we're now implementing called TechKnow ... where we work with corporations and institutions to provide technology to children who would not otherwise get that technology. It's as simple as providing computers to grade school kids and teaching them how to take it apart and how to use it. At the end of the training, and their parents have to be involved, they get to keep the computer.

We've been rolling this out school district by school district in many, many parts of the country and now we're expanding globally. This is where we can get our youngest minds more involved with technology sooner, because we think that's where it's got to start. And if it starts there, then by the time they get to college we'll have great engineers because they'll be so comfortable with this technology that they'll do great things for all of us.

So we're starting broadly at that level with very hands-on involvement and then we continue through the business. I believe we sell more computer technology to universities than anyone in the country and so we have programs to develop those engineering resources as well as provide them with gear to help them.

QUESTION: In Dell's search for new factories and new call centers in the U.S., have you considered Champaign County? (Laughter, applause)

KEVIN ROLLINS: In an election year, of course. (Laughter) I'll tell you, the criteria we look at are pretty simple. The reason we still look for factories and call centers even now is that locale has become the critical factor. Shipping logistics is the cost right now. And so shipping logistic centers for our product is becoming the critical cost factor. That's why we don't ship product from China into the U.S. for computing. We'll ship components in but then we assemble in the U.S. and be close to the customer.

I don't know if Champaign County is considered the logistic center or hub, but we'd have to have 747s landing a couple times a day right in here to be able to handle the volume, so you may not want us. You have beautiful farmlands; you may not want the cattle startled by 747s zooming overhead every day, but it ends up being quite a mass of logistics. But we certainly entertain the best.

ROB PENNINGTON: Kevin, we want to thank you for coming here today. We really appreciate your taking the time out of your busy schedule to come and answer some of our questions.

Access Online | Posted 6-15-2004