I have always had mixed feelings about Dell the company, not the man. Michael Dell is to be applauded and recognized for the tremendous vision and work needed to bring his namesake to the level of success is has attained. From a strategic and business perspective, few people will argue that Dell changed the PC business and has revolutionized the model by which computers are sold. It was all pure genius. Dell’s cost-cutting strategies and built-to-order model forced industry stalwarts IBM, HP and others to refocus on who their clients were and to ultimately build a better, cheaper machine. IBM got fed up with trying to compete and instead sold of its PC business to Chinese giant, Lenovo, leaving them the kings of enterprise software and services. HP, not having the services and software business to rely on, was forced to re-evaluate its hardware channels, cut costs in R&D and ultimately rework its internal structure to accommodate the changing tides. This is all good… to a point.

With last week’s abrupt announcement that Michael Dell was back in the driver’s seat and long-time CEO, Kevin Rollins was out, analysts, investors and industry insiders were forced to re-evaluate their position yet again. For years, Dell’s “direct” model worked like a charm in cutting out the middleman and associated costs. However, they eventually realized it can sometimes be cheaper to outsource your sales, invoicing, customer service, etc. (just like they’ve done for years with their R&D and manufacturing). Dell’s R&D budget is nothing compared to what IBM and HP have spent over the years to ensure compatibility, reliability and standardization. And this started to hurt Dell… more on that later. Rollins realized he had to include the channel to some extent to take advantage of the customer base and economies of scale; however he never really made a full effort to do so. CDW, the largest of the channel VAR’s, had worked up a deal with Dell, but it was supported poorly and, like the smaller VAR’s soon realized, Dell was in it because it had to, not to increase its business and footprint.

Back to the R&D… As Michael looked on, Rollins had to increase Dell’s customer service and support personnel due in part to growth, but also something else which they won’t readily agree with: Dell’s lack of full R&D investment, outsourced channel agreements and innovation have finally caught up with them. It costs a lot to support faulty hardware, pissed off customers and all of the other customer service functions associated with ANY PC business. So, after more than two years of losses in stock value and market share, what will Michael Dell do differently to correct Dell’s path? Obviously, with such a big move announced so suddenly, there are a number of good articles written on the subject recently. Peter Burrows, of BusinessWeek.com, wrote of Dell’s return to the company on Friday. Michael Kanellos, of CNET.com weighed in on the issue on Thursday.

Apparently first on Dell’s list of things to do is going back to the proven way to raise your stock price and generate some “change-buzz”: Cutting costs. The Austin American Statesman released an email yesterday (and a great story which accompanies it), detailing newly announced management cuts and a new bonus structure going back to 2006; primarily the strategy is that there won’t be much in the way of bonuses for 2006. I’m sure there will be more announcements to come, especially in the wake of the SEC’s continued investigation into Dell’s accounting processes. But, will Dell go back to a direct-only model, or has HP made enough of an impact to force Dell to do a deal with the devil and embrace the distribution channel and all that it has to offer? After all, the opportunities lie in services and in order to take advantage of this opportunity, Dell will have to at least court the MSP and VAR channel for a time. Time will tell and although I have nightmare stories of dealing with Dell as an influencer and MSP, perhaps they will make the right moves and regain their title from the glory years.