Dell was started by Michael Dell in 1984 with the idea of selling custom built computers directly to the customer. This direct business model has made Dell the world’s leading computer systems company. They design, build and customize products and services to satisfy a wide range of customer requirements; from the server, storage and professional services needs of the largest global corporations, to those of consumers at home. Revenue for the last four quarters totalled $54.2 billion and the company employs approximately 63,700 team members worldwide.

Dell’s direct business starts and ends with the customers. They have literally defined e-commerce, and they are one of the few businesses that successfully survived the e-commerce recession of the 90’s. Dell increased their share price enough last year to become the number one company in computer sales.

Dell's combination of direct sales and manufacturing-to-order means practically no inventory, and incredible success in matching products to consumer demand. Over the past five years, Dell has expanded this model beyond PCs to servers, storage and communications equipment.

“A key part of Dell's success” says Dell’s spokesman Clive Allen, is that the site offers consumers choice and control. Buyers can click through our site and assemble a computer system piece by piece, choosing components like hard drive size and processor speed based on their budgets and needs.”

“This direct contact with consumers gives Dell a competitive advantage” Allen explains, "Because we know exactly what our customers are ordering, it's a one-to-one situation. We get feedback on how our site is working so we're constantly making adjustments to it to make the experience for our customers easier."

Michael Dell is too clever to think he's intelligent enough to predict the future; he assumes that the world of IT increasingly resembles a global financial market, where the collected knowledge of all participants exceeds that of any particular business. Dell lets other companies dream up products never before imagined and risk their futures. Dell is content to ask consumers what they want and then sell it to them. It’s that simple.

Dell spends little on R&D and doesn't even pretend to be a technology innovator. Instead the company uses its influence to get early access to its partners' most innovative products and components, then uses its wonderfully sensitive market-testing machine (a combination of its web site and direct-to-consumer sales) to dictate what comes next. If new products sell, they are built to order and shipped. If they don't sell, they may never be made at all. It's perfect business theory, applied perfectly to corporate planning.

Not only did Dell’s competition help to force the Compaq and Hewlett-Packard merger in 2002, but they surely contributed to the problems at Gateway, which couldn't make money and compete with Dell’s prices. Dell was also partly responsible for IBM's decision to leave the consumer PC business in 2000. PCs may be a commodity, but what Dell really sells is the economics of connecting customers to suppliers. And it's proving more radical and harder to copy than people thought.

Despite Dell’s success, there have been few followers. For years, executives from all kinds of industries have studied Dell’s plan hoping to apply the winning formula to their own companies. "If this works for computers, it's going to work for automobiles, furniture, carpets, appliances, anything," predicted Larry Bossidy, Ex-CEO of AlliedSignal, in 1999.

Today, however, nobody outside of the computer business has successfully copied the direct plan. Many companies depend too much on their retail networks to go fully direct. In PCs, only Gateway has come close, although it could not make the model work well enough to avoid the need for retail stores and the inevitable inventory.
Compaq and HP talked a lot about doing it Dell's way but couldn't bear the pain of destroying their retail channels.

The one clear lesson from Dell is that the system only works in pure form. If you try to live in both worlds - direct as well as retail sales - you get the expense of both without the clarity of either.

So what is Dell? A one-off phenomenon, lucky enough to exploit a combination of factors that turn out to be unique to the PC industry? Or a truly explosive business model so disruptive that it can be adopted only through forcing change? Michael Dell knows the answer, but he also knows it takes a while to evolve. "These things just don't happen as fast as a lot of people predict," says Dell. "We've had a number of corporate customers who come back time and time again, and you could see them struggling with the change."