Friday 21 October 2016

A hi-tech giant's redemption: Dell's story, post-privatisation

It was just five years ago that Dell's job losses rocked Limerick - but post-privatisation, the company's local boy Aongus Hegarty has built up a happier story to tell Donal Lynch

Donal Lynch

Published 03/05/2015 | 02:30

Aongus Hegarty by Paul Young
Aongus Hegarty by Paul Young

It's the day after a man in America makes international headlines for firing a round of bullets into his allegedly slow Dell machine before announcing he has "no regrets", but at the company's campus in Limerick, the story seems literally and figuratively a million miles away.

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Today the ghosts of five years ago have finally been exorcised. The 1,900 jobs that were lost in 2009 - provoking widespread fury - seemed like the nadir of the recession in the county and saw a deeply preposterous call from Ruth Coppinger TD to nationalise the company's operation here.

Since then the local economy has staggered back to its feet and Dell has undergone an enormous transformation from public to private company, which in turn has allowed it to steer focus away from meeting short-term financial targets and back into research and development.

Which brings us back to the announcement; all 100 jobs will be in highly skilled R&D posts.

For Limerick-born Aongus Hegarty, head of Dell's operations in Europe, Middle East and Africa, those memories from 2009 provoke slight wincing but he knew the short-term pain was necessary for long-term gain.

"Frankly the situation here in Limerick was fairly tough, we possibly should have begun the process of change earlier and done it over a longer period of time," he says.

"I'm from Limerick, I knew many of the people impacted. I thought over time we could bring more growth back into the business. For me this announcement is about a series of announcements in Ireland for three or four years now. We announced in Limerick in 2011 the opening of our solution centres and command centres.

"In Dublin we announced our new Dell financial services centre. And last year we announced an R&D centre in Dublin and this announcement is part of our broadening R&D capability. We're putting a significant investment into Limerick."

Hegarty speaks with the smooth, on-message fluidity of a politician, at times neatly batting aside questions to deliver his spiel, but you couldn't find someone better briefed.

He also has an interesting story to tell, having been the top Irishman in the company during what Forbes magazine called "the nastiest tech buyout ever".

That deal saw Dell founder Michael Dell eventually fending off ferocious criticism from rival and billionaire investor Carl Icahn, who claimed that Dell's consortium had undervalued the world's third-largest manufacturer of computer hardware.

Under the terms of the transaction, Dell investors received $13.75 in cash for each Dell share, plus a special cash dividend of 13c per share. The total transaction was valued at about $24.9bn and Hegarty says it's been a key part of growth in the last few years.

"Privatisation allowed us to accelerate the strategy which was going on prior to that, but it has allowed us to take a long-term view," Hegarty says.

"We've continued to innovate around hardware, which was always at the core of our business. The last five years has really been about broadening of business, including software and services."

Since they are no longer required to fulfil the duties of a publicly listed company, there has naturally been a lot of curiosity about just how Dell is now doing, and Hegarty allows a cautious peek under the bonnet.

"We've seen some acceleration in our business over the last 18 months, double-digit growth across all areas of business in the client space. Our enterprise business and our software and services business," Hegarty says, before declining to get into exact figures.

"It's also been double-digit growth on a regional basis. We're ahead of our repayment from a debt perspective."

The company has recently completed a number of acquisitions in the area of software, network and cyber security.

"On the security side we acquired SonicWall. On the network side it was a company called Quest, which had itself acquired a number of companies in the previous few years. The third area is maybe the most exciting: it's around information management.

"For many years we've been generating lots of data. We're now the number one in terms of data storage for the region and we've developed a number of solutions around managing and interpreting the data retrieved and the acquisition of quest is a key part of that.

"We acquired StatSoft, which helps them to provide data to product and services groups. That whole area is going to be a significant growth in the future."

Traditionally Dell was not regarded as an innovator on the hardware front, and over the last decade the unforeseen (by many industry insiders) rise of the Apple store and the consequent tendency of consumers to want to visit retail outlets, meant that Dell's business model of selling cheap, slightly cosmetically challenged hardware to customers online, took a hit.

Its customer service was also much maligned - particularly in the United States, with the phrase 'Dell hell' being coined to describe the interminable wait for phone support.

The company responded, experimenting with retail stores in the US, and introducing tough customer service targets which demonstrably increased customer satisfaction. Through it all, Hegarty says, hardware has remained a key part of their business.

"It's at the core of it all. We've innovated around hardware in terms of notebooks and desktops, and in the data centre in terms of converging that hardware into a data infrastructure.

"When people think about innovation they think solely in terms of the consumer device. Our innovation is across all aspects. It's around the hardware but also around the business model.

"It was Dell 30 years ago who first started making technology more affordable, in terms of helping the customer in a consultative way, from proprietary systems, which are very expensive and tie up a lot of capital to more open-scalable solutions to enable IT leaders to invest in projects which add real value to the business."

The company has also diversified, moving into banking in recent years. Where does Dell's financial services arm fit into their overall strategy?

"It might seem strange for a technology company to move into banking," Hegarty begins. "That very much came from my region, Europe Middle East and Africa and the lack of availability of credit in those areas.

"We found ourselves working a lot with customers who had a vision and a clear strategy but couldn't get working capital. We'd helped with this in the past with partners but as the situation evolved we decided that this needs to be a core business competency.

"What that meant was that instead of limiting investments and deferring decisions on their business, which have a pretty dramatic impact on their business, we were able to give them the best technology solution today but consume and pay for it over a longer period of time."

Hegarty thinks that the strong American dollar will give Ireland's export-driven economy a good advantage in coming years.

"The currency fluctuations are making exports very competitive. So for Ireland there is an opportunity for strong growth over the next year. The second element is low-interest rates, so there will be better access to capital," he confides.

The roles to be filled in Limerick are highly skilled, Hegarty says. Investment in education is vital to ensure Ireland remains cutting edge in terms of being able to deliver graduates to fill posts like these.

"We as leaders have to actively engage around what's required. We have to go back into the schools in terms of encouraging young people around the stem areas and continue to do that in universities - supporting the masters and doctorate programmes.

"But we have to do that in-house as well. We've been undergoing significant evolution in terms of developing skills and capabilities and we haven't had issues.

There's also been a slow change in terms of the gender balance in the tech industry, which is encouraging."

As a local boy made good he is perhaps the ideal man to deliver the good news. His mother was a commerce teacher and his father a lecturer in UL where he himself would later attend, studying business.

"I started out in digital. I went into purchasing and procurement and never intended ending up working in finance."

Having responsibility for not just Europe, but also developing markets in the Middle East and Africa, has presented its own particular challenges, he says.

"When I go to Russia or the Gulf I'm looking at the market and opportunity. There has been strong growth in the Middle East, Dubai has just won the 2020 Expo - we've been making a lot of investments and developments there.

"There's a lot of opportunity in the Arab countries that have gone through huge change. I was in Kenya recently and they've skipped through certain technologies, they've gone straight to mobile technology for example."

Certain politicians may have rounded on Dell in 2009 - but Hegarty says that the political landscape here has largely encouraged investment on Dell's part.

"To be fair to the Government, they've created a pro-business environment. Ireland has now positioned itself to be competitive and highly productive and we need to make sure that continues.

"When we were making this decision, both globally and at a European level, we looked closely at many locations and we chose Ireland because of the talent and team that we already have but also the potential of attracting significant talent from Dublin and Cork to our business."

He sounds an optimistic note about what's coming down the line. "Some of the roles that were there in 2009 aren't there now, and the positions here are more skilled than they were then.

"The great news is that that's created great opportunities for people within the company. There's going to be more growth and I think there's great grounds for optimism."

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