Earlier this year, about 200-odd executives from multinational technology giant Dell met at a newly constructed hotel outside of Bangalore where founder and chief executive Michael Dell addressed them remotely. The top guns brainstormed and laid out goals for the next three years. During a chill out session in the evening, Suresh Vaswani, then just a week old in Dell, played drums.

Vaswani?s appointment as the chairman of Dell India and global head of the Dell?s applications and BPO business drummed up another message?the firm was serious about building its IT services engine in India where it is approaching $2 billion in annual revenues. The former joint-CEO of Wipro Technologies had steered and ramped up the Indian firm?s domestic services business into a major force to reckon with; the firm is currently placed second only to IBM in domestic sales.

Perhaps more importantly, Dell now wants to leverage India like never before as it morphs from predominantly being a personal computing player trading desktops and notebooks to a one-stop shop that sells servers, networking, storage and services.

There is a growing realisation within the company about the prominent role India can play if the technology company has to remain relevant in the decades ahead. Tectonic shifts in the technology buying landscape are making hardware-only companies jittery. First, there is a move away from traditional end-computing devices such as desktops and notebooks into more fashionable stuff like tablets. Even hard-nosed enterprises are relenting to what is being called as the ?consumerisation of IT?, letting employees use gadgets like iPads and smartphones to access and store company data. Dell must reduce its dependence on PCs and shift to a broader portfolio of products and services.

Second, hardware margins are falling every year and services is a highly profitable game. Third, customers are demanding consolidation of technology vendors. As delivery models migrate to the cloud and utility-based services, customers would look for players who are end-to-end?a big fish who can design, supply the infrastructure, build and maintain huge data centres where numerous applications would be hosted and then consumed on an on-demand basis.

All this is making services and India, where truckloads of engineers can be hired at short notice, a critical part of a multinational?s ecosystem. More so for Dell since its services foray globally is a relatively new affair. About $7.7 billion of the firm?s annual revenues of $61.5 billion in fiscal 2011 came from services. This currently includes a lot of its own product support and some infrastructure services. Applications and BPO would now complete Dell?s transformation journey into a true IT solutions provider.

?If I have to really be a big success in the applications and BPO business and I don?t leverage India, I will not be a success. Period. Same is true for the infrastructure business,? Vaswani says, biting into a vegetable sandwich, during a 45-minute meeting at Bangalore?s Leela Palace. ?You can?t be a very cost efficient organisation if you haven?t leveraged the basic strengths of India, whether it is engineering or back office processing. India is now an integral part of the world business ecosystem, particularly for IT companies. I was quite amazed at the depth of knowledge Michael Dell has on India. Lot of my discussions in deciding to work together was on how to leverage India better,? he adds.

Vaswani has therefore joined with a clear mandate?to put applications and BPO as a standout service for Dell globally. He would give the now fragmented business a shape and form; oil the engine for sales, delivery and customer management. ?Clearly, Dell stood out in healthcare because of the Perot acquisition (September 2009). We have good BPO capability in insurance, government and healthcare but it was all over the place. It did not have the structure of a solid applications and BPO engine that delivers services to customers. I am creating that,? he tells.

India is Dell?s second largest destination in terms of people outside of the US. The firm currently has about 25,000 people and with the services story unraveling, the number would only grow. One need not look further than IBM for a case study?when Indian IT outsourcing firms gave IBM a run for its buck, it underwent a painful restructuring to leverage India and ape what Indian firms do. Now, more than one lakh IBM employees service customers across the world from India.

Dell now has seen some early success with services which may have encouraged it to invest more. Key to the company?s strategy is to shift to higher-margin and recurring revenue streams. Enterprise solutions and services business has partly managed to do just that. In fiscal 2011, enterprise solutions and services revenue, including the contribution from Perot Systems, grew 27% while gross margins generated from this category grew 24%. The operating income increased 58% to $3.4 billion.

Nonetheless, Dell would hardly be satisfied leveraging India just as a destination for global delivery of services. It has, and could do much more. Already, the company?s R&D unit in the country is developing software for next generation enterprise offerings; a finance arm does critical tasks such as global order processing and an analytics unit mines all of the company?s data before sending back insightful reports to different parts of the company.

?Dell has all kinds of data because we are a direct company. Every element of our customer relationship is sitting in our data bases. The intent was to mine the data and make sense,? tells Pankaj Rai, director of Dell Global Analytics, sipping coffee in the firm?s noisy cafeteria in Bangalore, and one that passes a spectacular roof-top cricket field. ?Marketing analytics reports go to sales; if its supply chain, our insights help factory people make better decisions on inventory turns and forecasting. In online, we check how many are converting and buying and how you can influence their decisions by showing a banner advertisement, for instance,? he explains.

Now, India may be poised to play another critical role?with its huge and diverse population, the country can become a testing ground for consumer devices that Dell wants to launch globally. Ganesh Lakshminarayanan, president and managing director of Dell India points out that the company can try out lots of things in the country. ?It is a test bed for products that can work in other emerging markets. Phones are one example. Dell?s Android-based XCD phones were launched only in India. Tomorrow, we can try out services. If a particular service can work here at India cost structure, it can definitely work for the globe,? he says.

Lakshminarayanan also heads Dell?s global consumer and small medium business services. India, therefore, has two global leaders in the services space?Vaswani being the other. Industry watchers say that?s a big statement of confidence in India? role in Dell?s global transformation. Dell India?s attrition at the leadership level is the lowest in the country, informs Vijay Bharadwaj, vice president of human resources. This has helped build that confidence. The bespectacled executive confidently says that he has figured out a way to retain smart people using a troika of ?right job, right salary and right opportunity?.

The other transformation is expected in the domestic IT services space where Dell has negligible presence, lagging IBM, Wipro Infotech, HP, TCS and HCL. But soon, Dell will aggressively push its solutions story in India, building on the hardware relationships it already has. The importance of emerging nations can hardly be understated. The company?s future growth and success are substantially dependent on the continued growth of its business outside the US, including in Brazil, Russia, India and China (BRIC). During fiscal 2011, revenue from the US increased 14% to $31.9 billion and represented 52% of total net revenue. Revenue from outside the US increased 19% to $29.6 billion and represented 48% of total net revenue. Revenues from BRIC increased 38%. Together, the BRIC nations now account for 12.3% of Dell?s revenues compared to 10.5% in 2010. Dell is already India?s No. 1 personal computer company with a marketshare of 16.7% in the first quarter of 2011. The firm reported it grew 28% in India in its first quarter ended April 2011, far above the domestic market growth of 16%-20%.

To establish itself as a major services force, the company will now develop its own systems integration (SI) capability in India and bring in other high value-added services to the fast growing $17 billion domestic market. ?India as a market is extremely strategic to Dell. My job is to make sure that Dell reaches its true potential in the country,? Vaswani says. As chairman, he would also play a role in customer management and large deal management?similar to what he did at Wipro Infotech. Dell?s entry into services has implications for other established vendors; it mean more competition, aggressive pricing and possibly, marketshare changes in the years ahead, analysts said.

TR Madanmohan, managing partner of consulting form Browne and Mohan said that Dell would come in with aggressive pricing. ?The firm is hungry to get into the enterprise market. And as a late entrant, they would have fewer partners in India, which means there would be little unhealthy competition between partners. This appears to be the case with other big players,? he noted. Existing pure play SI companies in the domestic market, he said, is likely to bleed with the trend tilting towards solution players.

Dell does have a few advantages others don?t. Where it is lagging peers like IBM and HP, it is fast building capability?high performance computing clusters (HPCC), in layman?s terms, supercomputers?is one area. Vikas Bhonsle, general manager of Dell?s India Large Enterprise operations points out that the firm has an important ability many rivals don?t?its ability to control the end device. ?End device could be laptop, desktop, mobile. We have the capability to control the end device as well as take you to the journey to the cloud. You can handpick companies who can do this,? he says. IBM, because it divested its PC business, no longer has the ability to control end devices.

With the services piece, executives say that the company?s sales workforce is undergoing a transformation as well. They no longer have to push just boxes (PCs and other hardware). They are being asked to understand the business of customers and configure solutions that fit all technology needs. The firm is investing in bringing expert sales people who are service specialists, enterprise specialists, solutions specialists.

Nevertheless, Dell does have some distance to go before it can make Perot more relevant for the India marketplace. ?We have won some contracts but it is not even the tip of the iceberg. There is a lot for us to do with Perot,? Bhonsle quips, and on being probed, adds, ?There is no issue, my friend. Just that the Perot organisation was more aligned to work with customers in the US.?

We ask him to explain further. It emerges that Perot needs to understand how India works. ?If you go to the US and make a managed services contract, they will have everything put down as scope of work on a document. In India, there is always this element of flexibility that every customer wants. Not everything is defined and you are expected to sometimes move beyond the scope on relationship basis. These are some of the nuances that aren?t there in other markets. We need to get Perot to understand that and start to build an organisation that is in tune with this,? Bhosle says. Large acquisitions don?t pan out easily and Perot?s transformation for the domestic market may take time.

Yet, the company appears confident it can script a much larger India story in the years ahead. It knows the hardware business in and out. It has manufacturing, an efficient supply chain, good technology support and sales models. If Dell India can now grab the services opportunity, it should grow its overall revenues three to four times of what it is doing today. IBM and Wipro need to watch out.