Editor's Note: This story, which originally appeared in the Austin Business Journal, has been updated to reflect that the lawsuit between Dell Computers and Advanced Internet Technologies has been settled.

Internal documents and messages filed in the 3-year-old lawsuit between Dell and a Fayetteville, North Carolina-based company provide a glimpse into how they Dell executives have dealt with business customers.

Even though the case is now over—attorneys for Dell and Advanced Internet Technologies agreed on October 8 to dismiss the case—it gives a snapshot into the workings of the computer giant. One of the more compelling examples, among the hundreds of documents made public, is a 2005 email from Dell’s director of small- and midsize-business services and operations that outlined a plan to respond to AIT's complaints about problems with Dell servers.

The director, Michael Garrison, in recapping the situation, noted that Dell Financial Services, the company’s leasing arm, had directed the Dell account team to inform AIT that its lease payments were $100,000 delinquent and being sent to Dell’s collections department.

Garrison wrote that he had told AIT CEO Clarence Briggs that his company was not using the servers as designed and had informed him of Dell Financial Services’ plans to send the account to collections.

“This customer is likely to escalate again,” Garrison wrote. He was right. The dispute became a five-year battle that culminated last month with the two sides coming to terms on a confidential settlement agreement during court-hosted negotiations in Raleigh, North Carolina.

AIT, founded in 1996 by Briggs, a former U.S. Army major, provides website hosting and other tech services. At the time of the problems, the company operated 1,800 Dell servers under 30 leases, according to documents filed with the lawsuit.

Before the dispute, AIT had bought nearly $2 million in Dell equipment, according to a letter from Briggs to CEO Michael Dell in which Briggs asked for assistance. The request was met with a bill from Dell’s collections department, demanding a $15,000 payment by the end of the month.

The tactic was underscored by AIT CFO Steve Young in an April 25, 2005, letter to Michael Dell and Garrison. “It is interesting to note that this payment concern did not arise until we complained about the Optiplex failure rate,” Young wrote. “What does this have to do with the failure-rate issue?”

Two days after Young’s letter, an email from Dell executive Michael Gibson to several colleagues, including Garrison, referred to AIT as “definitely a bit on the unreasonable side.” Gibson also wrote that AIT probably wouldn’t pay the balance of its lease until the server problems were resolved.

“Also, I know this customer has spent a lot of money with us over the past several years,” he wrote. “What kind of margin have we made with them?”

The following month, in May 2005, another email from a Dell worker who visited AIT wrote: “We have about [$]1.5 million to loose [sic] this year on this account that they have for their needs right now.”

Dell officials declined to comment about the apparent focus on lease payments while a customer worth multiple millions of dollars to Dell was reporting server failures. Dell officials also would not talk about the financial details involved in settling the lawsuit.

“We maintain we were not liable in the issues raised,” spokesman Jess Blackburn said. “Serving our customers and responding to their concerns have been fundamental tenets of Dell from our inception, and we continue to put our focus there.”

Neither Briggs nor Young could be reached for comment.

Bob Barker, the managing partner of Austin-based 20/20 Outlook LLC and previously an executive at six technology companies, said for customer service to contact a collections department makes sense. Such a move would be done to gather information about the customer’s account rather than to intimidate, he said.

“It’s just natural,” Barker said. “You’d want to know what all the facts were before making a decision.”

AIT’s lawsuit, which was filed in 2007, alleged that the server problems were caused by leaky capacitors provided by one of Dell’s Asian contractors, and that Dell knowingly shipped thousands of the sketchy servers to customers. Last month, Dell attorneys reached terms on a settlement agreement with AIT and has until October 28 to finalize the deal. Details of the agreement will be kept confidential, those involved said.

The lawsuit generated hundreds of documents, and many of them were sealed by the court. Dell attorneys have claimed the company spent more than $200,000 collecting the documents requested by AIT.

The servers, typically assigned one per AIT customer, were stacked on steel pantry racks. Dell officials initially proposed a change to the stacking method to promote cooler operating temperatures. One email to Garrison from an executive at RMS Computer Corp., a New York-based company contracted by Dell to resolve AIT’s server problems, called AIT “an apparently hostile client.”

---

Christopher Calnan writes for the Austin Business Journal.