The Royals face City tomorrow and Dillon said: "Stuart Pearce said himself he was babysitting the club for somebody else because they never gave him any funds and now they have the ex-England manager.
"Sven's had money to burn and he's certainly bought very well. They're unbeaten at home and they're scoring a lot of goals so it will be a tough game."
He insisted: "I never doubted Sven.
"I've watched a lot of Italian football and I went to the game when Lazio won the European Cup Winners' Cup at Villa Park.
"He's been successful with almost every club and he was almost there with England but he couldn't get us over that final hurdle.
"But the question is, are we capable of doing that anyway? I really don't know. Regardless of that he's signed some great players and he's also got some good young players.
"It's a great boost for the team that some have come through the Academy. They're an exciting side now."