What can we read into Dell's customer event?

English: Michael Dell, founder & CEO, Dell Inc.

Michael Dell, founder & CEO, Dell Inc. (Photo credit: Wikipedia)

Dell’s recent DellWorld event in Austin, Texas was impeccably timed such that little of any strategic nature could be discussed.  Coming close on the heels of the ‘definitive agreement’ for Dell to purchase EMC, all that Michael Dell could really state were the obvious things around matching portfolios, complementary channel routes, greater reach into high end markets and so on.  What he couldn’t discuss – not only because Dell cannot do so due to legal constraints, but also as it is unlikely that even Michael or Joe (Tucci – EMC CEO and Chairman) yet know – was the strategy around products and rationalisation of not only these products, but also in the direction the Federation of companies will have to take.

However, while the fundamentals of the deal are hammered out, Dell has to continue moving forward.  Therefore, there were several announcements at the event that were newsworthy and will likely survive through the acquisition.

One of these was the Dell/Microsoft Cloud Platform System Standard box – a Dell-built box that contains a Microsoft OS stack along with several Azure services, enabling organisations to more easily create a hybrid private/public cloud platform for Microsoft workloads. This box can be either purchased (including via flexible terms through its Cloud Flex Play offering), or rented direct from Dell for $9,000 per month.

Next was the new Dell Edge Gateway 5000, following on from the announcement of a far more basic Gateway at last year’s event.  This new Gateway has the same approach of the old one as an internet of things (IoT) aggregator, but has been considerably hardened and improved in what it can provide.  It now supports pretty much any device’s output as an input, acting as an inline extraction, transform and load (ETL) system to ensure that different data schemas can be simplified.  The Gateway can then analyse the data collected and either disregard it (as being useless), store it (as being possibly interesting), or raise an alarm (as it identifies an issue based on the data). 

From Quocirca’s point of view, this approach is fundamental to a large IoT deployment – data volumes have to be controlled, otherwise the core network will collapse under the volume of small packets being sent to a central data lake by masses of uncontrolled devices.  The Gateway 5000 also gets around another problem – that of obviating the need for customers to replace all their existing devices, as the Gateway can take data in from proprietary, and even analogue, devices.

Dell is also extending its bespoke services to service providers, via a new group called Dell Datacentre Scalable Services (Dell DSS).  The high-capacity service provider markets (including telecoms and web-scale customers) have different needs to a general commercial customer – they are not bothered about badging of products, but require bespoke designs in many cases.  However, they are also extremely cost sensitive.  Dell believes that it can still make enough profit on deals in this space due to the numbers of bespoke or semi-bespoke designs it has to come up with – it expects that many of the designs will still sell in the tens of thousands to a single customer.

Dell also gave a rousing and staunch defence of its PC markets.  It believes (rightly so, in Quocirca’s view) that the PC is not going away any time soon, and also believes (slightly more questionably) that there is still plenty of space for innovation in the space.  While this may be true to an extent, the real innovation will be around ensuring that new access devices are flexible enough for on-device applications as well as web-based apps and services, and that there is a great deal of consistency between on-desk and mobile devices.  While Dell has a decent Windows tablet portfolio, it pulled out of smaller device formats some time back – and this may hurt it in the longer term as others, particularly Lenovo, come through with more end-to-end systems.

However, what everyone wanted to talk about was the EMC deal.  All that can be said here is Quocirca’s view on it, based on what knowledge is already in the public domain.  We have previously written about the problems for any company that would acquire EMC – and we still stand by much of what was said at the time.

Tucci created a federation of companies that had built-in ‘poison pills’ that count against a smooth acquisition.  Joint ventures, such as VCE and Pivotal will make it difficult for Dell to unpick and embrace them fully into the Dell company itself.  Taking EMC private while leaving VMware public does give some room for manoeuvre – EMC has an over 80% holding in VMware: Michael Dell has already stated that he would look to offload some of that, providing at least some payback to the investors backing the buy-out of EMC. 

Whereas it would make sense to get rid of the idea of a Federation completely, so removing the confusion in many prospects’ and customers’ minds as to how it all hangs together, Michael Dell did hint to a possibility of retaining such a structure – something that Quocirca would advise strongly against.  Indeed, even as the deal was being announced, Pivotal, EMC and VMware created a new member of the Federation by spinning out previous acquisition, VirtuStream, to carry much of the overall cloud strategy for the rest of the Federation.  While Dell has eschewed a public cloud system hosted by itself, it has become a cloud aggregator, using systems such as its own acquisition of Boomi to provide integration between partner and other public clouds.  Whether the idea of creating VirtuStream is to enable a quick offload of EMC’s own cloud pretentions when the deal closes (mooted for the middle of next year), it remains to be seen.

What is clear is that this is a very brave move by Michael Dell.  As Dell itself is only just coming out from a period of quiet after taking itself private, to suddenly take on the largest (by far) tech acquisition that will enforce true strategic silence for almost a year will stretch customers’ patience to the limit.  Dell must be thankful that with IBM still reinventing itself around cloud services (via SoftLayer, BlueMix and Watson as a Service), and HP in the throws of pulling itself apart, it should suffer little loss of customers to either of these companies.

However, with storage companies such as Pure Storage, Violin and Kaminario waiting in the wings, along with hyperconverged vendors such as Nutanix and Simplivity, it could be here where Dell should be focusing.

Dell is in for an interesting 9 months – what comes out the other end should be interesting.  For Michael Dell’s sake, Quocirca hopes that it makes sense to customers and prospects, and that it doesn’t create a company that is too large and slow moving to respond to the incoming, new-kids-on-the-block competition.

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