Dell 2.0: Top Takeaways from Dell’s Virtual Era Event

A couple of weeks ago, I attended Dell’s Solutions for a Virtual Era analyst and press event in San Francisco. At the event, Dell unveiled its new strategy to help companies more readily and easily provision computing capabilities to in the ubiquitous anytime, anywhere information era. At the event, Dell introduced several new hardware offerings based on the new Intel Xeon 5600 architecture to enable cloud-based solution deployment. But for me, the more interesting focus was Dell’s ambitious vision and roadmap to capitalize on the shift to cloud computing, and market demand for better, more cost-effective and easier to deploy, use and manage IT solutions. Here are a few of my top takeaways about what Dell’s vision, how it plans to execute on it and my commentary.

  • Change the economics of IT. Companies spend more than 50% of their IT budgets just to keep the systems they have up and running—stunting investments in new IT solutions that can help them to innovate and grow. Dell intends to apply its “direct” DNA and supply chain know-how to automate IT and change the economic equation to help companies get out of this quagmire. By delivering “open, capable and affordable” solutions with industry standard-based building blocks, Dell believes that it can reduce technology lock-in, complexity and cost for customers. Some specific capabilities in the works include autonomic self-maintenance and management; automated dynamic allocation of resources, and policy-driven management. In a recent keynote at Oracle OpenWorld, IT budgets in North America amount to $1.2 trillion, but through widespread adoption of x86 servers managed in a more automated fashion, $200 billion could be saved, asserted Michael Dell, president and CEO of Dell. He used Dell’s own plan to take $200 million out of its own IT spending by the end of 2010 as evidence that Dell–which provides two of every five x86 servers shipped–can help customers achieve this goal. Our recent research on Dell Managed Services customers also provides a strong proof point that Dell can deliver on this goal: built on its Silverback and Everdream acquisitions, web-based technologies, and Dell data center expertise, Dell Managed Services offers SMBs web-based, standardized infrastructure management services on a pay-as-you-go basis. I’m kind of surprised that its taken so long for Dell to get around to this, as its business model and technology legacy (Dell has no proprietary systems of its own) affords it a significant opportunity to differentiate.
  • Move from delivering solution components to delivering the total solutions experience. In Dell’s view, companies today spend far too much time, energy and money deploying, running and managing IT solutions. Dell wants will to simplify and make IT more affordable with turnkey, pre-tested, pre-assembled solutions that combine hardware, software and services. Although this may seem like a radical departure for Dell—best known as a hardware vendor—the company has been building towards this for quite some time, acquiring software companies (including KACE, Silverback and Everdream), along with Perot Systems. In addition, Dell is partnering with companies including Joyent, VMWare, Microsoft, Aster Data, Canonical and Greenplum) to provide additional solutions expertise and components.
  • Give customers “and” instead of “or” choices. Dell intends to help customers simultaneously pursue evolutionary and revolutionary paths towards cloud computing. To facilitate the evolutionary path, Dell’s Cloud Partner Program (partners include Citrix, Microsoft and VMware) enables companies to migrate legacy applications to more efficient virtual environments, pre-tested and optimized for Dell systems. On the revolutionary path, Dell’s platform-as-a-service (PaaS) will offer an efficient, scalable and flexible platform to deploy and manage new Web application workloads. Dell’s inspiration for this comes from its own Data Center Solutions Group, which provides cloud and high-performance computing solutions for companies that require massive hyper scale environments such as Facebook, Ask.com and Microsoft Azure. Dell’s open source platform is built on PHP, Python, Ruby on Rails, and runs Apache, MySQL, Rails and Java. The vendor plans to offer a full spectrum of delivery options, where customers can self-integrated components or turn on everything as a service. The initial target market for the platform is ISVs, telcos and others who would build on top on it, and sell through their services to end-user customers. However, Dell left the door open to offering it directly to the end-user market at some point in the future.
  • Start with a mid-market design point. Dell’s design point for the Virtual Era is the mid-market—which is a very big deal! Starting with mid-market requirements and scaling up or down from there can give Dell a big competitive edge—for a couple of important reasons. First, mid-market companies have complex IT needs, but scarce IT resources–they can’t afford a lot of expensive labor or IT tools. This aligns well with Dell’s theme of automating IT. Second, Dell’s major competitors, HP and IBM, offer mid-market solutions, but tend, more often than not, to gravitate towards a large enterprise design point for infrastructure solutions. Finally, history has proven that it’s very hard to scale down successfully. One concern I do have is that I heard different definitions for how Dell is defining mid-market in this context. Will Dell center the design point around its traditional definition of medium business (100 to 499 employees), or upwards into what I would call the upper mid-market—topping out at about 5,000? Dell needs to be clear on this because there’s a big difference in designing for 5,000 versus 500 employee firms.
  • Lead in listening. Dell has been a pioneer in building open community forums for customer input and dialogue. The vendor learned the hard way that in a Web 2.0 world, its important it is to let it all hang out–the good, the bad and the ugly. Dell was blindsided in 2005, when professor and blogger Jeff Jarvis used the phrase “Dell Hell” in his blog to describe his experience with Dell support. His blog unleashed a torrent of blogger complaints about Dell service, and escalated into an avalanche of unwanted media attention in publications such as The New York Times and Business Week. Once the shock wore off, Dell took action to listen proactively to and get involved in conversations relevant to its business and interests, globally and 24/7. Since then, Dell has dug deeper into social media to harvest and apply the collective wisdom of ever-larger crowds. Taking advantage of what it calls its “direct nature”, Dell intends to expand these initiatives. As an example, to reach and support their almost 400,000 fans on Facebook, Dell now provides “Dell Support on Facebook” widget on the Dell fan page. The widget is designed to provide Dell fans a way to engage with Dell support via Facebook to get assistance with technical and non-technical issues, check on an order status or any other issue they may be experiencing. Since the launch, Dell’s “customers’ heroes” team is touching about 3,500 customers a week through this widget, catching potential issues and flagging them so Dell can alert impacted customers and get issues fixed early. With social media rapidly displacing traditional one-way marketing in terms of influence, this should provide Dell with an enormous return.
  • Turn up the marketing volume. At the same time, Dell readily admitted that it needs to beat its own drum louder and more clearly to rise above the din in the industry. I think Dell is off to a good start with this event (the first analyst event they’ve held in a few years). I was also impressed with their executives’ ability to rein in business and IT jargon in most pitches. And, when execs did use motherhood and apple pie terms such as “open, capable and affordable” (which almost every IT vendor uses) they did a good job of following up with explanations about how they will actually deliver to those lofty goals. To really fire things up though, Dell will need to get more creative with broad and creative marketing campaigns that spark attention and interest around this new Dell and what it has to offer.

Since essentially reinventing the PC and x-86 server markets with its direct and efficient supply chain model, Dell has taken its share of lumps over the last few years for not moving past its traditional hardware-centric comfort zone. In the cloud era, Dell has the opportunity to create a new game, with new rules—ones that will favor its strengths and approach. Improving operational efficiencies has always been at the core of Dell’s DNA—a strength it can capitalize on again if it executes well in the solution, marketing and partner endeavors that back up its vision.

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