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.

Meet MrTed

Those of you that follow me on Twitter and read some of the reports I’ve written over the years know I’m very interested free software-as-service (SaaS) offerings, and how companies that take this approach plan to monetize their free services.

Last week, I had a briefing with Jerome Ternynck, the CEO of MrTed, which has been providing MrTed TalentLink solutions for enterprise applicant tracking system (ATS) since 1999. In October 2008, MrTed launched a new, free ATS called SmartRecruiters (still in beta) for small and medium business (SMB) recruiters and hiring managers. SmartRecruiters streamlines the hiring process with an integrated, collaborative solution to help recruiters and hiring managers create postings, broadcast openings, enable candidates to apply online, view, screen and organize applicants, scheduled interview, provide feedback and make job offers.

And, when Ternynck says free, he means it. There are no catches for the SmartRecruiters ATS—no user fees, contracts, hosting or installation fees, upgrade fees, and no limits on the number of users, storage or time. And, SmartRecruiters connects to popular job search sites such as Yahoo! HotJobs, SimplyHired, Indeed.com and Career Builder.

MrTed’s initial target for SmartRecruiters is the 220,000 U.S. businesses with 50 to 2,500 employees. This market has been underserved by traditional, enterprise-oriented ATS vendors, whose solutions have typically been too costly and complicated for the average SMB to use. However, MrTed doesn’t exclude others from using SmartRecruiters–there are no technical or other of limitations to prevent companies of any size from accessing and using the solution. With little marketing fanfare, 600 businesses have registered for SmartRecruiters since the company launched the beta.

Launching a recruitment solution during an economic meltdown seems somewhat counter-intuitive, but when you think about, even if overall hiring is down, the number of applicants for any given position is most likely up. So companies that are hiring must exert just as much or greater effort and expense to hire the best people. As the economy recovers, and more SMBs start hiring again, Ternynck believes that its SmartRecruiters business model will disrupt the ATS market in the same way that Google has done in many areas.

But unlike Google, which relies on advertising revenues to support many of its services, Ternynck plans to monetize SmartRecruiters with integrated fee-based services, such as job posting, background screening, compensation analysis, relocation and assessment. In effect, SmartRecruiters wants to become a resale distribution channel for the providers of these services, helping them cut sales costs and increase SMB market penetration. According to Ternynck, SmartRecruiters will need to convert just under 20% of SmartRecruiters users to one or more of these fee-based services to become profitable over time.

Can MrTed do this, and do it profitably? Ternynck believes that it can. Some of the key factors in its formula include:

·      Using MrTed’s healthy profitable high-end business to subsidize SmartRecruiters for a few years. MrTed’s TalentLink solution has 200 enterprise users, and has been profitable for 20 quarters. Ternynck doesn’t see cannibalization will be an issue; he believes that enterprise customers are used to paying for technology, consulting and support and will continue to spend for higher levels of service and attention.

·      A low cost technology platform. SmartRecruiters is built on single code-base multi-tenant open architecture. Ternynck estimates that technology costs will account for about 10-15% of the total cost of delivering the solution to customers.

·      Viral marketing model. Sales and marketing will be SmartRecruiters’ largest expense, but Ternynck believes that viral marketing—on it own and with its partners—along with a self-service access and delivery model will keep these expenses low as well.

·      Community features. The SmartRecruiters community will rate providers, and supply input about functionality they want and additional services they’d like offered.

·      Under-penetrated market. According to MrTed, less than 10% of its target market uses an ATS system today—it doesn’t need to unseat an incumbent.

Of course, SmartRecruiters must exponentially grow its user community to gain the scale it needs to monetize its free service—at a time when many SMBs just aren’t hiring. But MrTed seems to have enough patience and resources to get through this period. As the economy ticks back up, and companies transition from a cost-cutting mindset to growth, the talent war will heat up again. If SmartRecruiters can broadly educate SMBs about the benefits of ATS, and get the right partners on board, I think that it will be in a good position to make the headway it needs to monetize its free service in this as yet under-penetrated market. 

Let me know what you think about free SaaS services monetized with ancillary services in the following poll!

2009 Small Business Trends: No Longer Business as Usual

In 2009, it’s no longer business as usual. The sharp economic decline has led many small companies to slash operating costs and cut staff to the bone. In the wake of small businesses’ initial shock and awe, uncertainty has become the new normal.

With little fat left to trim, small businesses that want to stay in business will turn to technology solutions to help optimize talent and streamline business processes to get back on a growth trajectory.

Some of the technology trends that will take shape as a result are that small businesses will:

1. Catch the social networking wave. Reduced marketing budgets and headcount will tempt more small businesses to social networking to spread the word about their businesses—and tap into customer and market opinion and demand. Look for small businesses to start figuring out how to take advantage of blogs, Twitter, Facebook, LinkedIn, YouTube, etc. for no and low cost viral marketing. These businesses will also tap into the mobility angle, as vendors extend more social networking capabilities to more mobile devices.

2. Demand solutions that do more for less. With economic anxiety growing and budgets shrinking, “Easier, cheaper, better, faster” is the bar that vendors must meet. Transparent pricing and service agreements are a must; and vendors must  prove early on in the sales cycle that their solutions increase revenues, improve profitability and/or reduce risk. Those with blurry value propositions will not survive.

3. Find fresh technology alternatives more appealing. Barack Obama’s election signaled one thing loud and clear—people are ready for change. Small businesses are too. Their minds will be much more open to a new generation of solutions to help differentiate in the market, reach more customers, and pursue new business models and opportunities.

4. Favor software-as-service (SaaS) over packaged software that they have to buy, install and manage. The SaaS model is now about 10 years old. To date, adoption has been steady but gradual. Dramatic reductions in capital budgets and headcount mean that companies will be much more likely to consider SaaS alternatives seriously than ever before. The fact that all the big guys—Microsoft, IBM and Google—now have on demand offerings will also accelerate adoption.

5. Increasingly turn to non-Microsoft desktops and servers. Despite the price premium, those small businesses that are tired of dealing with Windows problems, will turn to Apple in greater numbers. At the same time, netbooks will pick up share in small businesses when workers are using the Internet most of the time and don’t need a lot of desktop horsepower. Likewise, value-priced plug and play server and software appliances (usually built on open source software), which bundle up a complete solution and require no IT management, will start eroding Windows server sales. Look for security, storage and collaboration appliances, along with pre-packaged solutions that zero in on specific vertical industry needs.

6. Innovate beyond what we can anticipate. Continuing economic uncertainty is a recipe for the unexpected. Hundreds of thousands of people are being laid off every month. After a few months of sending their resumes into the black hole of Internet job sites, many will decide to strike out on their own and do something new. Business innovation among both startups and established small businesses will be on the rise, and so will the opportunities for technology vendors that can create solutions to enable this innovation.


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My Top Takeaways from Lotusphere 2009

As always. IBM’s Lotusphere has been chock full of announcements about new products, upgrades and partnerships. At Lotusphere, “resonance” was the overarching theme, framing the benefits of having multiple applications work in harmony to amplify the benefits of individual solutions, and create better business outcomes (or something like that, I’m paraphrasing here!).

One level down from that, I see a few top takeaways that cut across individual announcements and point to where IBM Lotus (which I’ll abbreviate to Lotus for the rest of this blog) is heading. Here are the takeaways that bubbled to the top for me.

1.    Expect Lotus to take a bolder marketing stance. In the past, Lotus has been reluctant to go head to head with obvious rivals, particularly Microsoft. But in the opening keynote, Lotus executives came out swinging, declaring intentions to “drive the decline of the Office Suite”, “shatter Windows” and “change desktop economics” with Symphony, the free Lotus desktop suite. Likewise, Lotus is positioning Foundations, which bundles e-mail, file sharing, document management and backup in a turnkey server appliance, aggressively against Microsoft Small Business Server (SBS). While I don’t expect Lotus to get as edgy as Apple has done with its Mac versus PC ads, I think we will see a feistier IBM Lotus persona going forward.

2.    Substantial, long-term strategy and investment to broaden the Lotus market. Large enterprises have always been a Lotus stronghold. But, running Lotus on premise can chew up a lot of IT resources, putting it out of reach for most small and medium businesses (SMBs), and branch offices in larger firms.  After some past unsuccessful attempts to field solutions for these businesses, it looks like Lotus finally has a handle on creating easier, simpler and more affordable solutions. The vendor is taking a hybrid approach, with a mix of customer premise and cloud solutions. LotusLive (www.LotusLive.com, formerly codenamed Bluehouse) moves Lotus firmly in the cloud, offering  an easy software-as-a-service (SaaS) on ramp  for social networking and collaboration (with Web email coming soon via IBM’s planned acquisition of OutBlaze, www.outblaze.com). LotusLive  integrates solutions from cloud computing partners, and enables “click to cloud” integration with customer premise applications. Lotus Foundations comes at the market from the opposite direction, providing customers a plug and play on premise collaboration and email solution. While Lotus still has a lot of work to do to clearly position and market these solutions (along with several other appliance and cloud offerings within IBM’s broader portfolio) it’s on the right track to finally tap into this huge market opportunity.

3.    New momentum and vitality in the Lotus partner ecosystem. Partners have always been key to bringing complete solutions and added value to Lotus customers. But, while Lotus has enjoyed solid relationships with longtime partners, it’s often missed the mark in attracting fresh faces.  At Lotusphere, the vendor unveiled new and newly strengthened relationships that breath new life into the ecosystem. Not surprisingly, LotusLive and Foundations are fertile ground for many of these. Skype, LinkedIn and salesforce.com are working with LotusLive to create integrated collaborative capabilities. For instance, Skype will integrate voice and video to enable customers to directly connect to Skype contacts from LotusLive.  Meanwhile, Lotus Foundations is adding 80 new partners per quarter to its volume SMB channel, and working with ISVs to build turnkey industry solutions. For example, SRC Solutions (www.src-solutions.com) is building streamlined records and document management solutions for schools, healthcare, public sector and other verticals on top of Foundations. Lotus is also deepening relationships with more traditional partners, such as SAP, as well. The two announced joint development of Alloy, which will link collaborative and core business process applications more tightly for users. And Smart Market, a one-stop solutions shop for customers, gives partners a new vehicle to reach, sell and support customers.

4.    Going Mobile. Lotus and RIM announced new enhancements for the Lotus BlackBerry, adding new client capabilities for Sametime and Connections, and editing functionality for Symphony. The two also announced BlackBerry platform support for and Domino Designer for X Pages, so that developers can develop and deploy once for both Domino and Blackberry. While Lotus took some knocks for not moving quickly enough on other mobile devices—most notably the iPhone—it will almost certainly duplicate its BlackBerry initiatives with other mobile device leaders.

5.    Changing the conversation about collaboration and social software. Lotus will be doing this on several levels: extended collaboration, the value the openness brings to the collaboration equation, and the importance of using collaboration to optimize talent. LotusLive provides a great example of how Lotus is focusing on extending collaboration beyond the firewall with easy, secure on demand collaboration. Tying into the overarching resonance theme, the vendor will turn up the volume on the value of openness is maximizing the business value of an integrated portfolio and partnerships. Last but not least, I think that Lotus will turn more of the conversation to the fact that today, many businesses have already cut costs to the bare bone; the new challenge will be to grow the top line by enabling people to be  as productive as possible. Look for Lotus to progressively socialize (no pun intended!) the importance of using collaborative and social solutions to make collaboration more fluid and friction-free across the value chain.

On its 20th anniversary, Lotus is opening a new chapter in its story, offering up some new and convincing alternatives to the status quo, and extending its reach into new markets. By making these strategic investments now, in a turbulent economy, Lotus has time to get the kinks worked out, and get ahead of the game for when things turn around.

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