Growing Dell – #SSVE Trip Report

Dell held an analyst event in Austin a couple weeks ago (titled “Services and Solutions for the Virtual Era”, or SSVE), coming out strong with its message of transformation and growth via an expansion in the general “enterprise IT” space. This was primarily based on two, traditionally non-Dell lines of business.

The Growth Plan

Our strategy around the efficient enterprise and flexible supply chain continues. We continue to develop and acquire key IP and enhance our sales capabilities. And we’re also narrowing our focus on three key solution domains, namely end user computing, data center and information management and services and all things cloud. Each of these solution domains represent key areas Dell has to win. If FY11 was largely about getting operationally fit, then FY12 is going to be about leveraging this position of health and strength to move more aggressively and accelerate our transformation as a services and solutions company. Customers are now seeing Dell in a fresh light and we’re heading into the new year with strength and optimism.
—Michael Dell, FY11 Q4 Earnings Call

The up-shot is that Dell is trying to grow beyond its “cheap boxes” niche, which of course it should be. Dell is trying to become like those other “elder companies” out there: IBM, HP, Oracle, and a handful of others that dominate in the space of hardware, software, and services. For Dell, this is the way out of all their problems. That problem, as my investing friends would tell me, is being perceived as a low to no growth company. Microsoft is in that spot as well – and the pitch-fork mob of growthies have recently been let loose on Redmonk more than usual.

After the two day event:

• It’s still not entirely clear how Dell will first become a peer of and then win against the likes of IBM, HP, and Oracle (the tactics that is), but you almost don’t expect them to spill their playbook enough to make you feel like it’ll work.
• What is clear is that, product-by-product, Dell has a lot to offer: they’ve got a software division on their hands if they can realize it and start running it as such.
• Accelerating into this new role requires paying more attention to the practitioners involved: both the IT staff and the developers who’ll drive innovation and adoption. RedMonk, of course is always big on those “kingmakers.”
• As a “one stop shop,” Dell is at the beginning. While Perot allows them to speak to health-care as a vertical (“applications” and “solutions,” if you will), they need to build up more of these “solutions” with actual software and skill. The needs are things like: building up the IT for new banks from scratch, saving telcos from being stupid networks, leaning up government IT, modernization efforts, and other massive IT changes.

The rest, from Dell, is actually pretty good. Dell can talk to being additive to acquisitions, esp. in storage, but also in servers where Dell has been good at innovating and delivering to new needs for boxes from traditional profiles to “custom” orders of 50,000+ units for high scale web shops.

Also, see the quick video interview Barton George did of my reaction on the first day.

Dell as ISV

Most of all, what I like is that Dell is building a software division. I don’t feel like they really think this exactly, but they should (and they’re certainly acting like it). Software is what will allow Dell to grow in the enterprise, giving their customers a reason to buy Dell systems (or “solutions,” if you like) rather than just boxes.

Dell needs to start thinking like a next generation ISV: something even beyond salesforce.com. What does that kind of software organization look like, how does it operate day-to-day, how does it innovate, how does it package technology, and then deliver it all to make the most profit? Rival HP needs the same thing, but Dell is in a great position: a clean-slate, more or less. Dell doesn’t have the shackles of success tying them to previous (software) revenue models and technology.

Luring Developers

Well, I think the largest cloud providers today, if you will, are those Web 2.0. Those are like new workloads. I think there’s very little of the traditional workloads that are being moved into that space today. And so, most of those — and so, that’s pretty much incremental opportunity. I know there’s a lot of concerns about at some point is there cannibalization and then what happens. We haven’t seen that. I think where companies are at on private cloud is very, very early. And the number of them moving a massive amount of their scale out into the public, very, very few. And so, most of the consumption there is social media and things that wasn’t even in the calculation. So, this is net new business.
—Brad Anderson, Wells Fargo Tech Transformation Summit

This is a hard slog, though, and just the beginning of the “fun” for Dell. The main thing they’re missing is a tighter focus and catering to practitioners, developers in particular (those “king makers” of tech companies). Developers love Dell monitors, but they need to love Dell software, hardware, and systems.

Mounting up a developers relation program here starts small, but requires patients and stamina. As with any marketing program, you have to offer something better, unique, if not cheap to draw a crowd. For example, Dell could create the ultimate build box: take one of the T7500 work-stations, load-up git, Jenkins/Hudson, Vagrant, etc. and do the work to make the development tool chain integrated and ready to use once the box was plugged in. And then there’s updates to the actual open source tools and configuration to make it take advantage of the 8+ cores on that box and the 12+ gigs of memory (that’s the base-profile I have, at least). Having a powerful build-box that development teams can plug in and have it just work would be attractive: just like the Google Search Appliance is (equipment OEM’ed from Dell, by the way). The build box could come with OpenStack, VMware, Eucalyptus (curated to simulate Amazon EC2, perhaps), or whatever cloud platform you wanted. Developers always want faster builds, and they’re not too shy about being impressed by over-powered hardware.

Here, the long-term plan for Dell is (a.) gaining relevancy with developers, and, (b.) as the developers need more hardware, they’re familiar with – even like! – Dell systems and hopefully buy it. On the extreme end, in what Dell would call the “Web 2.0” space (public web sites that use a lot of servers, cloud or not, to host their web apps), developers with datacenter needs might favor the systems platform they started with, Dell. Of course, there’s software, now, for Dell to sell as those teams accrue the needs of success: security, IT management, networking, storage, and whatever vertical offerings Dell can bring to the table. Throw in a few big-ass monitors as a bonus, and there’s even more incentive for developers to dive into a Dell build box.

IT Folks

There’s another group that Dell needs to cater to: sys admins, operators, IT staff, or whatever you like to call that lot. New technologies and practices – cloud, mobile as the new PC, SaaS (to call it out as its own force), and the vague but getting more fully baked “social” – are set to dramatically change the IT department, if not greatly reduce its importance. Who knows what the change will be, but it seems like it’s there.

Dell should be the hand-holder, thought-leader, or at least best-friend of admins: the company needs to help that community stay relevant and paid. Cost savings (or “efficiencies”) work well at first, but then IT needs to actually do something that contributes to their company’s revenue generation. Even if that contribution is just cost-cutting, there’s a question of how those savings are then strategically used. For example, as one Dell executive told me, Dell’s internal IT clean-up helped save $2B, which could be shifted, at the corporate level, to apply to acquisitions and the transformation Dell is going through.

A slightly less than impossible ambition

Dell has set itself up for the big, risky challenge of becoming a one-stop, enterprise IT shop. One of the “big boys,” as I put in my interview with Barton George. Dell needs to not only graft on and grow a software division, but build out their services arm with broad industry skills and programs. At the same time, Dell has to keep up its pose as the most affordable option that works. Normally, this challenge would be an operational quagmire (something Dell people have found themselves in too much in the past), but Dell is slightly better positioned then its peers: there’s little defendable reason to be loyal to the way things are/were, and almost no “legacy” models the company needs to cater to. In a very real sense, Dell has a clean-slate to start from, but enough existing assets to make their turn at the wheel of tech company transformation an interesting, if only slightly less than impossible ambition.

Disclosure: Dell is a client, as are IBM and HP. See the RedMonk client list for others mentioned or related above.