So about this Dell digital transformation story. Pivots.

RedMonk is on the record that Pivotal has created a unique position for itself in driving digital transformation at Fortune 500 companies. No other vendor has made a similar impact on software quality and development velocity. The Pivotal Way, a business process reengineering counterpart to 12-factor development has become a religion and article of faith in industries including financial services, media and telecoms, even down to exposed brick walls and breakfast times. Pivotal packaged up modern software best practices about agile and automated testing, pair programming and “2 pizza box teams”, continuous integration and continuous deployment (CI/CD) and made them accessible, straightforward and easy to follow.

While other vendors are scrambling around trying to work out how to compete with Amazon Web Services, Pivotal is just getting on with it, carving out its own space, with a significantly differentiated message. You call Pivotal when you want to get better at writing software. Imitation being the sincerest form of flattery we now have the IBM Bluemix Digital Garage Method, and Red Hat spinning up a number of Innovation Labs.

But Pivotal isn’t just a services play. Interest in its Spring and Spring Boot frameworks is off the charts for developers and companies looking for a way to modernise their Java applications and infrastructure. Once an organisation has got the memo on 12 Factor stateless apps, Cloud Foundry looks like the enterprise Heroku it was always intended to be. And Cloud Foundry runs on premises. While pundits, like this one, have argued that cloud = public cloud, the market has shown itself to be more nuanced. There is no doubt that on prem use of cloud technologies is a thing and will be for the foreseeable future. Docker’s container technology changes the development model and Kubernetes (K8s) is increasingly looking to be the technology that fills the niche OpenStack failed to. Red Hat is doing a good job of positioning OpenShift to win on premises K8s workloads. Enterprises don’t want to manage k8s themselves, and Red Hat has an excellent track record as an open source packager. Red Hat has a channel and enterprise relationships. But Pivotal, having initially fudged its container management story, can now offer Kubenetes managed by Bosh, in the shape of Kubo, a joint development project with Google Cloud Platform.

So Pivotal has a Cloud Native story, but it doesn’t sell Cloud. It won partner of the year from Google Cloud Platform. It also won Partner of the year from Microsoft for Azure consumption by US enterprise customers. That’s a cloud story that’s working.

So what about Dell, anyway? By now you must be wondering why Dell is in the headline in a post which seems to be about Pivotal? Well for one thing, Dell of course owns Pivotal, by way of its ownership of VMware, by way of its ownership of EMC. It has been interesting to watch Michael Dell taking such a keen interest in Pivotal of late, with regular tweets and shout-outs, notably this one, which is currently pinned to his twitter profile

Growth trajectory @pivotal + @pivotalcf = Extraordinary. Tip of the spear for Digital Transformation, IoT, Cloud Native Apps ☁️🚀@DellTech pic.twitter.com/NtwBI2IW4W

— Michael Dell (@MichaelDell) July 26, 2017

Michael Dell of course has rather a lot on his plate in terms of managing a portfolio, especially in the age of AWS. What I think has changed however is that Dell, unlike its competitors HP, IBM and Oracle, now has a clean, well defined story for enterprise transformation – lead with Pivotal, talk about digital transformation driven by a developer-led transformation of infrastructure and operations. Don’t get bogged down in conversations about competing with AWS, but have a different conversation entirely about better software development and hybrid cloud.

Last year Dell introduced a contract called a Transformational License Agreement (TLA, geddit), which allows a customer to use software from anywhere across the portfolio. That’s what Michael Dell and all those EMC and Dell and Pivotal salespeople will be talking about with customers.

This post is obviously very positive, and we need to be a bit careful here. Dell’s challenges aren’t solved because it can lead with Pivotal. A spear is not going to be much use if the shaft is the thickness of a tree trunk. There are plenty of assets in the Dell portfolio that look overweight, and not entirely suitable for the changing buying patterns of enterprises. Hybrid cloud is a thing, but that doesn’t make it easy to sell traditional data center hardware today- servers, storage, and networking gear. Many enterprises adopting hybrid cloud are doing so not just for data governance reasons, or because they want to run their own hardware estate, but rather because of sunk costs, and long term contracts. Hybrid is a way to sweat existing assets, rather than a future facing strategy. VMware had a great run, but it’s definitely under pressure from container infrastructures. Virtustream makes sense in a hybrid and multicloud transformation. Security never goes out of fashion, though RSA needs to retool for competition with the likes of Splunk. The challenge for Dell is to make the portfolio a growth story rather than one of managed decline.

The challenges of transformation deals are of course going to be substantial. Balancing services and software revenues, for example. Pivotal needs to be a software company to justify the multiple, but without being an effective services company it won’t have customers ready to acquire its software. If the story is “don’t worry, work with our services partners like Accenture and Cognizant to learn CI/CD and modern software delivery” then the power of the Pivotal Way story is diluted, which will make also serve to make platform software sales harder. Once Accenture carries out a transformation deal, it could just as easily choose to partner with another software provider.

How do VMware and Pivotal begin to mesh? How does RSA become a big data company? These are gnarly questions in their own right, and of course public cloud isn’t going away. Dell, as an infrastructure company itself, isn’t in a position to simply cede infrastructure to AWS, as Salesforce and Heroku can. Dell needs to be in the cloud infrastructure game, and as things stand it simply isn’t. Microsoft is there, Google is pushing hard, Oracle has stepped up dramatically in cloud of late. IBM acquired SoftLayer, but is now focusing on platform services to move up the stack. Rackspace was squarely in the infrastructure game, but is now increasingly focusing on managed services for other clouds. Infrastructure as a service is an extremely punishing capital intensive business. For now the fact Dell isn’t in public cloud infrastructure helps Pivotal (with partnerships), but it’s hard to see this position holding over time.

Big company accounting can be brutal. Hardware sales-based organisations love nothing better to give software away, without internal credit for the transaction. For now Pivotal sees Red Hat as a target in terms of software-revenues. Dell on the other hand needs to drive significant multiples based on pull through. Dell needs to scale Pivotal, and get the software and services balance right, and find ways to create pull through for other software assets, while also finding a way to deal with the secular shift to public cloud. With Pivotal, though, Dell has a sharp point, a focused and well differentiated story to tell customers about what comes next.

full disclosure: Amazon Web Services, Google, IBM, Microsoft, Oracle, Pivotal and Salesforce are all clients. Opinions are our own.

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