Features

A solutions company

Michael Dell, CEO, Dell

Michael Dell, CEO of Dell outlines the company’s aggressive plans to grow its portfolio of solutions by acquiring more intellectual property and what that means for customers and long time partners. Excerpts from the interview.

Q: Dell says it has become an enterprise solutions provider. That’s a big shift from being a box seller and a fast adopter of new technology. Why is Dell making this change and what are you trying to accomplish?

Throughout the latter part of the ‘90s and early 2000s, we started creating more and more powerful enterprise products, and as we sold those products into the data centre, it became clear to us that customers wanted more than products. We started building a bigger business services capability and to verticalise the business. It was most prevalent in the public sector — because it was a business of verticals, with education and health care and the defence and civilian aspects of the federal government. And we were doing that, it became clear we needed to go faster.

So we bought Perot Systems, and for the last year or so we’ve been pretty aggressively
investing both organically and inorganically in accelerating our solutions momentum. The reason is that we found that it works really well. I think the reason it works is that we’re solving the real problem that the customer has — and getting into the real opportunities in a bigger way.

Q: How did you approach customers before?

Five years ago we would say: Hey, we’ve got shiny boxes. And the customer would
sort of say: Well, don’t really care, I’m busy, leave me alone. What do you actually know about my problem? And can you help me solve this problem I have? I’m trying to build a next-generation supply chain. I’m trying to make my sales force more productive. I want to get better outcomes for my students or my patients. If you know something about that in the vertical that I’m in, then I want to talk to you. If you don’t, go away and leave me alone.

Building that capability requires new skills, new capabilities, new intellectual property, some of which we can grow organically, some of which we have been acquiring. I think it also changes the frame of reference of the opportunities for Dell, because now we look at the entire $2.7 trillion IT industry and say: That’s actually the entire space that we’re going after. We’re not confined to this box or that box.

If you look at what we’re doing today, certainly you can find some places where we’re
highly advanced — like in health care IT, where we’re number one in the world. We’re doing health information systems and evidencebased medicine systems, electronic medical records and claims adjudication systems, affiliated physician systems, and really entire solutions that help care providers ultimately deliver better outcomes for patients. That’s actually what they want to do. They don’t want shiny boxes, although shiny boxes may be part of the solution. We’ve changed the conversation, and that is producing a steady stream of improving results financially. Our GAAP earnings in the last year have more than doubled. That’s a good thing. We like that. People seem to like that.

That success gives us a greater degree of freedom in terms of our ability to expand
and grow and invest organically and inorganically. And that requires some new things. It’s not as if we started doing this last quarter, right? So three and a half years ago, we bought a company called EqualLogic up in Nashua, N.H., and that was in a space that we were pretty familiar with. Dell has sold 15 million servers in the last decade — pretty hard to find a data centre where it’s not Dell.

About a third of the servers sold in North America are Dell. So what goes with servers? Well, storage goes with servers, networking goes with servers. Those are pretty obvious places for us to expand.

Q: You mentioned vertical solutions; Dell has also talked about a big focus on providing horizontal solutions that go across midsize companies of all kinds. What sorts of solutions are really catching on with those customers right now?

Among all the solutions, you’d say roughly 80% of them are horizontal and 20% of them are vertical. To the extent you can create the horizontal solutions first, you can sell them to everybody, and there’s more demand. Things like virtualisation — no great surprise there. What does the next-generation data centre look like? How do I implement cloud computing? What does the mobile client look like? What about IT security, migration to the cloud? There are pretty big horizontal solutions that are highly repeatable activities. You can almost apply factorylike thinking in terms of how you deploy them — efficiently for customers, with a very high degree of predictability that’s going to be successful and implemented on time. It’s just not that hard to do over and over again.

We much focus on the midmarket because we see a lot of new solutions being created there — and moving up. Think about x86 servers. When the x86 server started, it wasn’t the world’s biggest companies. In fact, I remember very well going to some of those big companies and they said go away because we’re doing mainframes, we’re not doing x86 servers. Actually, x86 servers started with the small, nimble, fast companies, worked their way up into medium and large [businesses], from the Web tier to applications and to the database layer. And now it’s finally eating away at the core of the data centre in the world’s largest enterprises across.

Q: What’s wrong with targeting big corporate customers?

It’s not necessarily a bad thing to do. We sell to those customers, they sell to those customers. They use channels and distributors and multistep distribution to deal with these customers, although one could argue whether they’ve done a particularly good job at it or not.
So we sell to the biggest companies in the world and we sell to the smallest, the consumer. But we also think the SMB market is not only the biggest, but it’s also the fastest-growing. Think about all the new emerging companies around the world.

The other thing you find is that the pyramid of companies is like unbelievably wide. Go to LinkedIn and they have advanced search tools that let you look at companies by size. You’ll notice that there’s an enormous number of companies that have 1,000 people or 5,000 people. There aren’t that many companies that have 100,000 people.

Q: Obviously, you’re not the only company to lead with services and solutions. Compared with IBM and HP, is the only difference in your target audience, or are
there other differences?

I think [the market segment] is one difference. The other difference is that we don’t have the legacy of an installed base of proprietary stuff, which is why we’ve taken this open approach. If you look at our approach in the data centre to orchestration, to systems management, it’s a very open approach. Dell has always been a leader in
standards, and I think customers know and appreciate that. It’s a great position for us to continue to carve out. It’s pretty different than our competitors.

Q: The companies you’ve acquired have expanded your portfolio of IP. Does it change Dell as an open company — or as a great strategic partner — if more and
more of what you deliver is your own versus pulling together solutions from across the industry?

I think we’re going to continue to pull together solutions across the industry, but there are clearly areas where we’re investing more heavily in our own technology. What I’d also tell you is if you look at the way we’re delivering our solutions, we’re still giving customers an enormous amount of choice.

With our data centre solutions, yes, you can buy networking from us, and you can buy storage from us, you could buy servers from us, and you could buy orchestration from us. But if you want our orchestration and you don’t want to buy any of our servers or networking or storage, you can do that, too. So we’re much more open than really anyone in the industry.

Q: But are your strategic partners as excited about this transition as you are?

Well, we certainly don’t design our deterministic future to make others in the industry happy. We decided to make customers and shareholders happy and give people at Dell a great opportunity. So “don’t really care” is the simple answer.

Q: But you don’t think it changes the customer view of Dell?

Actually, we’re seeing very positive response from customers as we learn more about their problems. We’re able to bring more definitive solutions, and customers appreciate that we’ve invested heavily in key intellectual property. Now, of course, it has to be the right [solution], it has to work well, and I think we’ve chosen quite carefully.

Our track record speaks for itself in terms of our ability. I mean, when you acquire
something, you don’t create any value. When you successfully integrate it and continue to invest in it, that’s when you create value.

Q: Can you give us a longer-range view of your cloud strategy and compare that with, say, Microsoft, HP, others who are moving into the space?

Well, I think we see customers increasingly embracing cloud as a way to transform their IT environment.

Q: Public and private cloud?

Public, private, hybrid. And we don’t believe there’s one-size-fits-all in terms of the cloud or most other aspects of IT, but certainly not the cloud. If you look at large
companies, they tend to be held hostage by their legacy environments, and they look at cloud and they say — hey, this is a way for us to break free from some of these old systems and have a more flexible infrastructure, and we really want that. They may want a private cloud. I think no matter what you do you’re going to have a hybrid cloud, because you’ve got services that are outside of your data centre, you’ve got services that are inside your data centre, you’ve got to connect those things together.
Data integration is a big, big deal. That’s why we bought Boomi — really helping customers link those together.

Q: What are the specific opportunities for Dell to fill in those gaps in the cloud for
your customers and in the solutions that you’re providing?

Well, I think it’s certainly in the infrastructure layer. That’s a natural place to start; we have a lot of experience there — a big advantage. We’re the leading supplier to the Internet companies. We’re now on, I think, the fourth generation of our modular
data centre, really leading in innovating in terms of densely organised modular data centres. I think roughly 60% of the Chinese Internet runs on Dell.

We’ve done a great job in serving the most complex users out there. We know how to
build the cloud infrastructure layer, whether a company wants to build its own private cloud or they want us to operate it for them in one of our data centres. I think data integration is a big barrier and challenge/opportunity. I have an old XYZ system and I want to go to Workday or I want to go to Salesforce.com or I want to go to SuccessFactors, or whatever it may be, how do I connect that with my old system? That’s what Boomi does.

If I have two cloud systems, how do I connect them together? Cloud providers will
tell you — oh no, you don’t want to do that. Because they want all the data to stay in their system and not go anywhere. But that’s really impractical, the bigger the company the more you need data to integrate and talk to each other. So again, Boomi is perfect for that.

Q: Can we shift to the old business for a second? The Windows PC market has taken a dip and we’re seeing a lot of other devices surging in the market right now. If it turns out that tablets, smartphones… Android and iPad devices represent a major shift from the Windows PC into this multiplicity of devices, how does that affect your business in the long term?

Well, it would have affected it a lot more maybe 5 or 10 years ago than it does today,
because our business is very different. If you look at our sources of margin and profit,
the majority of them are not the stuff you’re talking about. I think there’s definitely an enormous variety of devices out there and usage patterns are changing.

I don’t necessarily see that they’re all replacing each other. A lot of the new devices are in addition to the devices you already have. So, for example, when you get a smartphone do you get rid of your PC? I don’t think so. Now, the interesting one is the tablet. When you get a tablet do you get rid of your smartphone?

No. OK, so now we went from a person who has one device to one who has three
devices. Now explain to me why this is a problem. When we’re in the server business and storage business and making data centres? Now, would I love it to be our smartphone and our tablet? Absolutely. But if the total market expands, you know, if the 2.7 trillion becomes 3.7 trillion because people are storing more data…

I mean, I look at some of our big customers, the fast-growing customers, and they have nothing to do with PCs. We have a big customer in China called TenCent, and TenCent I think has like 700 million mobile phone customers. Almost everyone in China who has a phone uses one of the TenCent services. So we’re selling them huge
data centres and servers and storage and networking — nothing to do with a PC. When people consume content, video, whatever, on tablets, smartphones, the content has to come from somewhere. Where does it come from? It comes from servers and storage.

You look at these new companies that are popping up all the time with streaming audio, streaming video, and there’s a pretty good chance those are running on Dell servers.

Q: You’ve been a small business, a medium business, a large business, a global business. Today it’s a tough environment for medium businesses or small businesses. What would your advice be to someone who is running IT at one of these medium to small businesses? What would you do?

If you’re running a business, you have to think about surviving. That’s just part of
running a business, particularly a small or medium-sized business. I think that there are so many opportunities to get ahead using information technology.

I’ll give you a big one that I think is extremely relevant to medium-sized business. We’ve been providing storage systems to midsized companies for a long, long time, and they’ve been storing their data because they had to [due to] regulations, because it was thought to be a good idea. You have to have a database; you have to maintain all the information. But how does the information actually help you make better decisions?

People talk about big data. I think: big impact, big decisions, and big insights. And
there’s a lot of work going on in our industry. Dell is working on this in a big way to say how do you take all the data companies have stored and then turn that into much better decisions? And smart midsized companies will actually be able to do that in a faster, more nimble way than some of their larger competitors who are kind of stuck in these larger legacy systems.

 

Previous ArticleNext Article

Leave a Reply

Your email address will not be published. Required fields are marked *

x
Huawei Fit Band

Competition

Win a Huawei Fit Band worth over 300AED!

0 1866We’re giving away one Huawei Fit Band, a high-tech fitness watch with up to 6 days of battery life that …

GET TAHAWUL TECH IN YOUR INBOX

The free newsletter covering the top industry headlines

Send this to a friend