In the midst of a worldwide recession, $450 billion a year is being spent on building new data center space. Intel CEO Paul Otellini noted that figure in his talk at Dell World last week, citing it as "one of the world's more significant capital investments."
A good share of this capital spending is being done by the likes of Google, Facebook, Microsoft, Amazon.com, and cloud service suppliers, who base their operations on the Intel/AMD, x86 chip architecture. Even when it's an enterprise building a data center, I suspect the bulk will use x86 commodity hardware. These days, x86 systems account for a little over half of server revenues, but 95% of unit shipments. New data centers are being filled with x86.
It's not news that Dell is a primary supplier of x86 systems, but it's always ranked a distant third to HP and IBM in listings of server sales--that's in all types of servers and the measure is by revenue. In the first half of 2011, however, IDC figures indicate that Dell led HP and IBM in x86 revenues in North America for the first time. What's become a pattern in computing in North America sometimes presages what's about to become a pattern throughout the world. We'll see if the first half was an aberration or a harbinger of a future Dell power in x86 servers.
My own hunch is that it foretells solid things for Dell. But to consolidate its position as a leader in x86 architecture, it needs to accelerate some of the moves it's carefully made over the past three years--moves that are farsighted and frankly somewhat unDell-like. In the past, Dell has been a shuffler of x86 machine parts behind an effective electronic supply chain. Now what's needed is improvement of basic x86 technologies, not just the CPU, to fill a larger role. The critical question: Is Dell going to lead in this build out of the x86 data center, which you can also think of as the expansion of the private cloud, or merely ride along?
CEO Michael Dell said at Dell World, "This is a new Dell that you're looking at today." Let's take a look at Dell's recent moves and announcements and test that proposition.
Dell is now offering vStart systems, which are rack-mount server packages designed to function as a unit in the virtualized part of the data center. It's undeniable that the virtualized part will soon be the majority of the data center, and Dell has wisely teamed up with partners to put together these vStart rack assemblies that come with virtualized storage and networking built in. The packages are preconfigured, pre-wired, and pretested. VStart comes in three sizes meant to host 50 virtual machines, 100 virtual machines, or 200 virtual machines, with a starting price of about $50,000 for the 50 VM rack. They are configured as ready to run Microsoft's Hyper-V or VMware ESX Server--virtualization software included. Dell uses its PowerConnect switches and PowerEdge servers as well.
The storage included in vStart is Dell's EqualLogic arrays. Dell purchased EqualLogic in 2007 for $1.4 billion, an unprofitable company at the time that marked a bold addition to its basic PowerVault storage option. EqualLogic was the first iSCSI storage vendor to be certified to work with VMware, and Dell is an advocate of iSCSI as a basis for supplying converged networking--one network for the storage SAN and Ethernet communications--to virtual machine hosts. Of Dell's customers using virtualization, 80% of them use VMware, Michael Dell said at Dell World.