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1/15/2010
05:40 PM
Fritz Nelson
Fritz Nelson
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Full Nelson: Who Dell Is (Part 2)

The company built on commodity PCs is carrying its principles of predictability, reliability, and usability into the data center. Will that be enough to wow enterprise customers?



In many ways, Dell is the same as it's always been. Its values are rooted not in invention, but in a malleable ideal: that it's best to build its business (and yours) around established standards. It has applied those values maniacally (and manically) to desktops and servers and networks and storage, and now to data centers and the cloud. But Dell's inability to articulate its strategy is threatening to make this once-revered company prosaic.

In meetings last week with InformationWeek editors at Dell's Round Rock, Texas, headquarters, several company honchos delivered a similar message: standards matter. x86, Ethernet, iSCSI, Fibre Channel aren't just building blocks or tired notions in need of re-imagining, they said, but elements upon which come predictability, agility, reliability, usability--inarguable but uninspiring tenets. In Dell's eyes, there's charm in invention, but practical trumps charm. Or as storage and networking VP Praveen Asthana put it wryly: "Dell isn't wed to proprietary architectures and price gouging."

From this platform, Dell never wavers. It still sees the power of the x86 architecture driving today's data center. Executives cited again and again the lessons of so many fallen platforms, from DEC's VAX to a morgueful of other minicomputer and SMP names that are practically forgotten. Dell clings to the belief that this morgue is not yet full.

Companies don't bring in Dell when they are meeting their budgets or they're free from cost pressures, product strategy VP Tim Mattox noted. Of course, that's pretty lonely company. While other IT vendors can bring x86 solutions (HP comes to mind), Mattox argues that HP would rather sell at the higher-margin end of its product line.

Even Dell's R&D is cast around standards. The company devotes itself to standards body participation instead of creating new its own standards, mapping itself to customer problems rather than "perpetuating proprietary systems," Mattox said. Many R&D departments, he said, are devoted to protecting intellectual property. For Dell, that isn't an issue--it's how to get the most out of standards-based systems. A big focus, then, are things like power and cooling, cloud containers, and some of the services around it all.

Delivering The Message
Heading into our Dell visit, I wrote a column asking for reader insights, and more than a dozen of you responded by voicing concerns about Dell's ability to deliver to the enterprise. Questions centered on whether it can offer the services and breadth of offerings enterprises need, especially in the data center. The proof will play out over time, but Dell is indeed in the middle of recrafting itself to address enterprise customers, both vertically and horizontally.

Under Project Liberty, Dell has completely reorganized the company, this time not around product lines, but around customers. In this case, that means consumer, SMB, public, and large business. Mattox said this reorganization was all about Dell listening to customer needs, which had, perhaps, been sublimated by the volume-business decisions Dell had built itself upon.

Dell is further enhancing this organizational structure by diving its sales force into account management (a single face to the customer) and account service (solution selling via specialists). Steve Schuckenbrock, president of Dell's Large Enterprise division, said he hopes this effort will change the impression of Dell as a box pusher to a solutions provider, and change the sales relationship from a transaction-based one to a consultative one. Specialists in the thousands (storage, networking, systems management, and so forth) are being trained and certified in a process Schuckenbrock wants to make transparent. He said that Dell is already seeing a significant shift from PC sales to solution sales since last Spring.

A big piece of Dell growing up involves its services business. Even before the Perot Systems acquisition, this was a $6 billion business--most of it support services ("close to the box," Schuckenbrock calls it), but also a healthy managed service business and half a billion dollars in infrastructure consulting. The company regularly conducts free workshops for its customers, and it has no desire to cuckold a customer into an everlasting consulting engagement.

Perot boosted Dell's ability to manage customers' infrastructure (this was roughly 30% of Perot's business), but as so many others have pointed out (and Dell admits), half of its shiny new jewel's business is in healthcare, 90% of that in the the U.S. In other words, there isn't the breadth and diversity of an EDS (Schuckenbrock was co-COO at EDS until 2006), but it also doesn't have "150,000 people we have to go bill every day." Dell executives believe that the combined efforts can scale into other industries. But then again, that's what one expects them to say.



The Next Big Thing
And now to the data center, where Dell says it will disrupt through standardization yet again. On storage, it claims not to care whether you believe in Ethernet or Fibre Channel; it has a solution or a partner. But it does believe that iSCSI is the "platform of the future," and that Ethernet is moving very fast (now 10G, soon 40G, then 100G), making it the right network topology for just about anything, including storage. In networking, it thinks it can be what EMC was to IBM in storage eons ago. It believes that x86 + Virtualization + iSCSI + 10 Gig = big change and big savings. If those technologies seem routine--and they are, but that's just the point--the results are anything but.

Dell says that Cisco's data center approach is a defensive mechanism--against commoditized switch ports in a virtual world, and against the success that HP is having. It admitted that it isn't marketing itself very well in this bullring. Indeed, we've heard from readers a concern that Cisco's partnerships in the data center (EMC and VMware) and its customized approach to DCB (Data Center Bridging)--called Data Center Ethernet--is excessively costly and smacks of lock-in.

Dell will have to hammer hard and fast. While its servers may be on everyone's short list, at least for routine data center tasks, its broader solutions aren't, and its competition is moving aggressively.

For now, it seems as if Dell believes it has all the right pieces. When pressed, the company says the only area it sees as in need of development (in response to a question about acquisitions) is around managing heterogeneous virtual environments. Asthana, the storage and networking VP, says the control point isn't at the hypervisor layer, where there will be multiple solutions, but above it. Balancing workloads between private and public clouds, for example, will quickly become important.

All of this--the cloud (my colleague Charlie Babcock wrote more on this here ), the data center--is where Dell will have to grow up. If its newly marshaled army of specialists can front its now-formidable service organization behind an affordable, open solution, it will cease being just a box pusher or a brand that stands only for what it once was, holding on for dear life.

For now, that might mean targeting the small enterprise, the nascent data center, the tight wallets. But sometimes making inroads into more strategic territory starts with a simple declaration. It feels like Dell is ready to get on with it.

Fritz Nelson is the editorial director for InformationWeek and the Executive Producer of TechWebTV.

I am on the jury for the Cloud Connect Launch Pad, produced by TechWeb. This is a competition that lets companies present their innovative application (either in development and about to launch, or recently launched) to the Cloud Connect community in March. Feel free to submit an entry, following the contest rules.

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