The High-Volume Model

Ask Michael Dell what's going to happen when tech spending comes back, and he'll tell you that it never went away: "Companies are still spending tremendous amounts of money on IT."

Unlike the CEOs of many other technology companies, Dell has good reason to be upbeat. The more cost-sensitive business environment is making high-volume technology the wave of the future, he says. With its low-cost, direct-sales model and Intel-based products, Dell Computer has held steady, reporting flat year-over-year revenue for its first quarter, while competitors' sales have been slipping.

"One of the pervading trends across all of industry is this move toward industry standards, which is driving cost down and creating more flexibility," Dell said in a mid-July interview at the company's Round Rock, Texas, campus. That's good for his company, which is built on the low-cost, high-volume model, but it's also good for buyers. Such technology costs far less to purchase and support than proprietary systems, Dell says.

Customers are looking for new approaches. "It's not going to be, 'Well, we're just going to do what we did two years ago and just pile more bricks on the wheelbarrow, doing the old stuff,'" Dell says. He cites a chief technology officer from a large investment bank who's spending just 3% of what the bank spent last year for another vendor's proprietary server hardware; the rest of the budget is going for hundreds of Dell servers running Linux.

Customers increasingly are interested in Linux, both as a high-performance clustering platform and as they migrate from RISC systems running Unix to what Dell calls industry-standard architectures. His company, which uses Linux as well as Windows to run critical factory operations, is prepped to cash in: The vendor said in June it would collaborate with database vendor Oracle and Linux vendor Red Hat Inc. on a new server.

Of course, none of that means it's time to sound the death knell for proprietary technology. "There's still a lot of it out there," Dell says.

In the next few years, data centers also may fill up with a new type of server: modular systems that extend the concept of blade servers, driving down costs through simplified systems management while providing multiple custom-configured servers in a chassis and remote hardware-management capabilities. The modular, or "brick," system that the company is developing is designed to support more powerful database operations and make better use of shared resources such as input/output and storage.

Network-attached storage is another technology that's headed for high-volume markets, says Dell, who expects customers to realize huge savings as his company applies its manufacturing expertise to next-generation products in partnership with storage vendor EMC Corp. "You take a look at the benchmarks and Dell's asset efficiency," he says. "OK, what does that bring to customers in the form of savings? It's pretty huge."

< < Previous CEO Interview (John Chambers)

> > Next CEO Interview (Henning Kagermann)