Dell's Strategy: Embracing Cloud, Consumerization of IT

Dell’s Analyst Meeting is kicking off in Austin this week. This is where they lay out their strategy for the coming year for a collection of industry analysts. The opening talks are from their head of strategy, CFO, and Steve Felice (one of my favorite Dell folks) who heads their consumer and small/medium business effort.

It’s clear Dell that is positioning itself to aggressively move from the PC company it once was to one focused on the consumerization of IT, software, and cloud services that they will eventually need to be.

Let’s talk about proof points:

Fluid Data Architecture

The underlying concept Dell is attempting to achieve largely through their acquisitions of Ocarina Networks, Exanet, Equalogic, and Compellent is to create hardware-independent storage architecture.

Realize that for a hardware vendor to go hardware independent is a very difficult step. But it’s critical if they want a solution that will embrace what their customers already have, so that they can become a major player in the desired sectors much more quickly than a rip and replace strategy would allow.

Rarely does an aggressive strategy ideally meet the needs of customers and a vendor. But, in this case, it appears to because IT buyers typically try to aggressively avoid rip and replace strategies – they see them as too costly --¬¬ even though these are unfortunately the most prevalent. If buyers accept that Dell is sincere with this approach, and they are, given the company’s growth objectives, this should be well received by corporate buyers.

Embracing the Cloud

In this sector, acquisitions ranging from KACE to Boomi are designed to manage and optimize both client and cloud resources. They are also intended to vastly increase the ability to bridge differing on-site technologies without the typically hardware-driven rip and replace practices.

Dell apparently recognizes that to differentiate itself from other large vendors they have to not only appear to be more cost effective, they have to approach the problem in a way that demonstrates both eventual and current cost savings.

Part of this clearly is the result of going rapidly from a company that rarely if ever does acquisitions to one that has successfully done 8 acquisitions over a 12-month period.

Client and Server Hardware Remain Key

While the focus for this event is clearly on their enterprise and services business, they want to be clear that they are going to keep investing in their hardware businesses. Showcasing strong growth in hardware ranging from consumer PC hardware to server hardware (where they are currently ranked number 1 in the US), they are not planning on pulling back here.

Messaging, however, appears to be shifting to the other efforts, primarily to help change the perceptions surrounding the company. That appears to be why folks often seem to think Dell is abandoning these businesses, but their CFO assures that this is not the case. Investments, while they may lag areas where Dell is quickly trying to build a significant presence, aren’t trivial either.

Consumerization of IT

Dell is one of a growing number of companies that recognizes that consumer and corporate markets are blurring. Folks are increasingly bringing consumer products (tablets, smartphone, consumer PCs) into companies and Dell recognizes they both need to build these products and embrace products that are built by others if they are going to be serious about integrating the future enterprise.

This means that they need to be able to work across multiple platforms and provide centralized services for devices that weren’t designed for them.

This takes them down a rather interesting integration path that may be somewhat unique in their class of company and, once again, one that IT buyers at all levels may appreciate. This path is focused on solving critical integration and management problems, as opposed to simply introducing them with new attractive consumer products that workers introduce into their companies. This focus is one that should resonate.

Wrapping Up: The New Dell, the New Deal

Clearly Dell, in the early parts of this event, is showcasing that they are thinking about the new cloud and increasingly consumer/user centric world. What is interesting is that the recurring message isn’t, “Look at my new hardware and software products which will replace and improve what you have,” but instead, “Here are our new tools which will make the increasingly complex world you already are struggling vastly easier to deal with.”

This is not a typical path, though it is one I think IT folks the world over have been praying major vendors will take. The only other company I’ve seen adopt this concept as broadly as Dell is doing is Microsoft -- and they were initially forced down this path by the European Union. (They then surprisingly discovered that focusing on interoperability not only generally eliminated much of the Linux aggravation, it actually improved their sales.)

The lasting lesson I expect we’ll see repeated is: when a vendor focuses on customer needs ahead of simply trying to maximize product sales they are likely to actually be more successful. This is primarily because, in a world awash with vendors pitching forklift upgrades, a vendor who makes what folks already have is more valued and most firms simply can’t afford most forklift upgrades anyway.

In short, by not focusing on pushing hardware, Dell might actually end up selling more of it. Go figure.