In Dec. 2011, a delegation of editors from Techweb representing InformationWeek, Network Computing, Enterprise Efficiency and Insurance & Technology met with Michael Dell at Dell Inc.'s corporate headquarters in Round Rock, Tex., after a day of meetings with senior company officers representing Dell's storage, networking, virtualization and other business units. Dell shared his views on the shape of the company today, Dell's acquisition and growth strategy, the future of client computing, storage, networking and virtualization, and Dell's related foray into services.
Techweb: Who is Dell today versus three years ago, how has the company evolved?
Michael Dell: It is a "new Dell" if you think about what's occurred in last four or five years, and what occurred with its customers. I recently briefed customers, including a large healthcare provider that manages 100 or so hospitals. If I look at what we do for them today, it's all sorts of things we wouldn't have dreamed of doing in the past. We're running electronic health records system, helping with claims, disease management, mobile clinical computing strategy, security. We are so much more involved in things that drive outcomes for their patients today. Yes, there are some "boxes" involved but that's not the point. The point is the patient outcomes.
A few years ago Dell was competing inside a portion of the IT market. We were pretty clearly competing in the PC part of the market, or the server part. But if you talked about other areas, Dell wasn't really in them. We're now competing in entire $3 trillion sector of IT. We've opened up an enormous new set of opportunities in services and storage. We're showing up and winning in those sectors.
What you've heard us talk about today is end-to-end IT solutions. Certainly we have a basis in infrastructure and have used that to expand out into services that are very closely tied to infrastructure and key verticals, and into all sorts of services areas closely related to the infrastructure we provide. In the last four quarters we've added about 11,000 people into Dell. You don't find a lot of companies doing that today.
The Future of Client Computing
TW: When it comes to client/personal computing devices, where do you see the endpoints going? All mobile or will laptops endure?
MD: Are laptops not mobile devices? We believe it's a multiple device world. If you were sending your daughter off to college and you could give her only one device, which one would it be? If you go ten years into the future, what will a client device look like? Maybe you talk to your computer, maybe there's a hologram; maybe an image gets blasted directly onto your retina. Who knows? There could be tiny devices you carry with you, and bigger ones as well. We are very committed to the client device market -- we haven't changed our mind!
TW: OK, but in the B2B world expectations around things like depreciation and replacement schedules are changing. If you have an employee who today has a laptop a smart phone and a tablet, you may be think that's overkill, especially if all a company's apps are in the cloud. Shouldn't these considerations focus Dell's client device strategy?
MD: The fact is that there are about a billion devices in the world today and there will be about 2 billion by the year 2014. So the death of the PC has been greatly exaggerated.
Consider the example of a CIO of a big bank: employees need certain capabilities to be productive; what do you give them?
TW: Maybe you develop a user strategy to determine who gets a PC and who gets a mobile device.
MD: Are smart phones replacing PCs?
TW: In some cases they are.
MD: In a very small number of cases. How many are being replaced, how many are additional devices? Most are additional or supplementary. Also, the replacement cycle is much quicker for mobile and getting a bit longer for PCs. If you average it out, the replacement cycle is not changing that much.
Acquisitions and Growth
TW: Dell executives talked quite a bit about the acquisitions the company has made recently, particularly in storage and network computing. What kind of conversations would we likely have in a year or two?
MD: We have a road map for how we evolve our software and solutions strategy, but we find that if we tell people about it in detail before we do it, it is harder to do.
TW: Fair enough. We tend to focus on acquisitions, but what would you say are some of the top organic things that you've built in the last two years?
MD: Storage, server, cloud, services, growth in our market capability, emerging markets. We have a long history of growing new businesses with Dell. The latest market share data shows that we're selling 36 percent of servers, and we're number one in North America. Also, when we acquire, we hire. When we acquire an EqualLogic [a deal to acquire the Nashua, N.H.-based company concluded in Feb. 2011] and they have 100 engineers, we'll say, "Let's re-imagine this in the context of Dell and have 400 engineers." Our public sector team in China alone has sold 1,000 EqualLogic arrays. Previously the whole company had only sold 300 EqualLogic arrays, so it's illustrative of the kind of investments we can make organically on top of great intellectual property.
TW: Earlier today Darren Thomas, VP and general manager of Dell's storage business said that for almost every storage company acquisition you've doubled or tripled staff.
MD: True. If you go to Nashua you'll see that we're sprawling.
The Impact of Virtualization
TW: Virtualization is changing the enterprise, but it's primarily an x86-related development, moving away from Unix and proprietary technology. How much has this benefited Dell.
MD: Over time the movement has been onto small processors, and x86 has been the primary recipient, and virtualization has accelerated that. People used to say, "There's no way you can run that on x86"; then they said, "Unless you virtualize there's no way." It's kind of gone from "It won't work" to "OK, it will" to "It's an advantage." The other thing is that everything is being virtualized -- network, storage, etc. That's up-ending traditional companies and creating opportunity. For us, the opportunity is to find things that create enormous value for customers, making them easy to adopt and get in front. For example, server and storage virtualization, which is the essence of EqualLogic.
If you talk about network virtualization, if you have one server and one app, then you have a port and a switch. That's pretty good if you're a port-and-switch business. But all of a sudden you have four virtual machines, then 20 or 100. The whole networking business becomes soft, which is scary if you're a big networking company. When all the networking accessories, such as web accelerators, firewalls and the various appliances become apps inside the machine, it totally changes the value equation.
Balancing the Visionary and the Pragmatic
TW: To what degree do you think you should be driving the industry and to what degree answering existing demand? What's the right proportion of visionary and pragmatic?
MD: Our industry is constantly in transition from one way of doing things to another. The rate of change is very fast in terms of application environments, how data is stored and shared, and the molecular structure of chips. Our Job is to find things that make a big difference to our customers -- to create value and help them to capture it.
When it comes to client [computing], it's how do you automate management, how do you virtualize the environment. If you ask customers about mobile security and small devices, many are still using the technology in very basic ways. We recently met with one of the biggest companies of the world, and they wanted to be reassured that we'll continue to make the great devices that we have been making for a long time. They're not sure about those other guys. We're going to meet their expectations.
From Products to Solutions
TW: How do you close the gap of how customers see Dell today as fundamentally an infrastructure company to more of a services company?
MD: First of all, you don't do it with the same skills; you need new capabilities and skills, and some of those are foundational additions that we've made. We now have 45,000 people in our services business, and they operate with a solution-oriented mindset. Many came from Perot systems. We've added SecureWorks and more security capability on top of that. That vertical orientation is not something where you flip a switch -- it requires leadership. We brought in Steve Schuckenbrock to head the services business in 2006 and we've building the business ever since. It takes time.
On Achieving Company Vision
TW: How far are you on your path to achieving your company vision? 10 percent? 50 percent?
MD: People say, "What inning are we in?" but it's not baseball! I'll draw a picture of $3 trillion industry in three parts, hardware software and services. Services is bigger than hardware and software and also growing faster. But you can't have services with out software and hardware, and you can't have software without hardware. We're clearly evolving from a hardware core into these other areas.
The picture looks very different depending on who the customer is. For example, if you look at tier-tree to tier-six cities in Cina, which are a bigger market than tiers one through three, it's a whole different China, where there's a lot of hardware, less software and even less services. It's not hard to figure out why. People are selling the concept of a "smarter planet," but many people around the world need access to basic computing. Nigerian banks need different things than U.S. banks.
So the answer is that the whole world is changing. Emerging markets are very important, representing 28 percent of our revenues. We see the hardware as the foundational layer, followed by software and then services. How we evolve as a company is a never-ending journey.
TW: Is there anything you'd like customers to be asking for that they're not asking for today?
MD: I have sort of an emotional dislike for the question. Nothing against you! It has to do with a way of thinking about customers. It's not our job to tell them about what they should want to be doing.
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio