What Dell Sees in Store for `08

Here's a pop quiz: Which segment of Dell's hardware business—PCs, servers or storage systems—has grown the fastest over the last two years?

If you said storage systems, you are correct.

And as it looks toward the future, the company known the world over for building personal computers and high-quality application servers for the past two decades sees major opportunities in making hardware and software for digital storage. However, lots of other companies see the same opportunity—because the amount of data people and businesses are accumulating continues to grow at astounding proportions.

So what is it that will set Dell apart from EMC, Network Appliance, Hewlett-Packard, IBM, Hitachi, Fujitsu, Sun Microsystems, and a host of smaller but equally savvy storage companies? All of these competitors, bent on one-upmanship, continue to come out with faster, more capacious, and easier to use hardware and software. And generally, the prices are coming down as competition heats up.

eWEEK Senior Writer Chris Preimesberger sat down with Dell CEO and founder Michael Dell and Storage Vice President Praveen Asthana to discuss the company's storage strategy and trends it sees in 2008.

Michael, you've been back in the CEO position for one year now [since replacing Kevin Rollins in January 2007]. As objectively as possible, how do you assess Dell's progress over the last 12 months?

Michael Dell: I've been really pleased with our last four quarters. I feel really good about us right now. We're growing at a faster rate than ever. Our storage business is the fastest-growing in the industry right now—it's been that way for the last seven quarters. This is due to our distribution system, new and innovative products, our geographic expansion, and a better cost structure alignment that we've put into place.

Storage is one of our three most important businesses right now, along with servers and PCs. I intend to maintain that emphasis in 2008.

The acquisition of EqualLogic was the second-largest pure storage acquisition in IT history, at $1.4 billion in cash. Only Sun's merger with StorageTek in 2005 was larger [at $4.1 billion]. Praveen, what has the EqualLogic acquisition brought to Dell's overall business strategy?

Praveen Asthana: There are two aspects [of the deal] that make it so important for us. First of all, its simplification of IT. Dell launched a strategy to simplify IT for customers, and it was very well received. Customers have been saying, 'That is really my main issue. Life is too complicated, with too many headaches—so if you can simplify IT, great.'

So, if you look at the storage side, for the last few years we've actually been simplifying the storage infrastructure for customers, with the launch of the MD3000i, for example. This deal takes that simplification to a whole 'nother level, because now you're able to employ very advanced storage systems without needing professional services or a huge IT staff. So that changes the game as far as simplicity.

The second aspect of why this deal is so important to Dell is that we are one of the largest suppliers of server virtualization technology. We are a direct-to-customer company, so we get a lot of feedback from customers directly; they say that the No. 1 problem they have when deploying server virtualization is the storage. We wanted to find the simplest storage for server virtualization, and that's what EqualLogic provides.

Dell: According to IDC, iSCSI storage is going to be a $6 billion segment of the market by 2011, and that's why we made the move to acquire EqualLogic, which we judged to be the best of the new breed [of second-generation storage software vendors]. We made a decision a while back that's where we were going to go. We evaluated several possible candidates, and EqualLogic just turned out to be by far the best for us.

Their blade technology is fabulous—40GB connectivity on the backplane, which uses 19 percent less power than comparable blades—and they fit right in with what our 27,000 channel partners were looking for. … It's all just easier to install and manage, it has every feature you'd need, and the EqualLogic brand just fits into any existing system, thanks to its built-in virtualization.  

The market is moving to 10GB Ethernet, and virtualization works even better in that environment. We're the leading vendor of x86 systems in the world, and these new arrays fit perfectly into our product offerings overall.

Why is non-virtualized storage so difficult to deal with?

Asthana: Storage is difficult to deal with from a management perspective for a couple of reasons. One is that the amount of data growth you sometimes have is unpredictable—and it's extraordinary. So when you have a single array, and the amount of capacity gets filled up, you have to go buy another array. Managing two different arrays becomes difficult: how much of your files should be on the first array, how many should be on the second array, and so on. If you virtualize it, it all looks like one pool of storage, so it is very easy to manage.

What is Dell planning to do in the archive business in 2008? Will it provide its own archiving product line?

Asthana: Dell supplies archive systems [those with access through file systems and metadata] to customers through our partnership with EMC.

EMC told me that it provides about 75 percent of the storage hardware that Dell sells. Aren't many of the new, second-generation-type products EqualLogic brings to the table going to overlap with those that EMC already supplies to Dell, and might that cause some friction within the companies and with channel sales?

Asthana: To the question of whether our products overlap with some of EMC's, the answer is yes, there is some overlap. There is overlap with any kind of array that you put out there in the market, because the amount an array can scale will overlap a little bit with how much another array scales.

But customers don't look at it that way. They're not just buying arrays capacitywise. What a customer is interested in is this: 'What's my entry, and how far can I go up?' So if my entry is down here and the other entry of a product is up here, there isn't that much overlap—they start in different areas.

In terms of pure capacity, yes, there is overlap. You can look at it that way. But let me give you an off-the-wall analogy: How much overlap is there between a pickup truck and a Ferrari? They both have wheels. Both of them can probably go 50 mph. At that point, you can say they overlap. If you wanted to go 50 mph, you can do it with either one of the two. But they serve totally different purposes. If you want it to go fast and look good on the racetrack, you have the Ferrari. And if you need to haul stuff, need capacity and have a totally different mindset, you have the pickup truck.

If you're from Texas, you're buying the pickup truck; if you're from Los Angeles, you're buying the Ferrari.

So when you look at products from Dell and from EMC, if you just look at one surface level, you can say they overlap. But we look at them from the usage perspective. If you're a customer who wants Fibre Channel, you'll buy EMC products from us. If you are a customer deploying server virtualization and who wants best linkage [connectivity], then you'll buy the EqualLogic products. If you're a PowerEdge server customer of ours and need a product that looks like a server, you'll buy the MD series.

Even though there is overlap, there are so many different kinds of customers that we think it's a net increase [in number of products in the catalog].

Are you saying it's too general to suggest that Dell will sell its Fibre Channel products only from EMC and its iSCSI storage arrays from EqualLogic?

Asthana: Correct. It all depends on the customer ... Dell can put together whatever a customer needs.

And this is the main thing that we bring here; we bring a lot of choice to the customer. If the customer wants to buy products based on our Dell EMC technology, we're more than happy to provide it.

What new things can we expect to see from Dell this year?

Asthana: What you'll find from Dell is more solutions. EqualLogic was an important step in proving the optimum virtualization solution for the customer. We're going to increase our linkage with other applications; for example, we're finding that the way different applications are changing is putting different demands on the storage.

And we want to make sure we have the best storage. As an example, Microsoft in its Exchange 2007 has put in new intelligence—storage intelligence. And that actually allows the implementation to use lower-cost storage than in the past. In the past, if you needed an Exchange setup, you had to buy a pretty expensive SAN [storage area network] back end. And it was very complicated to manage all that.

What Microsoft did was it changed Exchange in '07 and allowed it to work with DAS [direct-attached storage] products. There's actually a customer implementation of 30,000 mailboxes using Dell MD DAS products and Exchange. Now that's a revolution; that's a big shift from using just SAN and using a DAS system.

You'd think, 'Why would anybody want to go back to DAS?' But you're not [going back]; the intelligence in the application brings in the same kind of availability and scalability as SAN, but it's much cheaper to buy and manage.

Why does this matter to customers? If I go to a CIO and say, 'I bet you that the No. 1 complaint you get from employees is, How come my -mail mailbox is so small? How come Google and Yahoo are offering 2GB mailboxes and you have given me a lousy 50MB?' I tell the customer, 'How about if we give you a back end that allows you to give 2GB mailboxes at the cost of 50MB?' They go: 'Yeah!' The way you do it, instead of using a very expensive SAN back end, you use Exchange with this kind of a DAS infrastructure, and bingo.

Dell is evolving its thinking from just saying, 'Hey, we've got a little box for you, it's only five grand,' to 'How can I give you a bigger Exchange mailbox for the price of a small one?' That is a solutions player; you'll see a lot more of that from us.

Tell me something new I don't know about Dell that you think is important for people to know.
 
Dell: Well ... let's see. Did you know that 85 percent of Dell's products are sold to business and government customers?

Actually, no, I didn't. I figured a much higher percentage of sales to the consumer market.

Asthana: We've been the fastest-growing storage company in the world for the last four or five years. We are the fast-growing division within Dell. We also are very entrepreneurial in our approach, which is the same as a startup. We have a small team, focused on winning, and we're changing the game in storage. A lot of people don't know how much we are changing the game in storage. Not only are we changing the price economics by lowering the cost of entry-level storage, we've also changed the playing field altogether with our DAS-Exchange solution. Now you don't need a SAN. We came out with the first scalable DAS system—45TB up to 90TB. For a small customer, that's a lot, and it costs half as much as a SAN. We're not just tweaking things—we're fundamentally changing things.

Dell: So there, you learned something new.

Happens every day. Thank you!