Dell's Shift Toward IT Services, Cloud, Storage Continues

 
 
By Scott Ferguson  |  Posted 2011-06-29 Email Print this article Print
 
 
 
 
 
 
 

At its annual investor conference, CEO Michael Dell looks to tie the company's acquisitions and R&D investments into a new company strategy.

AUSTIN, Texas-The fact that Dell is moving away from being a low-cost supplier of PCs and IT hardware toward a more robust company with a portfolio of technology that can address issues ranging from cloud computing to mobile device management is old news. However, the way Dell (NASDAQ: DELL) plans to integrate its acquisitions, intellectual property and technology remains an open question.

CEO Michael Dell attempted to answer that question for both the company's customers and financial analysts at Dell's annual investor conference here. Michael Dell kicked off the June 29 event with a keynote address that looked to tie the company's eight different acquisitions and a year-long, $1 billion investment in research and development.

While Dell and his executive team highlighted the company's overall financial growth and the strides it has taken to reach its financial goals, this year's meeting lacked a strategic realignment of the company's fortunes that had been the focus of previous meetings. Instead, Michael Dell and his executives detailed how the acquisitions and shift toward newer technologies is pushing the company toward a goal of being an IT services company in the same vein as Hewlett-Packard, IBM and Oracle.

"Last year was really about growing our services and solution portfolio," said Michael Dell. "Our focus now is on enterprise solutions that provide efficiency and flexibility. We very much have this idea of open, affordable and capable, which you will hear resonate throughout the day."

In the next year, Dell plans to focus on three areas, which include data management, IT services within the growing world of cloud computing and revamping the company's traditional user computing model by selling more software and services to these customers.

These areas are ripe not only for Dell, but its competitors. HP offers much of the same technology and Oracle has expanded into hardware with its acquisition of Sun Microsystems. IBM has a number of partners and is still considered the leader in IT services.

To counter that, the mantra that Dell is pounding into the head of the analyst community is "open, capable and affordable," which helps paint the company as not only a supplier of IT, but also one that works with customers despite which vendors they use for different hardware and software. Part of this refers back to Dell's recent string in acquisitions.

In storage, for example, Dell has bought a number of different companies, including EqualLogic for iSCSI and SAN; Exanet for NAS; Ocarina Networks for compression and deduplication technology; and Compellent for Fibre Channel. This, according to Dell, is pushing the company not only into high-end storage, but also into a new field where Dell is active in managing a company's data. The fact that Dell can offer a number of different storage technologies is a change from the past.

In order to achieve this new type of storage and data management offering, Dell is formulating a strategy called "fluid data," where a company's data moves across multiple platforms regardless of the specific underlying hardware. In addition, this strategy allows data to move across virtual and physical environments, as well as between legacy infrastructures and cloud computing environments. 

This push toward new markets and acquisitions has also put a focus on where Dell plans on spending its money next. Right now, the company has about $15 billion in cash and investments, which means Dell has the ability and leverage to buy a relatively large company. One area where the company is lacking in its data center and cloud strategy is networking. This has led to speculation that Dell is eyeing a deal to buy Brocade - a deal the company is not commenting on - or a small, privately held networking company.

At the same time, Dell is pushing its own technology. While the company's PowerConnect networking technology is not as robust as Juniper Networks or Brocade, the company does offer servers, services and software that fill out the vertical stack. It has used partnerships to fill in those gaps.

In addition to entering new markets, Michael Dell said his company is placing emphasis on what he defined as "midmarket customers," which includes part of the small business market, large companies and specific customers in the public, education and health care sectors. Overall, Michael Dell estimates the global IT market as a $2.7 trillion market and the midmarket represents the vast majority of these companies looking to spend more on IT.

"The design focus has the midmarket in mind," said Michael Dell.

"The largest part of the industry is right in the middle," Dell added. "Right in the middle you have the largest business, small and medium sized business and public sector, education and health care. No other company has the focus and understands those customers and the needs of those customers."

While much has been made of Dell revamping its traditional PC offering to conform more to consumer tastes and using traditional retail to sell PCs, the vast majority of the investor meeting focused on selling products and IT services to enterprise customers and the midmarket segment that Dell defines as its main focus.

From there, the IT industry will see Dell selling many more services with its hardware and software packages to businesses that have IT departments but not IT managers with very specific skills. One example is security. Dell recently acquired SecureWorks and the company is busy looking to sell security to not only to cloud customers but also to businesses that want to secure the number of different mobile devices - smartphones and tablets - that are coming into the network.

 
 
 
 
 
 
 
 
 
 
 

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