Dell Makes Headway with Server Business

Cloud computing, virtualization and workload migrations are fueling Dell's server business, as the company continues its transition to a solutions provider, according to Dell executive Forrest Norrod.

In a recent interview with eWEEK, Forrest Norrod, vice president and general manager of Dell's Server Platforms business, said that even though the company is rapidly intensifying its push to become less of a box maker and more of a solutions provider, servers will still be a key piece of the equation.

"We still see the server business being very highly [profitable], with very strong growth," Norrod said, pointing to such drivers as cloud computing, virtualization and the migration of workloads from RISC and mainframes to x86-based environments.

Dell's numbers from the fourth quarter of 2011 support Norrod's view. According to figures released by Dell Feb. 15, revenue for enterprise solutions and services grew 7 percent over the same period last year-and are now almost a third of all of the company's revenue-and server revenue jumped 16 percent.

In addition, server revenue in all three categories-large enterprise, small and midsize business, and the public sector-all saw growth of 14 percent to 22 percent.

During the interview with eWEEK-conducted before Dell released its numbers-Norrod said the cloud would continue to drive business to the company. Dell has become a strong server provider to various cloud and hyperscale computing environments, from Amazon Web Services to Microsoft to Yahoo. Norrod said he doesn't expect that trend to tail off any time soon.

Cloud computing as a term "is so ill-defined," he said. However, there are a growing number of "classic hyperscale customers" running large, cloud-like environments for such jobs as search, social networking and Web computing, he said. "[Cloud computing] is just going to continue to be very strong," Norrod said. "The rich continue to get richer."

In such areas as cloud computing and converged data centers, Dell will continue competing with the likes of Hewlett-Packard, IBM, Oracle and Cisco Systems. In the third quarter of 2010, market research firm Gartner had Dell solidly in second place in server shipments behind HP, and third in revenue behind HP and IBM.

Dell's DCS (Data Center Solutions) business unit is pushing to be a key supplier of x86 servers to this area. Over the past two years, the group has collected almost two dozen such customers that order a large number of systems to keep up the skyrocketing demand for computing power, he said. Through the DCS, Dell has worked to build customized hyperscale solutions for particular customers.

There has been some question whether cloud computing and virtualization are a threat to traditional server vendors like Dell. Norrod said that "any time you get a change in the market, it represents an opportunity and a threat." In this case, the opportunity is great, particularly as traditional businesses look to create private cloud-computing environments within their firewalls.

Private clouds represent an opportunity for Dell to take advantage of its growing expertise in this area, he said.

Virtualization and the continued migration of high-end workloads to x86 systems will also fuel the expected server growth for Dell in 2011, Norrod said. Regarding virtualization, he said, "Anything that drops the cost of operations drives up demand for computing."

In addition, the growing number of high-end four-socket x86 systems on the market is an indication of the rising demand for such systems to handle mission-critical workloads moving from RISC-based Unix systems and mainframes, Norrod said. Four years ago, such systems were rare. Now more are coming onto the market.

"We continue to see our customers migrating applications and workloads onto x86 servers," he said.

Norrod said he expects to see Dell continue to build itself out as a solutions provider, through both acquisition and in-house development. He pointed to the series of recent acquisitions-such as services provider Perot Systems, storage vendor Compellent and security software maker SecureWorks-as examples of Dell efforts.

During Dell's Feb. 15 earnings call, CEO Michael Dell spoke about the transition.

"If FY11 was largely about getting operationally fit, then FY12 is going to be about leveraging this division of health and strength to move more aggressively and accelerate our transformation as a services and solutions company," Dell told analysts and journalists during the conference call. "Customers are now seeing Dell in a fresh light. We're heading into the new year with strength and optimism."