Dell Technologies is staking its claim to be the only end-to-end technology vendor, and unveiled further details about its strategy at its recent Dell EMC World conference in Las Vegas. This strategy revolves around four main pillars: workforce transformation, IT transformation, digital transformation and security transformation. Each uses a combination of the seven companies under the Dell Technologies portfolio: Dell, Dell EMC, Pivotal, RSA, SecureWorks, Virtustream, and VMware. This is the first time that the entire family of technologies has come together under one strategy.

At the same time, Dell Technologies (Dell) is pursuing an ambitious goal to be the world’s leading channel vendor. Having integrated Dell and EMC’s partner programs at the start of the year, it announced a set of new incentives designed to reward partners that deepen their relationships with Dell by selling across the portfolio, bringing new customers to Dell and attaching services. The message from Dell is that it will invest heavily in the profitability of partners that do this. Infrastructure and client incumbency programs are the most important initiatives recently announced, protecting partners that have existing legacy customer relationships for servers, storage and networking, or new accounts for client (PC business). But inevitably Dell has discovered that trying to build the simplest, most profitable and predictable program in the industry, at the same time as undertaking the sizeable task of bringing together two global channel organizations (Dell’s and EMC’s), brings with it significant challenges. Partners have faced operational issues, in particular with deal registration tools, partner portals, the training platform and an overly complex MDF program. This has created problems for partners trying to sell across the portfolio. Dell has acknowledged these issues to partners and is actively working to address them, but it still has much work to do to create the “frictionless” model it is aspiring to.

Dell pushes back against public cloud-only strategy

In his keynote at Dell EMC World, one of the strongest messages from chairman and CEO Michael Dell was against the public cloud. Dell believes customers taking a public cloud-only approach could find themselves paying almost twice as much as for an on-premises model, leaving them uncompetitive. He emphasized Dell’s view that eventually all companies will adopt a multi-cloud, hybrid IT approach. This is important as the core business of Dell EMC, like many IT enterprise hardware vendors, has been under pressure from the hyperscale cloud providers, such as Amazon Web Services, Microsoft Azure and Google Cloud. It will be critical for enterprise IT vendors to continue to fight back against the public cloud players, which have been winning the PR battle so far. Enterprise IT vendors will need to highlight more customer wins that involve moving back from the public cloud to a hybrid environment. The “big three” public cloud providers are also among Dell Technologies’ biggest customers, but as HPE has shown, this reliance creates significant risk if the public cloud providers shift to alternative infrastructure suppliers and deployment models.

Dell lays out its vision for “transformation”

Dell Technologies sees its ability to support customers in their transformation journey toward hybrid IT as one of its primary areas of differentiation. It has outlined a three-step approach for customers. The first step is defining the right cloud strategy across general purpose, cloud-native and mission-critical applications. In each of these application types, Dell demonstrated how it can support customers:

  • General-purpose applications (Java, Microsoft .Net, SQL Server, etc): Dell EMC provides Enterprise Hybrid Cloud, a turnkey platform built on VMware technology as well as converged and hyper-converged infrastructure.
  • Cloud-native applications (Python, Spring Boot, MongoDB, etc): Pivotal Cloud Foundry, the company’s Platform-as-a-Service (PaaS) offering hosts cloud-native apps in partnership with Microsoft and Google.
  • Mission-critical applications (Oracle, SAP, custom apps, electronic medical records, etc): Virtustream provides the public cloud environment for these apps using Virtustream’s Enterprise Hybrid Cloud, which competes with Hewlett Packard Enterprise, IBM, etc. Essentially, Virtustream is Dell EMC’s cloud, and it boasts tight engineering integration and support. In May, Dell EMC also announced that Virtustream would become part of the Dell EMC partner program, with partners receiving benefits for selling its services. But Virtustream’s Storage Cloud, the object storage version, competes with AWS and Azure offerings, and it will continue to be under pressure from these companies due to their speed of growth and massive customer bases. Dell Technologies also announced a healthcare version of Virtustream to handle workloads in this vertical that need to meet specific regulations and compliance requirements.

The second step is to provide the IT infrastructure to support digital transformation. To this end, Dell EMC announced new products, including 14th Generation PowerEdge Servers as well as updates to VxRail (this will now be based on the 14G servers), Dell EMC XC offerings and its all-flash storage systems. Another key announcement last month was the Dell EMC Cloud for Microsoft Azure Stack, a bundled offering that includes VMware cloud and Dell EMC storage offerings. It is a turnkey platform that will support a hybrid cloud offering with the same look and feel as the Microsoft Azure Public cloud. Moreover, the company unveiled new products in its open networking portfolio, and launched the Integrated Data Protection Appliance (a turnkey offering that combines the company’s Data Domain backup appliance with a new version of its Data Protection Suite software). IT security remains important to its transformation strategy, with Dell highlighting the capabilities of SecureWorks for managed security and RSA for cyber-security.

Dell Technologies also remains committed to its client/PC business, given the continued importance of PCs to revenue, cash flow and actual profitability. Key products include its Latitude laptops, OptiPlex desktops, Precision workstations and Wyse thin clients. It is investing in innovative products, including the Dell Canvas, a 27" touch-screen display that connects to any PC, and has reaffirmed its support for virtual and augmented reality.

The third step toward transformation is around services and consumption, whereby Dell offers its customers and partners different options to purchase and consume IT. Dell Technologies unveiled consumption models for customers using Dell Financial Services. These include Flex on Demand for all Dell EMC storage solutions, which allows customers to pay only for the storage capacity needed; Cloud Flex for HCI for Dell EMC VxRail Appliances and Dell EMC XC Series, which allows customers to pay monthly under a form of leasing model, which includes built-in price reductions over time and also allows customers to return unused infrastructure; PC as a Service, which allows companies to pay for PC hardware, software, deployment, management, security and support for a single price per seat per month; and VDI Complete solutions, which allows customers to deploy VDI using Dell EMC’s hyperconverged offerings and Dell thin clients under a monthly payment model. These consumption models will be welcomed by both customers and partners, and show one of the advantages that Dell Technologies now has as a private company.

Dell Technologies’ latest product announcements show the breadth and depth of its portfolio, and how the company is moving its business units toward a more integrated approach, in contrast to EMC’s siloed “Federation” model. But it still has overlapping product lines, especially in its storage and server portfolios. It will need to streamline these further, to provide a clearer value proposition to its customers.

Dell Technologies has an ambitious goal of being the global leader in data center infrastructure and client devices, as these markets consolidate, and industries embrace digitalization. Sales of core servers, storage and networking equipment, as well as PCs, continue to be under pressure. Its next-generation technologies, such as all-flash storage and hyperconverged infrastructure, are growing rapidly, but, like its competitors, it is not yet growing fast enough to offset declines in its core infrastructure and PC offerings.

VMware and technology alliances will be under scrutiny

The breadth of Dell Technologies’ portfolio is supported by technology alliances, but these can also compete with its own offerings.

  • Converged and hyperconverged infrastructure (CI and HCI): Its HCI portfolio includes VxRail (based on Dell EMC and VMware); VxRack (VxRack FLEX powered by ScaleIO and VxRack Software Defined Data Center powered by VMware Cloud Foundation); and the Dell EMC XC series (based on Nutanix software). Dell EMC’s hyperconverged portfolio is the broadest in the industry and targets different customer use cases, though there is much overlap. There needs to be tighter and clearer messaging regarding its HCI offerings. Its converged infrastructure offerings now include only VxBlock, built on Cisco UCS, which supports either VMware NSX or Cisco ACI, having recently announced the discontinuation of vBlock, which only supports Cisco switches. Dell Technologies has insisted that its collaboration with Nutanix and Cisco will continue. But the key question is whether it can maintain this commitment at the same time as pushing the message that it is the “only” end-to-end IT vendor.
  • VMware: Among the seven Dell Technologies companies, VMware is one of the most strategic. It integrates across the Dell Technologies family – HCI, CI, virtual desktop, Dell PC Bios management (AirWatch), Pivotal Cloud Foundry, security and SDN. Last month, VMware announced the Pulse Internet of Things (IoT) Center, which is as an enterprise management and monitoring solution for Dell Edge Gateway IoT devices, using VMware AirWatch for device management and VMware vRealize Operations for infrastructure monitoring. Furthermore, VMware now has a strategic alliance with AWS, through which customers will be able to run VMware vSphere-based apps across private and hybrid clouds, as well as the AWS public cloud. But VMware also partners with Dell Technologies’ fiercest competitors, such as HP, Hewlett Packard Enterprise, NetApp and Lenovo across different offerings. VMware has maintained that it will remain independent, and this will likely continue for the time being given the number of customers that use VMware on non-Dell EMC equipment. Dell Technologies will likely favor its own offerings over its competitors, in line with its “better together” and end-to-end value proposition.
  • Networking: Dell Technologies is less well known for its networking gear than Cisco or Hewlett Packard Enterprise, but it is expanding rapidly and gaining new customers, primarily in data center environments and campuses. Its latest announcements on open networking switches make it highly disruptive, as it looks to gain further market share. But this further complicates its relationship with Cisco in terms of the balance between competition and cooperation.
  • Microsoft Azure Stack: Dell EMC’s latest partnership with Microsoft around Azure Stack highlights the importance of offering hybrid cloud solutions, but it also competes with its own Enterprise Hybrid Cloud (VMware and Dell EMC deployed) and Native Hybrid Cloud (Pivotal). But it is in line with its strategy of having a broad portfolio and giving customers choice.

Dell must highlight customers benefiting from its “better together” strategy

Dell Technologies used its Dell EMC World conference to showcase customers that are buying across its family of companies.

Dell Technologies will need to demonstrate more of these use cases as proof of its “better together” message. It will also be important to encourage channel partners to sell across the breadth of the Dell Technologies portfolio. At the same time, it must demonstrate excellent customer service, superior operational efficiency and consistency. Moreover, Dell Technologies sales reps across the six other technology companies need to be aligned when engaging a customer to ensure maximum cross-sell and up-sell potential. Currently, its Converged Platform and Systems Division (CPSD) oversees ensuring this integration, which is the correct move, but it needs to do this on a consistent basis to succeed. Most of all, it needs tighter alignment with its channel partners across the complete portfolio and to encourage them to sell the entire Dell Technologies portfolio. Adding Virtustream to the partner program is the correct move, and it will need to integrate all the other companies in its partner program in the future, especially VMware. It might need to reconsider renaming its annual conference “Dell Technologies World” to drive a stronger message to its partners and customers.

Dell Technologies boasts an impressive portfolio, from PCs to the edge and to core in data centers. It benefits from being a private company, without facing quarterly scrutiny from Wall Street and investors. Private status also gives it greater freedom to offer flexible consumption models to customers and partners. Meanwhile, its competition is getting smaller, though perhaps faster and nimbler. Its chief rival, HP, has split into two companies, and it will take many years to determine which of these strategies is most effective. It will certainly be an interesting study for industry observers and academics in the future.

The risk with being everything for everyone is that Dell Technologies will be under attack on all fronts, and it will create even greater complexity for customers and partners. Operational efficiency will be of immense importance, especially as Dell makes more use of its channel partners and seeks to increase the proportion of indirect business. Conflict between direct sales and channel partners remains its biggest go-to-market issue, given its legacy “customer choice” model. The company is seeking to address this through greater protection for partners selling into commercial accounts, through its incumbency programs and other initiatives. Yet it is not providing this level of protection for larger enterprise accounts and must go further to foster the trust of partners around the world. At its global partner conference in May, Dell demonstrated that it is listening to its partners’ concerns and working hard to address operational issues. But true integration of the Dell and EMC channels will take time. There remains a clear cultural divide between legacy Dell and legacy EMC partners, which may be one of the biggest hurdles to pushing the “better together” message through the channel. Dell needs to minimize complexity for partners selling across the complete portfolio.

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