Michael Dell Says ‘VxRail Is No Longer A Thing’ As Company Boosts Dell Private Cloud Partner Incentives

The global leader in storage is encouraging partners to move customers off VxRail and into its disaggregated, hypervisor-neutral Dell Private Cloud, which is home to multiple virtualization offers.

Two years after Broadcom closed its $69 billion acquisition of VMware, Michael Dell says VxRail “is no longer a thing.”

Dell Technologies is incentivizing its partners to move customers off VxRail, which was once a stalwart hyperconverged infrastructure offering that combined Dell storage with VMware’s virtualization technology and gave partners a sticky, reliable offering for customers.

“I think the thing you need to look at there is VxRail is no longer a thing,” Dell founder, chairman and CEO Michael Dell told CRN when asked about growth in its storage portfolio. “It was a thing a couple of years ago, and it’s a lot less of a thing now. And so the thing that’s been growing tremendously is the Dell IP in storage. And you could say, more accurately, the Dell EMC IP in storage.”

Dell Private Cloud is being combined with Nutanix AHV, Microsoft Hyper-V, Red Hat or VMware and used to transition customers from VxRail to a disaggregated infrastructure stack that is built on PowerStore or PowerFlex, both of which are Dell storage products, while the Dell Automation Platform is helping them make the switch.

Dell Technologies Chief Partner Officer Denise Millard said moving customers away from VxRail is the No. 1 issue the company is talking about with partners.

[Related: Dell Targets Rivals Pure Storage And Vast Data As AI Race Heats Up]

“We’re launching a new transition incentive program, and it’s tied to Dell Private Cloud. So we’re helping partners transition their customers from Dell VxRail to a disaggregated infrastructure built either on PowerStore or PowerFlex,” she told CRN. “That is really enabling them to operate in an open ecosystem. They don’t have to be locked into a specific hypervisor. Many customers are actually deploying a multi-hypervisor environment, and that really aligns well with Dell’s strategy and the role that our partners can play.”

To help partners make the switch, Millard said Dell has launched an incentive program offering greater profitability and resources as partners help future-proof customers with modern infrastructure.

Partners can earn more through front-end funding and rebates in addition to no-cost training and migration services, trade-in or try-and-buy programs and financial services offerings.

“We feel like we have a well-rounded strategy,” Millard told CRN. “We have the products that sit behind it, and now we’ve put a program in place to help support it.”

At the same time, a company spokesperson after the interview said in a statement that Dell has no plans to stop selling or supporting VxRail, noting that it remains a popular choice for customers in the VMware by Broadcom ecosystem.

“We believe customers are looking for greater hypervisor flexibility, so we’re making it easy for partners to transition their customers to other Dell offerings, but we will continue to support VxRail and its customers,” the statement said.

‘I’m Going To Miss It, But We Can’t Afford This’

At VirtuIT, the customers that are “willing to pay the Broadcom tax” are still using VxRail, but that number is shrinking rapidly, said CRO Josh Lee.

Many of the midsize companies that the Nanuet, N.Y.-based Dell Platinum partner works with—which once would have chosen VxRail—are picking PowerStore with Microsoft Hyper-V. He said VirtuIT’s overall storage business is up, but the company sees approximately 70 percent fewer VxRail purchases.

“The VxRail business is much smaller,” he said. “Our medium-business customers are trying to pick a hypervisor that is not Broadcom. So a lot of them are picking Hyper-V. We’re selling x86 servers, and PowerStore is the main storage unit that we’re selling with its all-flash goodness. Those are customers who, three years ago, we would have pitched VxRail to. Now we’re doing this.”

Lee said Dell is heavily incentivizing partners that help customers switch, both with front-end discounts and back-end rebates.

“There are some guys on my team that are going to have a great fourth quarter,” he said. “Everyone is looking for alternatives to Broadcom. … We’re leading with PowerStore in our conversations for primary storage. I don’t think I’ve had any customers complain about it. No one has gotten mad that we’ve sold them PowerStore. It just works. It’s super-fast, low latency. It’s an awesome box, and they keep making it better.”

What customers liked about VxRail was its ease of use. But Lee said when one of VirtuIT’s customers was told the price tag for VxRail renewal would now cost $50,000 per year for three years, the customer opted out. VirtuIT created a solution on a rival hypervisor for half that, Lee said.

“They’re going to buy four servers and a PowerStore, and the guy said, ‘I just wish I could keep this thing. … He was like, ‘I’m going to miss it, but we can’t afford this,’” Lee told CRN.

Lee said he sees vendors like Scale Computing, Proxmox and Microsoft “going to go up and to the right” for VirtuIT as customers transition away from VxRail.

C.R. Howdyshell, CEO of Dell Titanium Partner Advizex, Independence, Ohio, said he sees Dell’s move as more akin to a natural progression of technology from an older solution to newer, more flexible options. He said the competitive environment for storage is also demanding vendors move quicky to meet market needs, which puts pressure on legacy offerings.

“I wouldn’t say they’re sunsetting it, but I think it’s run its course. It’s gone through its life cycle,” he told CRN. “I think what’s happening is, with a lot of competition in storage, Dell has had to pivot quickly to competitive technologies as opposed to sticking with what was relevant and best in class in its time. … It’s been a key pillar for them, but as far as what they’re going to be betting on in the future, it’s all the Power series. They are driving incentives to do that. That’s where things are headed; they’re moving everything to ‘Power.’”

Todd Johnson, president of Avalon Technologies, a Dell Platinum partner based in Bloomfield Hills, Mich., said moving customers off VxRail puts them fully in charge of their data and applications. He said Dell also got the incentives right.

“They talked to partners, listened and put the right incentives in place to drive the transition,” he told CRN via email. “Customers are demanding flexibility, simplicity and a clear path forward. Dell’s Private Cloud approach—combined with automation, [Bring Your Own] cloud OS licensing and powerful orchestration—delivers that.”

Strength In Storage

This focus shift comes as Dell’s top-line storage revenue numbers have been choppy over the last six quarters, with three quarters of single-digit revenue growth, two with year-over-year revenue losses and one quarter that came in flat.

But Dell’s founder said the picture improves when you take VxRail out of it, as Dell-native storage products have seen “tremendous” growth “in the fat of the bat” during that same period.

“So, yes, you’re right when you look at aggregate top line,” Dell told CRN. “But if you take out VxRail, which is clearly not all Dell IP, you’ve seen tremendous growth right in the fat of the bat, if you will, with PowerStore and, again, double-digit growth. The first [digit] is not a ‘1.’ It’s gobbling up share and growing, and it’s enormous engagement for the partners.”

After Dell spun off VMware in 2021, the two companies struck a five-year deal that provided for the sale of VMware inside Dell products, including VxRail. At the time, Dell represented VMware’s “largest route to market,” generating $17.3 billion in sales for the virtualization giant as of November 2023, according to U.S. Securities and Exchange Commission filings. But even as Dell nixed the deal that hauled in that revenue in February 2024 in the wake of the Broadcom acquisition, it vowed to continue to sell VxRail.

“Broadcom and VMware solutions remain a part of Dell’s portfolio of products, including embedded solutions such as VxRail and Carbon Black,” Dell Technologies said in a statement at the time.

Most Significant Disruption In Decades

Word from Michael Dell that VxRail is “no longer a thing” comes just as the server and virtualization market enters a stretch of “significant disruption,” according to industry analysts at Gartner. The firm has carried out 5,000 interviews with 3,000 Broadcom customers over two years.

In its October report on infrastructure and operations, Gartner anticipates that by 2028 rising cost concerns will push 70 percent of VMware’s enterprise customers to move 50 percent of their virtual workloads.

“Heads of infrastructure and operations are being forced to question the vendor and technology options for current and future virtual workloads—and respond accordingly,” the analysts wrote.

The analysts said that while the majority of virtualized workloads will remain on existing platforms through 2027, migrations will accelerate through 2026. Gartner’s report stated that the “market will see an increased appetite for retirement of niche and complex, high-cost legacy applications and workloads.”

When it comes to selling AI factories, Dell lumps its infrastructure customers into three buckets: tier-two cloud service providers, enterprise deployments for large companies, and those that need stand-alone, sovereign AI systems.

Each of those buyers is now recognizing the critical relationship between AI inferencing and storage, which coincides with this push by Dell to place its own hypervisor-neutral IP at the center of customer discussions. Dell cited PowerScale and ObjectScale as central for inferencing unstructured data inside AI pipelines.

“Just like with cloud, you have hybrid cloud and multi-cloud; I think the same is going to be true with AI,” Dell said. “We do see growth in inference sort of taking over here, and the inference is likely to follow where the data is. So you go back to storage because storage is the fuel for inference. Attaching inference onto all that data storage that Dell has leading share in, this is like peanut butter and jelly. Everything goes together here.”