Michael Dell On The Contrast Between Dell And HP, Dell's Standing As A Cloud Player And Why Big Data Is A Potential $1 Trillion Industry

Michael Dell Under The Spotlight

In two separate Q&A sessions at this week's Dell World conference in Austin, Chairman and CEO Michael Dell was peppered with questions from solution providers and journalists about his company's impending acquisition of EMC, the contrasting path rival Hewlett-Packard is taking to tackle the enterprise market and EMC's brand-new plan to create a new cloud services powerhouse built on its Virtustream acquisition.

He also spoke about the channel opportunity around hybrid cloud solutions, his take on the future of EMC's RSA security business and his views on Dell's relationships with a variety of technology and channel partners, including Nutanix, CDW and distributors.

Edited excerpts of the two sessions follow.

What do you make of the fact that you're getting ready to digest EMC at the same point HP is dividing itself?

We have a different viewpoint as to how our company should evolve than HP does. We think scale is important. When you look at this industry, the companies that have succeeded in the volume data center space have been attached to large PC businesses, client businesses. The volumes really matter. At the very moment there is an explosion in devices, PCs, smartphones, all the embedded devices, the Internet of Things, the connections between devices and the data center is very important. We also find that customers actually don't want more suppliers, they want fewer suppliers. One of the resounding things we heard in the executive summit over the last day or so was that CIOs are telling us, "this is great, you're making our jobs a whole lot easier." There's a lot of work to do, and Rory Read has been appointed our Chief Integration Officer; at EMC, a gentleman named Howard Elias [president and COO, Global Enterprise Services] is his counterpart. They're planning to make sure we do this in a very thoughtful, successful way.

How will the new Dell stack up against HP?

They're doing one thing, we're doing another thing. If you look at where IT is going … in this step we've taken, we find ourselves with an incredibly strong hand in the future domains of IT. We'll compete vigorously as we always have. Our client business has had 11 quarters in a row of gaining share. We're gaining share in servers, virtualization, "containerization." We're well-positioned. We're going to support all the major cloud stacks: Microsoft, VMware, OpenStack. We're going to continue to be open and work with a broad ecosystem as we always have.

Do you see the Dell-EMC deal as a response to slower growth in the enterprise IT world, where you become a bigger fish in a shrinking pond, or do you see it as a response to a competitive threat from public cloud and Amazon?

No, I don't see it as either one of those. This is a complicated business that doesn't lend itself to sound bites, but what we see are a number of things going on. First of all, you have all the CIOs out there who are trying to fund the digital transformation by reducing cost in the current infrastructure. They need to be very efficient. There's also this move to virtualization, hyper-converged systems where the silos that had been built up in second platform of IT are starting to go away. It's very important to be able to lead in that next wave of IT. The combination of Dell and EMC gives us a great leadership position not only in existing technologies but in the new technologies. It's about helping our customers address the challenges they have, enabling these new capabilities. Companies are going to be measured by how able are they to take all this information and turn it into outcomes and success. The companies that are able to do that will be successful, the other ones will go out of business.

Virtustream assets are going to be spun out to be part of VMware. How much does Dell look at itself as a supplier to hyperscale players and how much should you own?

If you step back and look at it from a workloads standpoint, you have 160 million workloads in the enterprise. About 30 million of them are non-virtualized. Then you have maybe 10 million to 15 million that are in the public cloud. The rest are on-premise in one form or another. Virtustream as an offering for mission critical applications like SAP, like what VMware has done with VCloud Air, VCloud Network, we understand some of the plans that they have and we're not going to speak to that. We're separate companies for now, but we're comfortable with the steps that are being taken.

Did you see [HP CEO] Meg Whitman's comments about your EMC purchase?

I did, yes.

What's your reaction?

I think HP is a great VMware partner, and I don't have any other comment. I think she got some of the facts wrong, but we'll let the facts speak for themselves.

Not too long ago, EMC had a stranglehold on the channel and was reducing the number of distributors it worked with. Will Dell expand EMC products to all distributors you're currently working with?

We have a channel-friendly strategy, a distribution-friendly strategy. We don't intend to change that. EMC is a separate company right now, so we don't control EMC's strategy until the acquisition is completed. By the way, one thing I should clarify in case anyone is wondering: VMware will be an independent company, EMC will not be an independent company. Both EMC and Dell will be a private company. I don't know enough about the decisions they've made to provide any comment, and until the acquisition's done, it's a separate company. We'll be getting into that as we plan the integration strategy. Our strategy of being channel- and distributor-friendly is not changing.

Amazon announced 80 percent year-over-year growth. Microsoft Azure is growing. The market is huge for Infrastructure-as-a-Service. Dell with EMC, with VMware, are you now being positioned to be the third, and maybe the best player cloud service provider?

Thank you for your suggestion. Things have been kind of boring lately, so I need some new projects to take on. When I hear everything is going to public cloud, it sounds like 'the PC is dead' from a couple of years ago. It's a layperson's interpretation of trying to understand the industry in one sentence. I don’t think that's what's happening. You're going to have Software-as-a-Service, hybrid cloud, public cloud, private cloud. I think the answer is it's going to be hybrid. Software is bringing the management of data center up to the application, quality of service and data level and out of the silos of compute, storage, server and the quagmire that resulted from the original build-up of the original microprocessor data centers. When I look at the march of virtualization and hyper-converged, what I see is the gap closing. I see plenty of opportunities for you and us to go attack that hybrid cloud opportunity.

How well-positioned are you to attack the hybrid market?

I think VMware is incredibly well-positioned for this. I think the combination of Dell and EMC are very well positioned for it. I think today, VCE very well positioned for that. We have no intention to screw up the VCE business, in case you were wondering about that. The answer is there will be many, many clouds and EMC and VMware have some great assets that we'll look to figure out how we can grow even more. The VCloud Air network, VCloud Air itself, Virtustream for mission critical SAP-type workloads, there's some great capabilities there, and we'll work to address that. While we do all that, we're going to remain as open as we've always been. Dell has been very early with Microsoft in creating these appliances for on-prem Azure-type capabilities, as well as working with Red Hat, OpenStack. There isn't just one answer. We do sell a lot of equipment to a lot of cloud providers and SaaS providers. We're participating form many perspectives.

What keeps you personally engaged, hungry, driven?

This is the most fun you could ever have, what we're doing right now. I've always been excited and inspired by seeing what people do with tech out there in the world. I see incredible progress over the last 30 years. That gets me very excited when I think about what's going to happen in the next 20 years or 30 years, to have a front row seat to that, to see how it's changing the whole world. IT used to be just about how to you make businesses more efficient. Now you've got this digital transformation under way where services companies, product companies, are becoming digital companies. The role of IT is becoming incredibly important. It's the CEO's agenda, the business line management agenda, and how it changes the world in outcomes for students, patients, for productivity, for growth in the world. We're playing offense, we're having a great time, and if somebody told me I couldn't do this, I'd be very depressed.

What's your vision for RSA and SecureWorks?

These are both great businesses. RSA is more of a product business. SecureWorks more of a services business. You forgot to mention SonicWALL, Quest, our Identity and Access Management portfolio, our Dell Data Protection suite as well. The combined company has some awesome security capabilities, and don't forget about AirWatch, the leading mobile device management platform, and fastest growing. The security challenge is not getting easier. When I talked about tomorrow's IT, I mentioned security because when we're out there speaking with customers, it's a super high priority. Smart cars, smart homes, smart anything, each node is a new vulnerability. We've seen up close how unbelievably clever and resourced some of these hackers are. We're seeing 120 billion network events every day. We're able to understand that, look for malicious activity and put countermeasures in place to protect our customers. I think security is super important. It's a fantastic area for partners to focus on because it requires a lot of help from partners. We're doubling our capability there as we complete this transaction.

What is your vision for the big data business?

I think it's at least a $1 trillion opportunity for the IT industry. The IT industry today is about $3 trillion. I think the next $1 trillion comes right from all of this big data, the data economy, the API economy, machine to machine communication, all those areas will create enormous opportunities. There will not be just successes. There will be experiments that don't work, but that is perhaps the most exciting area. IT organizations, CEOs have this challenge. They have to reduce cost from the existing infrastructure in order to fund digital transformation. If they don't, their companies are going to be out of business in a relatively short period of time. You have all these new companies popping up that have new business models that are leaps ahead of all the existing ones.

What's your view of Dell's expanded partnership with CDW? How will you be working with them?

We've actually had a partnership with CDW for quite some time [on technologies Dell has acquired, including SonicWall, Wyse and Quest], and it's been relatively significant. More than $100 million. We've been on a very clear journey to grow our channel program. So, I don't think this should be a big surprise. Consider where we are after the close of this transaction, It's hard to do IT without the things we have. So we're very excited about our position. I can tell you the CDW announcement we made last week was completely disconnected from the other big announcement. It just happened to occur on the same day. There was no connection between the two.

What changes can we expect with the relationship with Nutanix and Dell?

We intend to continue to support and enhance all of the existing relationships that we have, including Nutanix. We are involved in this sector from many different perspectives. We have a great relationship with Nutanix, with Microsoft, with VMware, with Red Hat. There are a lot of companies in this industry that use Dell OEM platforms, like Pure Storage, SimpliVity, Solidfire, etc., etc. So we have lots of capabilities, and we're open to working with lots of partners, and certainly Nutanix is a good one we want to continue to work with.

How do you deal with ever-growing competition in China? What are the big players in cloud going to bring to the table? What is your ambition for the PC market there?

I was just in China. All of us are in China on a regular basis. China has become our second largest market after U.S. We've made significant investments in China, creating products that are unique to the Chinese market. In the last quarterly period, our business in China grew 10 percent on a year-over-year basis. As we understand it, that's a quite favorable outcome compared to the overall industry. Our business there, whether it's PCs, or certainly in the data center working with a lot cloud providers over there to help them build out their clouds. I think the data center business in China in particular has been quite a healthy business. We see markets in China and India, other key markets in Southern Asia, enormous growth opportunities that we need to invest in.