Dell Enterprise President Haas: Shifting Industry Will Disrupt Cisco

Haas, Dell On The Offensive

Dell Chief Commercial Officer and President of Enterprise Solutions Marius Haas says the rapidly shifting technology landscape is putting the whammy on rival Cisco Systems' proprietary networking stack.

In an exclusive interview with CRN at Dell's Round Rock, Texas, headquarters, Haas said the market shift favors Dell's flexible and more agile standards-based building blocks over Cisco's rigid proprietary network architecture. In fact, he said, software-defined networking threatens the longtime Cisco high-margin, networking business model.

Haas also talked about Dell’s plan to hire several thousand new salespeople -- "hunters," as he calls them -- across the globe to drive share gains working hand in hand with solution providers. Below is an excerpt from the edited transcript.

Talk about Dell's hiring of former Cisco vice president and general manager of computing systems Paul Perez as CTO of the Dell Enterprise Solutions Group.

Part of the reason Paul [Perez] (pictured) came to Dell was that [he was] seeing Dell show up at customers Cisco never, ever thought we would show up at. There's a trend toward driving more commoditization, there's a trend toward more consistent, standards-based building blocks, there's a trend toward x86. All those things are true. We're embracing it. We're enabling a software-defined ecosystem, an open networking ecosystem, all these things that Cisco doesn't want because it disrupts their model of a three- to five-year cycle where [they] are going to generate a new product line and a new portfolio where a customer is going to have to upgrade, and that's been my historical business model, and I'm doing it at 60 to 80 points of margin.

Customers don't want to pay for that anymore, they don't want the lock-in and they don't [want] to pay for that. Partners are looking for who can absorb or be their partner in this transition, but how do they still make good money in doing that? That's where we've been focused, making sure the economics of working with Dell is something that is enticing to them.

Compare the Cisco enterprise philosophy to the Dell enterprise model.

[With Cisco], you require a whole new infrastructure upgrade to take advantage of the capabilities, and that's been a trend that they've always driven. How do I create full upgrade cycles for my proprietary stack or architecture? And customers are saying, 'I don't want to do that anymore. Why can't I have more nimble architecture like cloud and have cloud-like economics within my infrastructure and data center? How can I be more agile and be able to pick and choose technologies and also be able to go with a partner that is always going to give me the best value for that flexibility and agility that I want? Who's going to support it consistently?'

If they want consistent support around the world, I have to look at the partners that have that capability, and how can that consistency be across the whole stack, not just the network stack with some compute? They see Dell as the stable one, consistent with strategy, always focused on creating customer value, never focused on creating customer lock-in. All of that is resonating really well with customers.

Talk about the transition Cisco is making with its Unified Computing System.

They went from UCS, and now they're trying to move up the stack with ACI [Application Centric Infrastructure]. There's not a lot there except a lot of marketing vaporware. The theory had always been how do they stay ahead of the market by defining what supposedly is the next trend. Well, customers no longer want to pay for the premium that they had been charged by that competitor because a lot of this has become mainstream common knowledge. Our differentiation sits in practical innovation. We invest in time-to-value for customers now and into the future.

How much pressure are companies like Cisco, HP and EMC under, and how does that position Dell?

There's tremendous pressure. You see companies splitting up, you see companies selling off assets, you see activists coming in. I can't imagine that's very much fun. It creates a focus around those types of activities rather than a focus on how you create better value for customers. That's the luxury we have in the structure we have as a private company. We make investments around how we best serve our customers, how we create innovation that solves their business problems with the greatest and quickest time-to-value. We're not going to create bells and whistles [customers] don't need and don't want to pay for because we're protecting an old, legacy business model. We don't have that. The old Cisco model was, ’Let me give you more and more and more features. You might not need them, but it gives me a reason to keep charging the same price.’ Customers are at a point where they're looking at a new world; I've got to move to a more agile, more cost-effective, more standards-based architecture because that's the competitive landscape that's emerging.

Talk about the bid to grab share from Cisco in the enterprise market.

You could draw an analogy of who was the biggest networking leader in the industry a while back. Nortel was one of the biggest players in the space. Well, industry changes, technology changes, business models change. You're not going to be on top forever. The question is: Is Cisco going to be able to keep on adapting, or is the industry going to create a shift that will be disruptive to them? I'm betting that the shift will be coming.

What is the Dell enterprise value proposition?

This goes back to the notion of how do we show them that the aggregate of architecture movements are in favor of Dell. Going to a customer with a value proposition of ’I've got a great networking solution in and of itself’ isn't of huge value to a customer. They're moving up the stack and saying, ’Here is my business problem, and here [are] the applications and the workloads that I'm trying to optimize and, by the way, I'm trying to secure it and trying to give my internal and external customer base a better SLA at a lower cost.’ At what point in time did I say 'networking,' or 'storage' or 'compute' in that sentence? I didn't. The customer is looking at it from a different position. When I said we're going to do everything we can to really embrace our partner ecosystem, to really have that conversation around here, [it’s about] how we -- together with an all-Dell architecture, without creating lock-in -- deliver much greater value to customers, assuming that's what the customer is looking for.

What is the partner value proposition for Dell Enterprise?

The partner can go to the customer and say, ’I can provide the total solution, great flexibility, great agility, great price, great performance, tailored to solving business problems, driving business outcomes.’ How do we create these blueprints around different workloads, different solutions for different customer types so that the ability to consume the Dell IP or the Dell solutions inclusive of our partner ecosystem is much more simple? If I'm hiring these 2,000 people to generate demand, how do I make sure the demand that's generated are well-qualified leads and then hand it off to a partner quickly and go and close the deal quickly?

You're adding salespeople, you're adding enablement. How does that position you against Cisco and HP?

At a macro level, the technology trends are moving away from Cisco. At the macro level, I think HP is challenged to produce growth and is challenged to produce an earnings-per-share increase that they need to deliver to their shareholders, especially after they split. I think there's going to be another set of cost-reduction exercises that are going to happen over there for sure. Those two things create an opportunity for us as a private company. Guess what? We're not hamstrung by any of that. Technology trends are coming our way, we're going to invest because we have a plan to grow in excess of market everywhere we compete. Why not hire the people that can generate the demand for us? The number of calls we're getting from those people that want to come join our team is through the roof.

How are you going to move Cisco guys over to the Dell camp?

One: Is there market and customer demand? And the answer is yes, absolutely. Is there partner demand? Yes, absolutely. So now, it's the enablement component of it that needs to happen. Can you get enough of the networking ecosystem to play together to create a viable and strong alternative that generates enough momentum and enough scale to be able to be disruptive? That's clearly one of the opportunities we have in front of us.

What kind of feedback are you getting from partners regarding Dell's programs?

We've got to be a lot more aggressive with our channel program. We've got to be more aggressive with awareness, training. That's clearly the feedback we got from our partners. They love what's happening, they love the progress, but they'd love to get more around training, enablement, certification processes, some of the things Cisco's done well over the years. They've clearly stepped up the bar and the standards in many of these areas. We know what they are, so now it's our opportunity to go faster.

Talk about partner demand.

The fact that they can go to one partner for that end-to-end solution in a solution provider forum is a big, big, big differentiator. We've got the momentum, we're getting receptivity from the customers, and they can go to us whereas others are unclear in their path or direction. Stability, consistency, and we've been very, very clear in our engagement model and we're expanding those programs. All of that momentum is coming our way. In addition to that, you have a transition to technology trends that are coming our way. So you've got a strong partner that is moving at a pace greater than [the] market, meaning an opportunity for them to gain with that, and two, the technology trends are very much in line with where we're going, as well.

Talk about the converged and hyper-converged opportunity and how I play with Dell as a partner.

Trying to drive extreme agility and flexibility within an infrastructure so that I can instantly provision virtual app sets in a hyper-virtualized way for server, storage, networking all seamlessly so that I can deploy workloads as quickly as possible, as effectively and efficiently as possible. What was happening was that everyone's pretty comfortable with a compute or server virtualization ecosystem. We've been at it a long time. What we were finding was pretty significant degradations in performance on the storage side in, for example, a VMware-based architecture, about a 20 percent degradation in performance, a throttling of the ecosystem, and customers are saying, 'I've got to solve for that.'

When we started talking to customers and asking what are some of the technologies you've seen out there that you've found interesting, Nutanix was one that came to the forefront. So we went and had the conversation with Nutanix, and we felt as though [in] time-to-value for customers it made the most sense to partner.

What is the Nutanix value proposition for Dell VARs?

There is a good, strong symbiotic relationship here of a total solution that generates value. We have seen growth in the pipeline just with that partner, just with that example, at a huge rate just within the last 90 to 100 days. Now how do we close that pipeline quicker? That's an example of a partnership that's a good value-add in making the ecosystem [drive] more toward software-defined, more driven toward a hyper-convergence and more driven toward a virtualization of all parts of the infrastructure, not just the compute node. Where we see it as a good value-add for customers, we'll do that. Of course we've done it with certain workloads as well, with Oracle, with SAP, with Cloudera on big data, with Microsoft on cloud, with VMware on EVO: Rail. We're kind of becoming that de facto partner you want to go to because of our speed and agility. We can get these solutions in place, get these appliances in place but, more importantly, we make it easier to sell for our partners and make it easier to deploy and simplify for our customers.

How does the addition of the 2,000 new salespeople change the dynamic for the partner going to the enterprise?

It's about creating demand, finding opportunities. Part of the market is a declining market -- the client space, desktops and notebooks. When that happens, the opportunities aren't as present as they were a year ago during an XP migration. You've got to spend more time understanding the customer, getting closer to the customer so you can identify those opportunities to drive consolidation, which is the play you have to do if you want to drive share in a declining market. It takes a little more effort to find them, and it takes a little more effort to fight for them. I want to take those resources in the enterprise side where we know we have a value proposition that is not reaching enough of the audience today. How do I do that so that I create demand for my partner ecosystem while I'm also training them, while I'm also enabling them? How do we quickly together reduce that cycle time of finding the opportunity, vetting the opportunity and then closing the opportunity together? It's a value proposition for both us and the partners that is very symbiotic.

What are the dynamics in the program to make sure there's no channel conflict?

The No. 1 focus in the company is how do we drive growth? How do we drive a refuse-to-lose approach in the market? How do we find every opportunity there is? How do we then get the whole ecosystem together, the whole channel system together to help close those opportunities? The big conversation with partners is, ’Let's go do account planning at the territory level. I can match up my skill sets to your skill sets.’ That has been working better and better and better. It's not perfect yet, but it's getting much better as our salespeople better understand what the partner concerns are. The next conversation is, ’How are you, Dell, helping me create demand?’ --which is exactly what we're doing. How do we get into more fights, and how do we get more quickly aligned to go after those together?

Talk about the Dell channel program plan to get partners and Dell reps to work more closely together.

The programmatic elements are around making sure we have an extremely competitive program on the economic side, we have an extremely competitive program on the training side. Those things are rolling out. How do we then make sure we have a very efficient way to do order management, configuration and so forth? Our Dell Sales Application, which we are starting to pilot now, is a tool that takes six disparate tools and brings them into one. If I have a complaint from partners today, it's that the SLA from quote to order is still too long. So how can we make that a lot more frictionless?

What other tools are you investing in for partners?

We're also deploying what we call an Online Solutions Configuration so that they can take more complex solutions and do the ordering and the integrating and also integrate our Dell Financial Services into that. We're taking what today is a multiscreen approach and taking it to one and it's all going to be done where our partners have the exact same tools and capabilities as our inside people so they're all looking at the same data. The core data will be the same, consistent and it'll make us that much more efficient.

Where are some of the biggest issues for the channel dealing with Dell?

It was still too many times I had to call a Dell inside sales rep to place my order, to do the quote, to get special pricing approved -- take your pick of a couple things that you'd say, ’You know what? We should do a better job there.’ We've got it now down to all the specifics. We worked very closely with the big distributors, Ingram, Tech Data, Synnex, and they gave [us] a list of the top 10, 12 things you could really do for us to really make this a world-class experience. The nice part about being a private company [is] we [had] a quick conversation with the boss [and] he said, 'Yup, off we go,' and now we're going to go execute on it. If this were a public company, it probably would've taken many, many cycles to get that approval done.

How big an impact does that make, particularly on the channel side?

Just on those top 12 things distribution wanted from us, just in IT alone, it's about a $10 million investment over the next six to nine months. But we said it's worth doing because if you make that whole system a frictionless, real-time process, the return is very, very, very quick.

Where do you see the enterprise market going from a macro economic view?

If you look at the U.S. GDP, I think calendar third quarter was 5.6 percent growth and calendar fourth quarter was 2.4, calendar first quarter this year was 0.2. I think everyone was a little surprised by that -- an overall pause, an overall slowdown. Some of it was due to the strong dollar, which created situations with foreign exchange in Europe. Part of it was the digestion of the oil and gas industry understanding the new norm in oil prices and what it means for investment levels. All of us are trying to understand in greater granularity, but I think all of us understand it's pretty consistent. Everyone sees it. If you talk to economists, they still say they believe in aggregate the year in the U.S. is still going to be north of 2.5 percent GDP growth, somewhere between 2.5 [percent] and 3 percent, and they think it'll be more back-end-loaded.

How has Dell been affected by the overall economy?

We've been extremely healthy on the enterprise side. We saw a little bit of a slowdown on the PC side. Some of that is a year-over-year compare on XP, it's a harder compare. We saw other markets that performed extremely well for us. India has been on a tear. China is doing very well for us. Latin America, even though it's tough market conditions, there’s significant share gains. For us, Mexico is doing really well. Western Europe is generally slow. I'm sure there's quite a bit of inventory there that's piled up by our competitors. Customers are kind of wondering, ’Well what does the currency do and what kind of re-pricing strategy will different players have?’ It's an opportunity for customers to see where they can get the best value. So, there was a pause in the first quarter in North America. Pipelines are healthy, and I think we're cautiously optimistic about where this year will deliver.

Are you guys seeing growth in the channel?

Our channel is doing phenomenally well. We're seeing double-digit growth in the channel this quarter. The partner ecosystem is really growing nicely.

How much of that is driven by new guys coming on board with you?

We're very careful to make sure we don't run into the problem partners don't want to run into, which is an oversaturation of Dell partners. They want us to make sure we've got the right partners that are willing to invest in us and we're willing to invest in them so when we come to an opportunity, we have the ability to get deal registrations high and not have many others competing for that business, which is a problem for Cisco, which is a problem with HP.

So you think you're already right-sized in terms of number of partners?

We're still adding partners to the mix, but I think we're real careful to make sure that it's the right partner with the right skill set. We'd love to build a deep relationship with them, not just go broad.

How much of the growth in the channel is a result of the program to pay Dell reps more for working with channel partners in enterprise accounts?

I wish I had a specific data point, but the growth of their business with us, net new growth for them, has been very healthy. I've had partners say to me at our Latin America conference, 'I was all-HP as of a year ago. I moved it all to Dell. I didn't know where they were going; they were inconsistent with the message I got. I want someone I can lean on with a consistent approach.' We have others that were selling IBM servers, or IBM storage, that are now saying, ’Wait a minute, I'm not sure I want to move over to Lenovo, I might as well go with Dell.’ It's wide open. Where Dell might have been the second, third or fourth choice before, now we're the first choice and it's a good position to be in.

Are there verticals where you'd like to be doing better, or areas that you'd like to see the channel get you into that they haven't?

We have it account by account, territory by territory, line of business by line of business. We know exactly where we're bringing them. It's a good balance between inside and outside. We know exactly the accounts where we're not expanding into more lines of business, we know exactly the accounts that have been inactive over the last 12 months and, when we ask them what's happening, they say, ’Well, no one has called us. You haven't called us, a partner hasn't called on us.’ Us not showing up cannot be the reason why we don't grow.

Do you put a big number in front of partners and they say we need this many additional salespeople to make this work?

We go country by country, territory by territory, metropolitan area by metropolitan area, line of business by line of business and dissect it as deep as we possibly can. By type of customer, by size of customer, we went through and said how many decision-makers are there in that type of customer? What do we believe the relationship ought to be with those decision-makers? How many on-site visits are expected? How many discussions do we need to have? We have all of that in excruciating detail. The glaring conclusion was that we're so under-covered based on the opportunity that was there, even just within our retention account space.

How many new accounts did Dell add last year?

We added 72,000 accounts last year, and we [attritioned] many, not because they went to a competitor, but because we didn't call on them. It's always easier to grow share within an account you already have than it is to get new acquisition revenue all the time for everything. We want to do both. We want to acquire new accounts aggressively and we want to go have the optimal coverage model talking to all the key decision-makers in our retention and development accounts. Just to have that conversation and find those opportunities, we need a lot more people. At the same time, how do you get those opportunities efficiently translated into the partners? How do you create the best pipeline possible with the best-qualified leads and the close?

What kind of sales reps are best suited to go out and win that new business?

It's a mix of inside and outside. It's more of a hunter mentality, creating opportunities. If you're going into the acquisition side, net new accounts, clearly the definition is a hunter definition. It'll be slightly different skill sets and interaction in an account we already have. It's more how do you get the right relationships, how do you get to the right decision-makers, how do you get into the fights earlier? We found we were way too transactional in nature and we were responding to RFPs instead of helping to influence RFPs. You have a much greater opportunity to have that partnering dialogue when you're early on in the conversation, and that's a big part of it.

What percentage of time were you coming in when the RFP was already set?

It varies by line of business, and we're getting better. Our close rate is very good. Now we just need to get into more fights. It's a transition that doesn't happen overnight. You reskill the team to be able to have a much more partnering conversation, to have a business-outcome-driven conversation. It's much more valuable to the CIO, CXO than a procurement relationship. You have to have the more consultative selling motion, which is much more closely tied to the region I'm in, the segment I’m in, what my competitors are doing, what differentiation do I need to create, what business priorities do I have and how is IT going to help me?