Customer-Driven And Accelerating

Tom Burns, Dell EMC's networking senior vice president, expects the market to be dominated by an open, software-defined model in the next three to five years. He said customers that continue to buy the traditional, proprietary stack from legacy vendors like Cisco are settling for "just more of the same."

Burns also said customers are driving the transformation of the networking market as more enterprise firms seek to emulate the way major webscale and hyper-scale firms operate and that trend makes its way down to firms of all types and sizes.

Dell EMC's strategy is to provide both traditional networking hardware along with its own OS-10 operating system while also partnering with the likes of software-defined networking start-ups Big Switch Networks and Cumulus Networks and using partners to push a converged and hyper-converged infrastructure portfolio to offer customers a broad range of options.

The effort, Burns says, is gaining traction as customers realize significant cost savings and Dell EMC works to maintain profitability for partners selling its networking solutions.

What follows is an edited excerpt of Burns' conversation with CRN.

What do solution providers need to do to get out in front of the market?

They really need to put the customer first. What is the customer trying to achieve as far as the applications they're deploying, services, the discussion between on-prem or off-prem or hybrid, and what are your options? Most of our solution providers are very familiar with the traditional option: Cisco. Maybe they've got a second source with Juniper or Arista, but isn't that just more of the same? In my view, it is. I think solution providers need to think a little bit ahead about what's happening in the market for hyper-converged and converged and who is the best provider of that today, and where do I get a lot of those solutions today as it relates to compute and storage? Let's leverage compute and storage and maybe we can pull in networking and look at Dell EMC's networking story. There are a lot of exciting opportunities we're working with the team on as it relates to the partner program including Dell EMC networking.

How long can open networking strategies live side-by-side in the market with traditional solutions?

I think it's going to take time. I don't think it's going to be an all-of-a-sudden wake-up call. I think it's going to be three- to five-year type of transformation to where the market adopts completely this open path versus traditional. That's an advantage we have. We have a traditional stack. We're releasing a full new networking operating software that customers can buy from us, but they have the option to go full open source, even with that software. It's something we'll see shift more toward open source and a DevOps environment over the next three to five years while living in parallel with the traditional point of view.

What does that mean for margins for Dell EMC and for its channel partners?

We expect a small change in our margin. With our new OS-10 base, which is the firmware that sits on our switches, that comes free to the customer, so there's a pretty good cost benefit to the disaggregated approach to the customer. We haven't adjusted our margin scheme for how we work with partners. The point is how do you build value across the stack, across server, storage and networking. How do they add services? I think our partners today would say we offer a very competitive margin in comparison. We're not keeping the cost difference in Dell so the margin comes to us, or making the partner pay for it. Ultimately it's about what the end customer sees as the benefit.

How is Dell EMC positioning itself as the networking market shifts from its traditional model to a more open, software-defined model?

We compare that to what has happened in the PC business with the move away from PCs being very expensive. [Dell Technologies Chairman and CEO] Michael [Dell] kind of revolutionized that with the use of third-party technology from a hardware perspective and Microsoft and Linux and so forth. It also happened with the server market moving to x86. Mainframe was a proprietary stack. Now we have x86 with scalability and performance for almost all applications that are being deployed in the enterprise today. We saw an opportunity that we believe is happening now in the networking area, and what we did is a little different. We really changed our strategy and said we need to drive this because we believe the democratization of this technology is good for the industry, good for our customers and we more than anyone can prove out the scalability and performance for it. We changed how we build our data center platforms both leaf and spine.

Does it matter to Dell EMC to build market share in traditional networking to compete with Cisco or HPE?

We believe it will build market share as the market adapts to this new paradigm shift. It's important that we increase market share. We believe that the market share we have in blade switching is substantial. We're No. 2 to HP, but we're ahead of Cisco. We believe the growth we've seen in 10G and 100G is above market growth. I'm trying not to measure my team, or Dell EMC Networking on the total $26 billion TAM of networking and here's our 2.2 percent. I'm trying to measure us on what is our adoption of converged type of networking, so products like blades, like FX2, like what you'll see coming in converged and hyper-converged from Dell EMC, and how are we doing in the products that are closest to server and storage as it relates to spine and leaf. I'm measuring us on, and I think Michael is measuring us on, are we helping our customers move from traditional to digital-ready to cloud-native applications by helping them have the data center of the future that can handle both traditional applications and also future-ready applications. We're focused very much on that.

How are you doing independently as a networking vendor?

We are doing well independently. We grew last year. We had 10 percent-plus growth in the channel last year. We feel very optimistic about our opportunity. But we're not ashamed that we're part of Dell EMC. We have the No. 2 [market] position in compute, and the No. 1 position in many aspects of storage, and we're probably the fastest-growing hyper-converged player in the market. We've focused a lot of our development toward convergence, and that's why we've done well in our blade products, we have over 16 percent market share in blades. We've done well in our top-of-rack products combined with our server and storage.

Does the open model save customers' money?

We're starting to get great customer feedback. We got a study on a deployment we had in a tier one service provider now deployed across the United States in several data centers. The study did an analysis of both the capex and the opex savings. It's a solution with ourselves, Big Switch, Dell EMC compute in a Red Hat open stack environment. The savings are approximately 47 percent lower TCO over a projected five-year period. We've got a couple of other customers that have talked about the benefits of our openness in that it provides flexibility, agility, but at the same time infrastructure protection, because we do have a full stack of traditional networking software and hardware that we could extend to the customer if they choose a traditional path. We have capability and flexibility that no one in the industry offers.

How does the open approach to networking fit into Dell EMC's push to get solution providers to sell across the entire portfolio?

Part of that is moving toward a converged and hyper-converged environment, and we believe that our open, disaggregated approach is very much in line with the strategy around hyper-converged. You'll see us offering and announcing more and more combined Dell EMC server-storage-networking products in the future that allow this disaggregated, open customer choice capability versus here's a proprietary stack, you can deploy it in these, and oh, by the way, you need to do additional training. You don't need additional training. In the tier one example I gave you, they're using open source to do management, orchestration, configuration. They don't need more training. We see a big change in traditional network administrators. Some people are now calling it 'NetOps,' which is really DevOps and the move to containers and those types of solutions where the agility and flexibility and bring-up time is much faster and easier.

How fast is that change from traditional solutions to software-defined and cloud-native solutions taking place among your customers?

It's been a slow base. Well, the base three years ago was zero. I've been extremely excited by the acceleration we've seen in the second half of this year. The number of customers and the number of partners that are having conversations with us about it has increased tenfold. We really see accelerated adoption. It's mostly large enterprise, web- and cloud-scale enterprise. It's mostly SaaS providers and so forth, but we think we'll start to see this carry down just as we saw it happen from mainframes to x86. As studies start to get published to show our benefit, people are going to read those. They're going to say, 'gee, we want to act like that.' If you think of Facebook and Microsoft and Google, more and more enterprises want to be like that as far as their data centers. Scalable, performing, low cost of operation, maximum efficiency. We do that really well.