CRN Exclusive: Dell Execs On How Enterprise Solutions Group Will Beat Cisco, HP, IBM And EMC

Taking Aim

Dell is poised to win big in enterprise solutions against Cisco, HP, IBM and EMC, top-level executives at the company said. In the face of industry turmoil, Brian Humphries (pictured left), Dell president, Worldwide Sales & Strategy, Enterprise Solutions Group, and Matt Baker, executive director of enterprise strategy, said in an exclusive interview with CRN that Dell is standing out as a stable, private, "future-ready" alternative. That momentum is underscored as the company gains market share, makes key executive additions like Paul Perez and Rory Read, and is converting hundreds of partners over from some of its top competitors, the executives said.

Take a look at what they had to say about the changes Dell has been making, and where the biggest opportunity for partners is.

How is Dell's Enterprise Solutions Group doing?

Humphries: It's a nice time to be at Dell. It's an exciting time for the industry, but in a strange way at Dell we feel like we're in stealth because we're private, so we're doing a lot for our customers that we don't have to disclose to our competition. It's a nice position to be in to be able to actually focus on your customers and not have to disclose quarterly. A lot of the trends are moving to a compute-centric world ...That's very much aligned to Dell's strategy over the last 30 years: open industry standards, scalable, modular. We've certainly benefited from that and driven the IT democratization across PCs and into servers, and we're continuing to drive that dynamic into the enterprise and the data center business -- things like storage and networking too.

How does that compare to the competition?

Baker: I also think that, if you step back for a second and take a look at the arc that the industry has been on, we entered into our own transformation and then ultimate transformation with going private some time ago. Now you see many of the other industry folks entering in these phases of some degree of uncertainty: HP splitting, EMC in the middle of a very complicated market transition that's going on, Cisco in the middle of it.

Humphries: IBM exiting hardware.

Baker: Exactly. We moved early, and I think that early movement to position ourselves properly in the market as it is today to accelerate forward is also accelerating our business.

What sort of changes in market share have you seen?

Humphries: If I take servers, the biggest portion of our business in the enterprise business with about 70 percent of our mix, we've closed the gap to HP. Our aspiration is to be the No. 1 server provider in the world as part of this future-ready IT vision and compute-centric world. We've closed the gap by 10 points in the last five years. Every year, consistently two points of the gap is closing, and at this rate we'll surpass HP in the coming years.

How do you look at the competitive storage landscape for enterprise solutions?

Humphries: I think you have to start with the technology trends that are happening. We talked earlier towards what we see as a shift towards a more compute-centric environment in the future ... [We're] closing the gap to HP's No. 1 server position by 10 points over the last five years and undoubtedly we'll be No. 1 in the coming years ... even as people start thinking about the competitive dynamics and the segmentation of the market, I think all of that is going to change in the coming years because the technology evolution that is happening, convergence and internal storage and things like this. That's playing to our strength because we're very strong in servers, and we actually have the momentum versus the leading player in servers. Then it's playing against the dynamics of more of the pure-play or traditional players in external storage; [EMC is] one of the big names in this locality.

What is the challenge these other companies face when jumping into new technologies?

Humphries: It's hard as a CFO of a public company to accept that you need to fast-track to tomorrow's world if your gross margins are going to plummet. That's the bane of the existence of the EMCs and the Ciscos of the world. By the way, history is full of examples like this. Sun Microsystems is a good example of a company that had a very strong business built around proprietary Solaris Unix and, and it was clearly a matter of four or five years later, after its heyday, to have massive turmoil.

With all that technology turmoil, what's the effect on Dell partners?

Humphries: First of all, I think all over the world there's lots of disruption happening. They're all trying to come to terms with this. When you've got a vendor like IBM exiting servers, rumored to be potentially exiting other hardware categories, people are trying to come to terms with what that means. They're trying to come to terms with what the HP split means for them as well. They're looking at the competitive dynamics and also who to place some bets on. I think they like the fact that we're very stable and more committed to the channel these days than ever. It's almost a safe pair of hands for them ... The environment from a Dell point of view remains solid. There's lots of opportunities in the market for companies like us to take advantage of, and I think channel partners see that as an opportunity to partner with us and see some top-line growth.

What about the competitive landscape for networking?

Humphries: You can see what's happening in server storage, but even in networking where we have effectively embraced open networking and software-defined networking ... We're just seeing the implications of that technology is broad when you start thinking about the competitive dynamics. IBM is exiting categories of the market. EMC, to a certain extent, is, in my opinion, debating how to go forward in this future world. You're seeing on NetApp's stock price the implications of that. Certainly, HP, my sense having been there for a long time, splitting up structurally is more of a shareholder-value creation attempt as opposed to anything focused on the customer. It's hard to believe that people are not going to get distracted from serving their customers as they go through a massive disentanglement. They say it was to be nimble, but you're still going to be two $50 billion companies.

How does that benefit Dell?

Baker: We said a few years ago that we believe the market is coming towards us ... Truly, I think you're starting to see the proof of what we were saying that the market was coming to us actually come to bear. Again, that puts pressure on the legacy, three-legged server, storage and networking approach and, therefore, the pure players are under a lot of pressure.

Humphries: We don't have proprietary at Dell. It's always been around industry standards. The notion of these companies, even the HPs of the world, trying to protect proprietary servers, what they call business-critical servers, they all have a sort of vested interest in protecting the past. Our point is, no, we want to fast-forward to the future, and the future is playing to our strengths around x86 open, scalable, modular infrastructures. We're confident.

How do these technology shifts benefit Dell partners?

Humphries: First of all, everything we do these days is completely open to the channel and the direct sales force. We think of the channel as an extension of the Dell sales force more than ever before. Not just do they complement our sales skills in terms of market coverage, but, frankly, the skill set in our channel partner community is very, very strong so they also buttress our selling capability and our solution-selling capability ... Once you have something unique in the market that is ultimately still built around x86 architectures, it becomes very appealing, naturally, to the channel partner. They also see the writing on the wall for more proprietary and they know the future is going somewhere else, and having unique offerings in that space is really compelling.

How is Dell's approach to enterprise solutions different than it was five years ago?

Humphries: That's the consistent thing about Dell: open standards, module technology approach that Dell has always embraced. The legacy of Dell, as you know, is PCs, but it's a different company than it was 20 years ago, 30 years ago, but those DNA or those characteristics continue through. Dell spent the best part of $20 billion on mergers and acquisitions in the last eight to 10 years, so the portfolio of software, services, enterprise and PCs is more a reflection of the new Dell than yesterday. The core approach to the customer is absolute commitment on the customer focus, starting on the outside and working back in.

What about Dell's approach to the channel in enterprise solutions? How is that different?

Humphries: We are very much embracing the channel. The channel portion of our business now, in any given region, can be as much as 30 to 40 percent of the revenue mix and it's growing at multiples of the market. That's just the start because I think we're still very much at early innings with the channel in terms of doubling down with them and embracing them, not just resellers but distribution and things like systems integrators ... The upside opportunity that gives us is tremendous because I think that was a largely untapped opportunity for Dell ...That, for me, is all this tailwind that's still coming. I still think as much as we're proud of the momentum that we have, there's still a lot more to come. If we can leverage those things, I think we've got a bright future.

Who do you view as your competition, then, in this space?

Humphries: We're confident in our ability at this stage, absolutely. I think you've got a company with a lot of confidence -- it's hitting its stride, private. You don't find people at Dell regretting the fact that we're private. If anything, I think we love the fact that we can be entrepreneurial and aggressive again. We're confident about our position. The data points are there in the industry -- we're gaining share typically across the business. I think the PC business had eight quarters in a row of year-over-year share gains. Then, there's some great assets in fairness to guys acquired over the years -- I think things like SecureWorks, things like Boomi, that are truly wonderful assets to have in Dell. That provides us with a different level of intellectual property.

Are you planning more acquisitions to augment those capabilities?

Humphries: I think as a private company, there will be maybe some tuck in acquisitions. I'm not expecting any material acquisitions coming ... I think it's more of the same for us. In an industry-standard architecture world, we're comfortable in our position and certainly some tuck in acquisitions are always possible, but that's not the area of focus right now. We want to execute the potential that we have.

Baker: We spent the last number of years acquiring assets, and we're really hitting our stride in terms of integrating those assets. Dell, also, has been partner-centric and all partners, so we have a great set of technology partners we're leveraging and we're able to put together really compelling offers, leveraging all of the capabilities we've acquired and that our partners bring to the table.

How does the addition of Paul Perez (pictured) add to that shift you're talking about?

Humphries: There's a lot of new faces in Dell. I think that's indicative, as well, of a company that's more appealing than ever before. Paul joined us from Cisco. It's a great opportunity for us to attract talent. We also added Rory Read, the ex-CEO of AMD and senior executive at Lenovo in the past. There's just more in our portfolio that's expansive that's got more intellectual property and innovation. I think a lot of people love the fact that we're private ...There's a commitment more than ever towards targeted innovation because we don't have the shackles of Wall Street, so we're able to make much more targeted, long-term bets. Paul Perez is that kind of guy. He's great. He's a great thing for Dell, a really, really big hire.

Why do you think people like Paul Perez and Rory Read (pictured) are coming to Dell?

Humphries: Being private is important. I had dinner with Paul a few days ago and talked at length about the fact that it's so appealing to be private. People like him are more progressive, forward-looking, very much part of the next generation. As we said, some of the trends around industry-standard architectures, scaling right through into the data center, more of a compute-centric, future-ready IT world, that's very much what Paul envisions as well. He certainly has bought into that vision.

Baker: I think that people like Paul see the arc of the technology writing on the wall. We've been an early innovator and have a deep understanding of what that new style, or new IT ... I think that's very attractive to Paul, as somebody who has seen this arc of technology development coming. We don't have a 30-point-margin Symmetrix business like EMC has, which is the base of their business model. We're able to move faster and be more progressive about what we embrace.

What effect do the executive additions have on Dell partners and customers?

Humphries: When someone like Paul joins Dell, not only is it good for us in terms of having another technology visionary joining the company, but the confidence it gives the employee base that industry leaders like Paul are joining Dell is huge. As I call it, Dell is getting its swagger back. This is a rebirth of Dell as a private company, entrepreneurial focus, consistent approach to start with the customer and be absolutely relentless in terms of customer focus.

Baker: As a 10-year employee of Dell, I can tell you that we weren't always viewed by the presses as the innovative, fast-moving company. I think that we've turned that around quite a bit. People absolutely take us seriously, and I think people like Rory and Paul and others joining is evidence of that. Dell's a progressive place people want to come to work because they see us having a greater impact on the world of IT and the world at large.

How do you keep that momentum going?

Humphries: First of all, I think success breeds success. A winning team will attract winning players, as well. We've had a very strong second half of the year. Also, when you don't have to deal with Wall Street on a quarter-by-quarter basis, we're in the middle of pretty significant investments in the company at this time, and those investments take the form of channel investments to research and development to actually sales coverage, as in hiring more sales makers than ever before. The more momentum you get, the better financial results. As a private company, we don’t have to necessarily fit in the perimeters of short-term targets, so we're able to make more of a long-term commitment to sustained success.

What are you doing for recruitment? Are you seeing a lot of success recruiting from competitors?

Humphries: It's easier than ever before. People like Paul Perez joining the company, it's a great vote of confidence, when people see leaders like him putting their badge on the company. It's a good time.

Which vendors are you seeing the most conversion from?

Humphries: It depends by region. I'm not sure there's any one vendor. In the data center, there's a lot more traditional enterprise players winning against ... You think of events like IBM selling its server business. We have acquired hundreds of channel partners that, frankly, even in the past were not Dell channel partners. But, with IBM exiting the category, by definition they're going to look to two vendors: HP has already been part of this ecosystem already, so maybe it's a big opportunity for Dell. We now have hundreds more channel partners in that server space if you just take a point product and hundreds of millions of revenue in what we call a Lenovo attack or IBM attack program that was launched when we started hearing rumors of IBM going to exit that category. There's just lots of tactical work streams up there in our channel business.

What do you see as the big challenge for partners over the next year?

Humphries: I think making a bet on some partners, not just for today's world but for tomorrow's world, and who's going to have the value to play that they can be part of. In a world of competitive dynamics, we are changing pretty dramatically and that's very important to them.

Baker: I also think that we're all in this up-level phase. I just spoke last week at a CIO event, and the theme was we need to crack the nut on getting closer to the business and being a business value-add, not a cost center. They have to move up and, with them, the channel partners need to be able to get closer to the business and the channel partners, therefore, need to add value up higher, and they need to find a [vendor] partner that can help add value up higher.

How do you, as Dell, enable partners to face that challenge?

Baker: I think enabling partners is, one, providing them with better recipes that are off the shelf, ready to go for certain workload areas, and they're the ones who bridge the gap between business process and application. Then, two is the training of this is where the industry is going ... a gap would form if we didn't move. We're going to come up and you're going to have a better platform to stand on so you can extend your value up.

Humphries: Even when you start to think about channel rebates, you're trying to orient more of the rebate structure toward incentivizing people to acquire new customers, help sell workloads. Those are very tactical things, but in the same breath it rewards channel partners who are most intimate with us.

What can partners expect over the next year from Dell Enterprise Solutions?

Humphries: First of all, stability. That's a tremendous asset in a time of competitive disruption, the fact that customers and channel partners can look at us and know that they can count on us, and we can look them in the eye and say that you can trust us. We're absolutely confident in our strategy and, therefore, we're confident that we can execute to that strategy because we're sure it's the right strategy ... We have great assets. We have fully embraced multiple go-to-market routes, and I think stability is going to be one of our key elements going forward, taking advantage of the technology trends that the market is embracing because nobody is going to embrace it faster than us. We don't have any legacy to protect, so we're full speed ahead.