Michael Dell On Leveraging Dell's Scale To Grab Share In 2017, The VMware AWS Deal, The Cisco Partnership And The 'Golden Age' Of Information Technology

Michael Dell Recaps 2016, Looks Ahead To 2017

Dell Technologies Chairman and CEO Michael Dell spoke with CRN about his outlook for 2017 and the company's plan to drive share gains in a consolidating market, Dell's supply chain advantages, the VMware- Amazon Web Services partnership, the Cisco partnership and what he called the new "golden age" of information technology.

Dell's comments come just three months after the company completed the biggest acquisition in the history of IT – taking control of storage market leader EMC in a $58 billion blockbuster deal. The acquisition creates the largest privately held IT company in the world – a $74 billion technology behemoth with a product line that spans PCs to a complete software defined data center portfolio and multiple cloud services offerings.

Dell Technologies, which recently posted third quarter sales of $16.8 billion, a 28 percent increase from the year ago period, is set to unveil its new unified Dell EMC channel program in January.

How aggressively are you going to use scale and the financial structure to gain share in 2017?

We are absolutely going to use our scale. Who wants to be with number three or number seven or number eight when you can be with number one?

What you are doing with supply chain to drive share gains?

There are several aspects to this. One is we have the scale which is well beyond our competitors. I think we have an advantage with our financial structure being a privately controlled company. We also have a unique element in consistency. If you look at Jeff Clarke (Dell Vice Chairman Operations and President Client Solutions) and myself we have been doing this for over 30 years. So these suppliers that are very capital intensive, that dig big holes in the ground and expect to get a return in 5-10 years, they value that consistency of the relationship and the long term nature of our thinking.

How that could that benefit Dell EMC and its partners?

So when you have supply shortages, for example, I think we are very well positioned for those kind of environments because we prepared. We took the time. We spent the resources and energy years ago to ensure we would have the supply. We are not approaching this from a transactional standpoint either as individuals or our relationships with these capital intensive suppliers. I think all of that gives us an advantage. We know that combining EMC with Dell we were able to see some significant improvements in our material cost structure which again makes us more competitive. It allows us to deliver more value to customers and partners. But that is not very surprising.

You're now three months into the EMC acquisition – how do you feel about the progress you have made?

I'm feeling great. I think this is week 15. We've got lots of great momentum with our partners and customers. We've been out a lot communicating and gathering feedback, whether it's the Canalys Forum I was at in Europe or that my colleagues have been at around the world. Partner Advisory Boards, councils. We've got off to a fast start here. Everybody sees the power of the combination, bringing together servers, storage, VMware is doing extremely well. As we create more of these products to bring together the combined innovations of the company, the reaction from partners and customers is off-the-charts positive, and we're just getting started.

As you look out in the future, who would you peg as your weakest competitor?

I think about this in where are we likely to gain share from – so I think it moves around a little bit from period to period, from region to region, from product to product. I am not sure there is one that I would particularly mention. There are lots of competitors. And by the way in many cases these companies are also our partners because we have an open ecosystem at VMware, an open ecosystem at SecureWorks, an open ecosystem at Pivotal, and so it is a little more complicated than it was before.

It's not hard to figure out, just look at where the share is and the consolidation opportunity.

So where would you really like to take some share more than anywhere else?

We've got some big engines of the business – storage, servers, client – those are big engines where I think there is going to be consolidation. There already is consolidation going on and then we have some of these new areas that are very important to us as well. Our teams will know exactly where to focus. That is not information we are going to share publicly.

Talk about the VMware-Amazon Web Services deal and how important that is to the Dell EMC and VMware story?

Cloud is not a place. It is a way of doing IT. Our customers wants to be able to extend their environments out into this multi-cloud world. VMware has partnerships with AWS, with IBM, with Rackspace, Fujitsu and thousands of other partners. And all of those partners are creating a way for a customer's workloads to work in an off premise fashion. So customers will have a variety of ways to manage their workloads. Some will be off premise, public cloud, managed service, software as a service – that is a big part of off premise. And on premise will continue and get more efficient- as you apply a lot of the same software defined and automated transformative technologies in on premise it becomes extremely attractive.

You might have seen that there are more people starting to recognize that it doesn't go all one way or the other. There was an interesting talk by Peter Levine of (venture capital firm) Andreessen Horowitz. With this enormous buildout of infrastructure there are going to be lots of ways that data is managed and stored and protected. At the core of it we have I believe the best capabilities and assets in the world. And that is why partners are signed up with us.

Where are the biggest opportunities for partners right now?

It kind of depends on what your starting place is and what your capabilities are. If you are starting from the components of the infrastructure – which many of them are. In other words, they know how to do servers, they know how to do storage, I think the best most obvious place is in converged and hyperconverged. Our VXRail is growing super-fast. That has great momentum. That is the perfect place for partners to go. Certainly I think the reason VMware continues to grow very nicely is because it is right at the center of automating and transforming the data center – as that extends beyond the server that is how you create the efficiency that customers are looking for.

How are you making sure that VMware is integrated into the Dell converged infrastructure story and partners gain a competitive advantage by leveraging VMware?

It is easy. We designed it in. That is what we have done. When you buy VXRail VMware is inside, Dell EMC is inside. You have these products that we have created that are the combined innovation of Dell EMC and VMware. And some of them have Pivotal technology – for Pivotal Cloud Foundry – which is at the tip of the spear of digital transformation inside many of the largest companies in the world. That has got enormous momentum.

What is the Dell software defined data center story versus Cisco?

Well Cisco is a partner. They use a lot of our technology and we use some of theirs with the VBlock alliance with VCE – what we now call our converged platform and systems division. And that continues to grow very nicely. We are continuing to create new versions of that. Cisco is a partner.

If you look at the core of software defined and the infrastructure you think about the virtualization of the server – VMware, the virtualization of the storage – VMware and Dell-EMC and the virtualization of the network – again VMware with NSX which has tremendous momentum and is having from what I can see a monster quarter.

What is competitive set that you face now and where the market is moving towards in terms of technology?

There is something really amazing going on in the technology world and it is often referred to as digital transformation. If you step back and think about it the number of connected nodes is just absolutely exploding. The way to think about this is the cost of making something intelligent is approaching zero dollars. When ever that happens you get large numbers of them assuming it is useful. So what is a connected node? Well it started out as a PC, then it was a smartphone, then a tablet. Now you have connections in just about everything. So if you look at the large industrial companies they are in the process of making all of the things that they make intelligent. If you look at the car companies, they talk about the connected car. And it goes on and on across every industry.

So if you think about ARM- the microprocessor company that licenses the ARM processor – they have licensed over 86 billion ARM cores. If you add the other microprocessor companies cores and add it all together imagining 100 billion microprocessor cores is not unrealistic. In fact, we probably already have that.

What impact are those microprocessor cores having on the market?

Those cores are becoming increasingly connected and the rate of deploying new ones is increasing. If you p-lot that out it is not hard to imagine like a trillion of these microprocessor cores creating just enormous amounts of data. So that data has to be interpreted, used, turned into usable insights to help businesses create better outcomes, success in all elements of society, whether it is in education, energy, business, environment, whatever it may be. Then when you layer on top of that the really interesting things going on in computer science right now with artificial intelligence, machine learning, deep learning, unsupervised learning. It is really kind of a golden age for information technology where it is kind of changing from IT to BT – BT is Business Technology. So you can't really do anything without technology.

What kind of infrastructure is necessary to support the business technology transformation?

All of this requires a very different kind of infrastructure to support it. And we are just at the very beginning of this. It is why we created this company – Dell Technologies. It is why we have significant investments in things like Pivotal, Boomi and the software defined data center. It is what we are talking a lot about at VMware and of course the infrastructure has to change to support all of this. And it has to be more converged, more hyperconverged, more scale out, more all flash. There is a lot required in terms of networking. So we are just at the beginning of this. That is what I am excited about. That is what I see our customers doing. And the smart partners are going to be the ones that are with us on that journey. I have watched this over a long period of time. You keep doing what you have done before – there is just not a ton of value in that. That is where I see the world is going.

What are partners asking for in terms of leveraging the new Dell EMC portfolio?

It's mostly the just let me go sell it. When you step back and look at this, customers don't actually want to have more suppliers and partners. They don't want to assemble things themselves. They want more solutions, and on the journey to hybrid cloud you've got things like converged, hyper-converged, software-defined data center, all areas where our new company, Dell Technologies, is absolutely in a fabulous and leading position. Those are areas that have significant momentum in the industry along with things like all-flash, where we have 40-plus-percent share, bigger than the next three competitors combined and growing faster. I think you're going to see some industry consolidation take place and we're well-positioned for that as well.

How can partners win in 2017 by selling the full portfolio amid industry consolidation?

I don't think it's that hard to figure out. You've got a company that's No. 1 in everything all in one place, and what's the alternative to that?

Where are you seeing the biggest synergies as you combine the two companies?

I think it's clearly in the data center. We're No. 1 in servers, No. 1 in storage, No. 1 in virtualization, No. 1 in security, No. 1 in cloud infrastructure and cloud software, No. 1 in software-defined data center, No. 1 in converged and hyper-converged infrastructure, No. 1 in platform-as-a-service. So it's not that hard for partners to figure out. Customers and partners have made us No. 1. We're very grateful for that. We don't take it for granted. We work hard every single day to earn that.