Michael Dell: We're a 'solutions' company

In an exclusive interview, CEO Michael Dell talks about his company's new direction and its plans to serve a diverse midmarket

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Dell: ...is that if you define Dell at any given point in time and say, OK, this is what Dell does, in the future Dell wants to do more things. By definition, when you go do more things, somebody's probably not going to be happy. So are you living your life to make other people in the industry happy, or are you living your life to help your customers and your shareholders?

Gallant: But you don't think it changes the customer view of Dell?

Dell: Actually, we're seeing very positive response from customers as we learn more about their problems. We're able to bring more definitive solutions, and customers appreciate that we've invested heavily in key intellectual property. Now, of course, it has to be the right [solution], it has to work well, and I think we've chosen quite carefully. Our track record speaks for itself in terms of our ability. I mean, when you acquire something, you don't create any value. When you successfully integrate it and continue to invest in it, that's when you create a lot of value.

Knorr: I assume a good part of the $1 billion investment you mentioned is going to cloud technology, building out data centers?

Dell: Yes.

Knorr: Can you give us a longer-range view of your cloud strategy and compare that with, say, Microsoft, HP, others who are moving into the space?

Dell: Well, I think we see customers increasingly embracing cloud as a way to transform their IT environment and...

Knorr: Public and private cloud?

Dell: Public, private, hybrid. And we don't believe there's one-size-fits-all in terms of the cloud or most other aspects of IT, but certainly not the cloud. If you look at large companies, they tend to be held hostage by their legacy environments, and they look at cloud and they say -- hey, this is a way for us to break free from some of these old systems and have a more flexible infrastructure, and we really want that. They may want a private cloud. I think no matter what you do you're going to have a hybrid cloud, because you've got services that are outside of your data center, you've got services that are inside your data center, you've got to connect those things together. Data integration is a big, big deal. That's why we bought Boomi -- really helping customers link those together.

Knorr: So you see yourself as playing a major role in helping your customers manage hybrid cloud environments?

Dell: Implementing, deploying, operating -- whether they do it themselves or they want us to do it in our data center. Then if you look at the smaller and midsize companies, they look at cloud and they say, Hey, we could never really implement these big-company IT systems because it was too expensive and took too long. And the infrastructure and the whole deployment process are unbelievably difficult. So now, with cloud, they can onboard these systems much more easily and capture the benefits that larger companies have. I think [cloud computing] truly is the big enabler for the next decade of our industry and it's important for us to play a big role in it.

Knorr: But all the pieces aren't in place...

Dell: I don't think anyone has all the pieces. Also, I think these transitions take time.

Knorr: What are the specific opportunities for Dell to fill in those gaps in the cloud for your customers and in the solutions that you're providing?

Dell: Well, I think it's certainly in the infrastructure layer. That's a natural place to start; we have a lot of experience there -- a big advantage. We're the leading supplier to the Internet companies. We're now on, I think, the fourth generation of our modular data center, really leading in innovating in terms of densely organized modular data centers. I think roughly 60 percent of the Chinese Internet runs on Dell.

We've done a great job in serving the most complex users out there. We know how to build the cloud infrastructure layer, whether a company wants to build its own private cloud or they want us to operate it for them in one of our data centers. I think data integration is a big barrier and challenge/opportunity. I have an old XYZ system and I want to go to Workday or I want to go to Salesforce.com or I want to go to SuccessFactors, or whatever it may be, how do I connect that with my old system? That's what Boomi does.

If I have two cloud systems, how do I connect them together? Cloud providers will tell you -- oh no, you don't want to do that. Because they want all the data to stay in their system and not go anywhere. But that's really impractical, the bigger the company the more you need data to integrate and talk to each other. So again, Boomi is perfect for that.

Knorr: Boomi is a great example of a public cloud service. Are there other public cloud services on your road map?

Dell: I think when you get into the verticals, there are lots of them. Certainly in health care, a lot of the services I described earlier we provide as cloud-based services today. If you look at medical imaging, we have 4 billion medical images in InSiteOne, which is a medical imaging archive. I think you'll see lots of opportunities for vertical clouds, particularly with our customer access and go-to-market model.

Knorr: Sounds ideal for health care.

Dell: Health care -- and education. There are 15,000 public school districts in the United States, and each one has some kind of an IT infrastructure. Maybe it has a data center, but there are horizontal apps that run in almost every school district in America. And does it really make sense for that to be replicated 15,000 times? Or would the county or the state or any particular region be better served having that as an on-demand service where you charge by student? We're already doing that today for some fairly sizable school districts, and as we get that working and get it to scale, we'll go add more school districts.

Dineley: Can we shift to the old business for a second? The Windows PC market has taken a dip and we're seeing a lot of other devices surging in the market right now. If it turns out that tablets, smartphones ... Android and iPad devices represent a major shift from the Windows PC into this multiplicity of devices, how does that affect your business in the long term?

Dell: Well, it would have affected it a lot more maybe 5 or 10 years ago than it does today, because our business is very different. If you look at our sources of margin and profit, the majority of them are not the stuff you're talking about. I think there's definitely an enormous variety of devices out there and usage patterns are changing.

I don't necessarily see that they're all replacing each other. A lot of the new devices are in addition to the devices you already have. So, for example, when you get a smartphone do you get rid of your PC? I don't think so. Now, the interesting one is the tablet. When you get a tablet do you get rid of your smartphone?

Dineley: No.

Dell: No? OK. When you get your tablet, do you get rid of your PC?

Gallant: Not yet.

Dell: OK, so now we went from a person who has one device to one who has three devices. Now explain to me why this is a problem. When we're in the server business and storage business and making data centers? Now, would I love it to be our smartphone and our tablet? Absolutely. But if the total market expands, you know, if the 2.7 trillion becomes 3.7 trillion because people are storing more data...

I mean, I look at some of our big customers, the fast-growing customers, and they have nothing to do with PCs. We have a big customer in China called TenCent, and TenCent I think has like 700 million mobile phone customers. Almost everyone in China who has a phone uses one of the TenCent services. So we're selling them huge data centers and servers and storage and networking -- nothing to do with a PC. When people consume content, video, whatever, on tablets, smartphones, the content has to come from somewhere. Where does it come from? It comes from servers and storage. You look at these new companies that are popping up all the time with streaming audio, streaming video, and there's a pretty good chance those are running on Dell servers.

Dineley: So you win on the back end regardless. But as for the devices themselves, what's your plan to make Dell's Android or whatever tablet devices and smartphones that people buy?

Dell: Yes. [laughter]

Gallant: Is it too early in the game to say how that's going to shake out? You asked the question of the desktop versus the tablet. People haven't made that decision today, but do you see that the usage pattern will change down the road, and how do you deal with that?

Dell: Go back a bit to the netbook. What's a netbook and what's a notebook? Maybe there's a high priest of defining what is what. But you know, I think the lines start to get real blurry. I could look at a tablet and say: Well, the reason somebody bought a tablet is that it's light, it's thin, it comes on right away -- and they can access their information, they can carry it in one hand. And then you say: Well, why did the notebook insufficiently do that job? And can you make notebooks better to approach that need? The answer is absolutely you can. It doesn't mean that we won't make tablets. We will. But as you get ARM processors and notebooks with Android, Windows 8, etc., I think the lines of what's a notebook, what's a tablet, I think it'll be harder to distinguish.

Gallant: Do you think there will be a different market for an enterprise tablet versus a consumer tablet? Cisco has one, and Avaya has one, and BlackBerry tried to do it they're targeting a very different kind of audience than the consumer tablet. Is that a different market?

Dell: I think there are some needs that enterprise customers have, and it could take the form of software and services -- certainly security. I mean there may be unique products as well. Again, a market this big, it's certainly not one-size-fits-all, and there will be companies that say, Hey, bring your own and we'll secure it and we'll fence it off and OK, that's great. And other companies that say, No, no, you have to use the company-issued one. I don't think there's one answer.

Knorr: We hear today about explosive change and that this is one of the most exciting times in enterprise technology. What technology gets you the most excited?

Dell: Well, there's a lot to go around. I certainly get pretty interested in the changes that are going on in data centers. Look at how virtualization is changing, the whole server and storage networking layer. You used to have one application and one server, and attached to the server, you had a port that led to a switch, and then you had all these other things to protect the network.

Now the server is a lot bigger and a lot more powerful, and you've got 50 virtual machines inside the server and those networking boxes are running inside the VMs and the switching is getting virtualized inside the server. Yeah, you have a top rack, but the top rack is going to 10Gb and 40Gb and 100Gb. It's a flat tree network, you have storage virtualization. I think the ability to build these highly flexible data centers and burst out to a secure cloud, the flexibility customers have, I mean it's just tremendous. So that's pretty interesting.

Knorr: In our interview series, you're one of two CEOs who is also the founder of the company. So looking back all these years...

Dell: Still here...[laughter]

Knorr: What would you say is your proudest achievement?

Dell: My four kids.

Knorr: That's a good answer.

Dell: You know, there are many things to look back on and be proud of. Dell started in PCs, but in the mid 1990s we broke out of PCs and we broke into the data center. I think we changed that market forever in the sense that the traditional enterprise companies had to react to what Dell was doing. If I look at the whole concept of how does technology enable people, I think we fundamentally altered the course of the industry in terms of opening up competitiveness. Just imagine for a second if among the companies that sold all the products into data centers, Dell wasn't included, I think you'd have a very, very different Internet today because I think we inserted competition into that. Now, some could argue -- well, if you hadn't done it, someone else would have. OK, fine. Well, we did do it, so we can take credit for it.

Gallant: Let me ask you a similar question. You've been a small business, a medium business, a large business, a global business. You've run the company through all those phases. Today it's a tough environment for medium businesses or small businesses because the economy is sort of caught in the wind. What would your advice be to someone who is running IT at one of these medium to small businesses? What would you do?

Dell: If you're running a business, you have to think about surviving. That's just part of running a business, particularly a small or medium-sized business. I think that there are so many opportunities to get ahead using technology.

I'll give you a big one that I think is extremely relevant to medium-sized business. We've been providing storage systems to midsized companies for a long, long time, and they've been storing their data because they had to [due to] regulations, because it was thought to be a good idea. You have to have a database; you have to maintain all the information. But how does the information actually help you make better decisions?

People talk about big data. I think: big impact, big decisions, and big insights. And there's a lot of work going on in our industry. Dell is working on this in a big way to say how do you take all the data companies have stored and then turn that into much better decisions? And smart midsized companies will actually be able to do that in a faster, more nimble way than some of their larger competitors who are kind of stuck in these larger legacy systems.

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