CRN Exclusive: Michael Dell On Making The Most Of Industry Consolidation, The Channel Program's Fast Start And VMware's Position In The Container Market

Dell On The Record

About six months after closing an acquisition that represents perhaps the biggest piece of IT industry consolidation ever, Michael Dell isn't expecting that trend to slow down. He does, however, expect his company to reap most of the rewards.

If fourth quarter results published by Dell Technologies on Thursday are any indication, the chairman and CEO might be onto something. The Round Rock, Texas, company saw significant growth in several major business lines, including all-flash, servers, hyper-converged infrastructure and security. Despite concerns in the market that container technology could threaten VMware, Dell said the virtualization kingpin is well positioned to be a major player in that market.

According to Dell, customers want to do more business with fewer vendors, and Dell is one of those vendors thanks to its wide portfolio and engaged channel partner ecosystem. "One of the discussions we've been having here is, how high is up, given all the opportunity?" Dell said. "We just see tons of opportunity to grow."

Those growth opportunities come as the economy at large prompts businesses to put resources and muscle behind their growth plans. "Customers are on offense and they're investing," Dell said. "They're starting new projects. Then when you step back and go back to how we engage with customers in across-the-board transformation, we have extremely high relevance in terms of helping customers evolve."

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

We're seeing a lot of consolidation across the market. HPE is now boning up with a couple of significant purchases. Are you looking for more to fill out the portfolio further?

There's organic and inorganic consolidation going on. Certainly in the data center we have a leading position. In essentially every area of storage, we are significantly larger than the next company, in many cases two, three, four times larger. If you look at servers, last quarter we had double digit growth. HP also had double-digit growth, except theirs was negative and ours was positive. You can see the one up, one down phenomenon there.

If you look at software-defined and all-flash, we have a higher share in those newer areas. In all-flash, we had high double-digit growth, I think it was something like 97 percent. The business is on a $4 billion run rate. You look at client products; we had the fastest growth year-over-year in both total and commercial units among the top three. Mobile workstations grew 50 to 60 percent in commercial. Notebooks over 20 percent growth, and it was our 16th quarter in a row to gain share, growing faster than the overall industry. As far as the portfolio, we are in a very strong position. VMware doing very well. NSX is on a $1 billion run rate. Hyper-converged is doing really well. VSAN continues to grow super fast. VxRail was on a $400 million run rate. SecureWorks grew 26 percent year-over-year. Pivotal bookings [are] up 130 percent.

And those are signs that you're on the right side of a consolidating market?

I think what's also happening with servers, where we're up double digits and HP's down double digits, is that the customer and partners see strength in the portfolio and they're coming with us to do a lot more. We're selling, let's say, three of eight major product lines to a customer, and they say, "Why don't I just buy all eight from you?" That's happening in a significant way. I think the consolidation is going to keep going. The problem is there can only be one No. 1. With the combination of Dell EMC, VMware, and the rest of the family, we're in a very strong position.

Reaction from partners has been over-the-top positive. In my interactions with partners on a regular basis, they're very pleased. We listened to them, we took their feedback, we designed a thoughtful program that meets their needs. They're engaged.

It's still early, but have you seen an uptick as a result of the new partner program? Are you happy with the program?

Very happy. Off to a great start. We're quite pleased with what we're seeing. I'm seeing a lot of green on the charts. One of the discussions we've been having here is: How high is up, given all the opportunity? We just see tons of opportunity to grow.

VMware in the multi-cloud era, it's a super important part of our architecture. You look at the momentum with NSX, AirWatch, the vCloud Air network, everything we're doing with hyper-converged, VSAN, with VxRail – they all grew very, very strong. NSX is on a $1 billion run rate. Pivotal had a pretty major milestone this last quarter, over a quarter-billion dollars in 2016 bookings, up 130 percent year-over-year. The momentum with Pivotal in terms of digital transformation is white hot. Pivotal is now engaged in a third of the Fortune 100, and I would say the strategy so far has been to only go after the tallest buildings in the city. The opportunity to take Pivotal Cloud Foundry into Fortune 2000 and beyond is enormous. That's going to represent a big opportunity for partners.

A lot of people, HP included, are saying container technology is a big problem for VMware. Is container technology a threat to VMware?

If you look back at the history of this, first OpenStack was supposed to be the threat, then it was supposed to be containers. It's not necessarily a new story. Containers are growing, but if you really go into these companies and say, what are you doing with containers, what you find is that it's virtual machines and containers, it's not virtual machines or containers. In many cases, the containers are inside the virtual machines. VMware has a strategy that embraces containers and extends its capabilities into the container world and that's well understood by customers and partners.

Are containers something you'd like to add to the portfolio?

The VMware Photon product, which is the open container strategy at VMware is marching forward, and many customers also use Docker containers within their VMware environment. Again, I see it as virtual machines and containers, not virtual machines or containers.

But don't you need fewer instances of VMware if container technology really comes on?

Not necessarily. Containers lack a number of management and security features. What many customers will do is put multiple containers inside a VM. These containers tend to sprawl out rather rapidly into infrastructure disposable software. We haven't seen the growth in container be bad for VMware.

In hyper-converged, you've got Nutanix, you've got your own VxRail, which some people would say is more converged than hyper-converged. Is there something more you need there? If you have VxRail, why have Nutanix?

There's no question VxRail is hyper-converged. It's a server with virtual server and virtual storage with software to make it easy to deploy. In servers we're number one in the world. In PowerEdge, we're going into the fourth generation. We have more scale than anyone on the planet. We're very good at building servers. The virtual server, there's no question the No. 1 virtual server company is VMware. Nobody is more successful at that than VMware. If you look at virtual storage, VSAN is growing very fast, over 8,000 customers. The easiest, fastest way to deploy VSAN is VxRail.

The No. 1, No. 2 and No. 3 virtual storage platforms are within Dell Technologies. We also have the Nutanix-based Dell XC solution for multi-hypervisor environments. We saw a pretty big milestone in the fourth quarter where VxRail volumes surpassed the XC. They're both growing and continue to offer customers choices. Think about us as bringing customers open[ness] and choice, but with an opinion. Certainly for those VMware-centric environments, the best way to get VMware-centric hyper-converged is VxRail, no question.

What's driving you from a strategy standpoint? Do you expect that everything you play in you'll be No. 1?

When you think about strategy, our customers are faced with a number of simultaneous challenges and opportunities. Then there's digital transformation going on, and that takes its own form in each industry. At the same time, there's this IT transformation. How do you modernize and automate the data center and make that more efficient? You've got tens-of-billions building to hundreds-of-billions of connected nodes, all this data.

Transformation isn't really an IT project, it's right at the center of the evolution of a company. Digital transformation, IT transformation, then you have the workplace – workforce transformation – where work is not a place you go, it's a thing you do, and you need secure, connected devices to access your information wherever you are. Then there's a security transformation required as well. Only Dell Technologies has the broad portfolio to help our customers across all four of those areas. That's where we have really high relevance. We started life out as No. 1 in everything all in one place. If HPE bought several other companies, it wouldn't be close to our share.

What are you seeing in the general economy? Do customers want to engage more with Dell and partners to solve problems they haven't in the past? Are we in a phase where a rising tide lifts all boats and we see a lot of growth and you're not necessarily going to have to just take share to grow?

I'm optimistic. I think the backdrop of overall economy, if you look at financial markets and the way customers are engaging; customers are on offense and they're investing. They're starting new projects. Then when you step back and go back to how we engage with customers in across the board transformation, we have extremely high relevance in terms of helping customers evolve. We think of it as somewhat of a land grab where custom would rather do more with fewer partners than the opposite. That positions us very well. I think it's why you're seeing us continue to gain share, and that's what we plan to do. We're going to use our scale, we're going to use the advantage of being a privately controlled company with a long term focus. Our R&D innovation engine is running very strong, cranking out all sorts of new products and solutions. I'm feeling quite optimistic about the year ahead.

Where are you spending your time these days? The acquisition is behind you, but I'm sure you've got stuff coming at you about the integration. Where do your really like to spend your time?

This week, all week, I'm in New York City. Right now, I happen to be on the other side of the river at the moment in New Jersey. I'm about to go see a customer with a partner. I'm spending time in the field with customers and partners. Next week I'll be back in Boston. I'll be on the West Coast first part of the week with VMware and Pivotal. I spend time with our customers, and partners and with our R&D teams. That's what I like to do. The other stuff, let the other guys do that.

How much time to spend talking to product development? Are you talking to customers and partners all the time, hearing what they think?

It's products and customers and partners. I spend a lot of time with product teams in Hopkinton (Mass.), in Silicon Valley, with VMware and Dell EMC, and of course in Austin. Products, customers, partners. If you want to talk about other stuff, we've got a great team. The integration has gone extremely well and the vast majority of it is them. We're on to execution.