Update on Dell Technologies - W/Howard Marks

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All right. You're listening to episode 84 of the CTO advisor. And no, this is not a replay CTO dose. This is a CTO advisor live in the flesh. I have Mark May back again. Mark has been a while since you've been on the CTO advisor. It's been a while. I've been hiding from you, Keith. You have been hiding. I've been hiding. Yep. But, uh, I found you on the interwebs. Uh, it's not hard to do.

And I, uh, and I, you, you brought a friend. I did. I did. I brought a friend. It's Howard. Everybody knows Howard. I think you can deep storage on the, on, on the Twitters, a host of great beers in storage. Howard, how's it going? It's going pretty well. And you guys still can, Keith, you still consider me a friend? You know what my wife for some reason really likes you. I was just going to say that.

So, you know, I've run some new ideal buyer and you know what she says? Well, what, what, what does Howard think about that? Like Howard of all people, but there you quit your job. Cause I'm a bad influence and then went on another podcast and described how you quit your job. She's still thinks I'm a good influence. There's a listen to the podcast, obviously. Obviously. So guys, it feels like, uh, we're going into a familiar part of the year, season, you know, pure accelerators coming up, Dale technologies, world, new tech, interop.

It goes on and on outside of Howard's famous influence event where we're going to go and have some of the best Thai food in America. And you know, I extended my trip to Vegas by a day just to go to dinner. Just for that dinner. That's it. Yeah, that's, that's good. I'm honored Mark. Well, it wasn't for you. It was for the garlic prawns but beyond great, great food in Vegas. There's two big technology shows coming up as we're recording this podcast next week.

One of which is the former Dale EMC world, which all three of us have attended. But for the first time, we're going to have a Dale technologies world. So I thought this would be a great time to talk about, Hey, let's talk about the current state of Dale technologies. Yeah. Okay. I know what Dell was. I know what EMC was. I know what VMware is. I know there was a federation and pivotal fits in there someplace, but I don't really have a handle on Dell technologies as an institution.

So we can start right there. So I guess on paper it's fairly straightforward. Howard, I think you, you, you mentioned that, you know, you knew what Dell EMC was, you knew what VMware is. And I think there's some debate on whether it's what it's morphing into. And we always knew there was this, you know, step child called pivotal and that at some point, you know, there was going to be some interesting parts of period. And then there's other parts of the federation.

There's RSA and there's Dale, the individual pieces. I think we all have a pretty good handle on what they are, but as a offering, I don't think EMC ever really made a, other than VMware being a cash cow. I don't know if VM, if EMC really ever made a really significant customer facing deal of the federation. You know what I mean? They did. They talked about it all the time, but they talked about it. And I don't think anybody ever really saw the benefit of that.

You know, you couldn't buy from what was the federation and get discounts on VMware or pivotal because you were buying, you know, a V max, you didn't have that real federation. It was just like a loose coupling of companies that happened to have the same common executives. Well, I mean, you could look, I mean, since we're coming into conference season, you could look at it just from the perspective of conferences. RSA had a conference, VM world had VM world, VMware had VM world, and EMC had EMC world where, you know, there was a big document them booth, but there was never, it was a conglomerate.

Well, so I think the best thing to think of is essentially there's three large divisions for Dell technologies, right? You've got client services, groups, laptop, desktops, peripherals, that type of stuff. You got, what was Dell EMC, the infrastructure group, storage, all that type of stuff. VMware, right? I think those are the three big ones. And then on the heels of that, you've got pivotal RSA secure works and a boomy. I think that's still a thing. Boomy. Well, Michael Dell tweets and only thing is a lot about booming.

Yeah. But I think he's the only person I've ever heard talk about boomy. I don't know nothing about no person. No. Okay. So let's talk about the, the bigger part of this whole conglomerate. I can't even say that word though. The bigger part of this huge company. And that's, and that's Dell EMC. What used to be EMC and used to be Dell's infrastructure group, the servers. I personally didn't run into much in the, you know, the fortune 500 space that I've worked in.

I know Dale sold a lot of servers. I just didn't run into a lot of Dale, uh, in my previous world. Yeah, me either. I didn't see, I didn't see Dell servers, but interestingly enough, I'm curious which one is actually bigger. I know at least in 2016, the client services group was supposed to be much larger than Dell EMC. So I think when we say bigger, we probably need to think about, is it actually bigger? Well, I guess bigger and that's the one I care about.

I agree. I also care about that one. Yeah. Also, the thing you have to understand is that, you know, $1 of gross sales in a data center is a lot more profit than $1 of gross sales for a laptop. Well, so that's actually raises an interesting point when you're, when Dell is selling, do they use laptops as a loss leader or do they try to make a profit off of laptops? I think they price laptops competitive with, you know, so that they're competitive.

But it's just a much more commoditized market. You know, Keith is, is thinking about taking the XPS 15 back and getting something very slightly different. But if his corporate overlords told him, here's your XPS 15 and if you want to run something else, you have to pay for it yourself. The XPS 13, 15 would be that is exactly it. If, if Dale, if you're listening to this, you want to send me an SPS 15 for free, you know what, I will definitely not consider another laptop.

Why not send a dozen and a few minutes. And, and so, and so that's, you know, that's just a much more cost competitive, price competitive. The other thing with that Howard too, is that, you know, a scale of, this is the big question HP had before they spun out from HP was scale when it came to vendors, you know, you know, if I'm buying a million units a month from Intel, whether they're desktop laptop or server SKUs, I have more influence and weight or leverage against Intel because I'm a much bigger overall Intel customer.

Bill has those same economies of scale. They can not make profit off of individual units. But the discounts they do get make them overall much more profitable company. Yeah. I, I had thought that was significant, you know, dating back to when IBM sold their desktop group to Lenovo. That's like, okay, so now you're going to get lower margins on your servers cause you're not buying as much from Intel and Micron than the other five vendors that sell all the parts that are the same.

But enough vendors have done it, you know, enough companies have done it that I don't know how much weight I put to it anymore. And I think one of the things that we forget, and this is to your dollar for dollar comment, Howard is that enterprises, we actually don't care much about price. We, we, we, Oh no, no, no. Very, very much so. I mean, Greg Farrow posted some stuff this week. Yeah. So, you know, if a server is five to 10% more in cost, would it stop us from getting that server?

Absolutely not. It has not because HP ProLiance and Dell PowerEdges are seven to 10% more than super micros, but super micros do not populate corporate data centers. They're populated with HP ProLiance and Dell PowerEdges because the a, the little bit of advantages that those products have and B buying my servers and buying my servers and my storage from the same vendor means I get a point and a half off on the $4 million in storage. Yeah. So we, we understand from a on paper perspective, what is Dell EMC versus the client services group.

But is it just me or does Dell EMC, especially the EMC part, and this is to be expected after the acquisition, does it just seem like it has a different mission? I think so. But I think that's always the case, right? They have a different thing. They're selling something different than all the other ones. I think we're seeing a lot different now. The reality is what the story was, right? If you remember the story, it was, um, open source, things like that, uh, unified leaders.

And we're, we're seeing executives leave. We're seeing scale IO being kind of back burner sort of, you know, we're, we're seeing things that I think point to a different mission for Dell EMC, which is more about selling storage still. And maybe that's good or maybe that's bad. I don't know. And, and at the same time, the storage market has changed. So the market in the market for everything from V maxes to SCs is shrinking and is going to continue to shrink.

I get a lot of pushback when you know, Mark, when for those people who don't know, scale IO was a, it was a piece of software that you could buy and create software defined storage out of commodity hardware, Dell technologies or Dell EMC made the strategic decision to say that that solution can only be sold in combination with Dell servers. So if you're an exist, this thing, scale IOs customer, you use HPE proliant servers to form your scale IO cluster. They'll continue to support you, but you can't rebuy that solution.

You can't buy net new licenses. If you wanted this solution brand new, you'd have to buy it with Dell power edge. And I remember that conversation, Keith, and I know we cared about that, right? You and I were like, wow, that's kind of a terrible move. But on reflection, the question I have is do customers care? Do customers want to buy scale IO? The real question Mark is how many customers care? But I've, I've talked to many companies that make software defined storage solutions and they all tell me that in the corporate world, people want to do POCs on their own servers and then they buy it pre-installed on a server as an appliance.

And that makes sense to me. We've been talking about build versus buy for a long time in infrastructure. Why would we go back to it to building our own when it comes to your actual work? So I think what I'm hearing you're saying is by and large, most customers want to buy the platform as a whole and it's easier on the vendor to sell a platform as a whole than letting you build your own anyway. More than most customers. It's most customers who would buy from Dell EMC, HPC labs, universities, places like that who buy software to find storage, but aren't likely to be Dell EMC customers.

Anyway, don't want to buy software only and they want to, you know, and hyperscalers want to buy software only, but those weren't likely to be scale IO customers. They were more likely to be Gluster or Wicca IO or GPFS. So where does this leave Nutanix's story? I know we're talking about Dell technologies world, but their story, their story of where a software company doesn't kind of play into what I think you just said, Howard. Well, there's a difference between software defined storage and software delivered storage.

And so what Nutanix is doing is they're saying, we're not going to sell appliances that say Nutanix on them anymore. We're going to sell software to Arrow or Avnet or the other distributors and they're going to bundle it with one of the 17 models of servers that we've approved altogether. And what's going to get delivered to the customer is still an appliance. Sounds like a V-specs blue that they originally tried at a Dell or what was EMC? And, you know, for Nutanix, it means they can sell on HP ProLiant servers because HP doesn't really want them to.

But customers who are really low HP ProLiant can now buy Nutanix and they'll be a meat in the channel kind of solution that Nutanix has changed to software only is really also about wall street because now their gross margins are much higher because the hardware they were buying and selling with a small markup isn't on their books. So they look like a much, they look like a software company and they have a much higher margins. I never thought about that point. That's, that's interesting.

Good point. So back to Dell technologies and I think the scale IO highlights a couple of issues that I've had with Dell EMC, both me and you, Mark, one of which I don't know how much of this is. We had friends that Dell code, Dell EMC code, and they've decided that they're going to completely let that group go. And again, Dell EMC code, was about helping customers figure out how to integrate Dell EMC hardware with open source. Wasn't necessarily an open source sponsored project, but it was a group.

It was more of a developer advocacy program than it was. Oh, we're sponsoring open source. So I've made the argument that Dell EMC has retreated to saying that there are hardware company and they're the hardware component. They're the enterprise hardware component of Dell technologies with the exception of maybe their networking group, which I'll show the networking folks some love, which completely embraces open source. But for the most part, the bulk of the business is focused on selling storage and servers. And I'm right with you.

I mean, one thing that I think is fundamentally true is developers are gaining more and more power in the enterprise buying scale, right? They're just starting to get it outside of that corporate card. So it's still pretty, pretty low, but infrastructure often has trouble talking to developers, right? They just do. So I think that was the value of the EMC code. Could have brought to the table and should have, and did when they were there is helping the developers understand the offerings that they had, whether it was, you know, Sentara ECS or their API or any of those things.

But I think I'm with you. They moved back. They said that we're not trying to sell to that market. We're going to sell you servers and storage. So when I pushed again, when I pushed back on that, their argument was pivotal VMware. VMware is the leader in enterprise data center software. Why does Dell EMC have to have a software focus, outward facing software focus at all? If VMware and pivotal are fulfilling that role, you got to see. And I just, I think I just called bullshit, right?

VMware is table stakes now. Right. I don't think you can say, yeah, sure. Everybody has it, but everyone has it. It's, it's not a, it's not a differentiator anywhere. VMware is still part of the infrastructure. Exactly. It's it. VMware does not directly interact with applications. Or it doesn't really. So Mark, let me ask you this. I'm not sure. I'm not sure. I'm not sure. I'm not sure. I'm not sure. I'm not sure.

I'm not sure. I'm not sure. I'm not sure. I'm not sure. I'm not sure. I'm not sure. So Mark, let me ask you this. You're, you're, you large, you lead or have led a fairly large VMware infrastructure in the past. Did it matter tangibly whether your VMware infrastructure ran on Dale hardware, HPE hardware, super micro operationally wise? Was there a differentiator once you abstracted away the hardware? Not at all. The only thing I really would care about is trying to minimize the types of servers just from a managing the hardware perspective.

So VMware had nothing to do with it. Yeah, exactly. You know, have a unified firmware as much as we can. Make sure the config works from top to bottom and not, okay, this HPE needs this. This Cisco blade chassis needs this. This Dale server, this super micro. That's a pain in the butt. That has nothing to do with VMware. So our good friend, Josh Atwell, is a developer advocate that works for a storage company. And I know NetApp will slap my hand and say, no, a data company.

But they work for he works for a competitor to Dell EMC. And his messaging is very different than what Dell Technologies messaging is. It's, hey, you know what, we'll help you integrate your application with our storage service. But, Keith, that comes from where SolidFire came from and where EMC was at that point in time. Right. SolidFire sold their systems primarily into solution providers who were going to integrate it into OpenStack or bigger systems and needed that developer support because they were going to write code so that they could automate all the functionality that's in that system.

So it would be interesting to get an update from Josh to see if that audience is still his main audience or has he moved into the enterprise and he's starting to have conversations with cloud native application developers. That would be an interesting thing to see. Yeah, what conversations he's having. That's what we need to know. And that might be indicative of the more forward-looking or more application-driven enterprises are moving to products that have that kind of support. Yeah. Yeah.

So if I'm right, at a recent tech field day, didn't Dell basically say none of their customers want vBalls? I'm paraphrasing there, but they didn't see huge demand for it? Yes. I wasn't there, but I remember seeing that. Yeah, I keep hearing that from them. And I think it's partially because there hasn't been enough evangelizing to people who could buy the product. That was evangelizing three years ago. I'm just presuming that means they don't have a good implementation of it.

Some of their implementations are lacking. So let's give the server guys some love. And I'm going to call it server because when you go to a customer, what do you lead with? Do you lead with the new tank story or do you lead with what used to be the VCE story and this Dell hyper-converged solution that's, frankly, all over? Does Dell have a split brain when it comes to HCI? Well, yes, but is it the VMware salesman leading or is it the Dell server salesman leading?

I'll tell you, it's fun when they're both in the same room. Because if you're asking about what do you lead with in the room, the answer is, what do you have a higher commission rate at? So I've heard this from back channels and from VMware guys directly, is that Dell EMC owns the relationship. So if it's Dell and VMware in the same room, VMware is there for pre-sale support in a form to promote whatever the Dell EMC sales rep has to say.

See, I have personally seen them pitch one product and then in the next breath when VMware is talking, them pitch an entirely different product. If you believe that we're all singing from the same hymnal stuff, it's been too long since you've actually had that situation with multiple sales guys. So does Dell Technologies now have the Cisco and HPE problem? So EMC and VMware always had that problem, but I always had different EMC and VMware reps and the two shall never really meet.

I didn't have combined meetings with the two. Dell Technologies is saying that they're going to a one salesperson type, one global account manager approach. So in really large enterprises, I've seen this where the VP of infrastructure will say we're putting everything on hold from Dell until we get better pricing on laptops, whatever the case. So you have you have buying centers that had nothing to do with laptops. They can no longer buy equipments. Products get put on hold because you can't buy because the organization is trying to get better pricing from Dell as a whole.

They 100 percent have that problem. Right. I talked to somebody on Twitter who was negotiating their VMware ELA, and that's exactly what they did. They took a Dell deal and tanked it to get the pricing they want on VMware. I think the real problem, though, is that your Dell Technologies salesperson, your Dell EMC salesperson, they don't get commission on what VMware sells and vice versa. Right. So they're both incentivized. They're both paid to sell different things. So they're competing.

You're competing against your own company, and that's a hard place. Yeah. And so I can buy VX rail from VMware, but I can't buy it from my Dell salesman. But my Dell salesman will sell me all the parts to run on our seven thirties. So HPE had this problem when they were just HP. Cisco has this problem because they're Cisco. And at the end of the day, one of the challenges, again, at the beginning of this merger at Dell Technologies as a whole is how do you surface the right solution, the right technical solution for enterprise when you're this big and complex?

And we haven't even talked about pivotal RSA secure or even their ecosystem of partners that have built solutions. Is it the vendor's job to tell me as an enterprise what the best solution is? Most enterprise customers need that. They need that. They're not you, Howard. They just don't know. But I think I don't think it's a problem, Keith. I think they have to do that. Otherwise, VMware seems to be too coupled with Dell EMC, which would make their other partners more nervous.

Well, and there's legal problems. They're independent, publicly traded companies. OK, they're intertwined publicly traded. Yeah, so you know what? I have mixed feelings about Dell Technologies. It's complicated. The scale is great in instances, but in other problems, the scale is when it's not organic. When you have these non-organic periods of growth and acquisition, you have these uneven presentations where, you know, we talk to I used to talk to HP all the time and say, this is the solution I need.

I'm talking to one part of the business. HP says they don't have it at all. I end up getting like a partner come in and pitch me a solution from HP software. That's the exact solution that I needed. So you have a problem. Well, you needed you needed object storage and you talk to your HP storage guy and he said, we don't do it, but there's no way to deal with scaling. So let me let me ask you guys a question then at this point.

Has the Dell acquisition of EMC and the subsequent forming of Dell Technologies been good or bad for the average customer of both or neutral? I think it's been neutral for the average customer. Yeah, I think I think you have to probably categorize it into different categories of average customers because Dale had a lot of SMB mid market customers where EMC owned what all of or nearly all of the Fortune 500. So if you say average average. So Dell customer neutral, it really probably doesn't impact them.

They haven't noticed a difference one way or other other than for the lower end EMC products like unity. They might get pitched those those on what what would have been higher end deal solutions in that cat in that market category versus Fortune 500. I'm going to I'm going to go slightly negative, not not quite bad, but not not neutral and not good. I could see that, you know, I could definitely see that. So then what about from a Michael Dell decided to do this thing?

Did he make a smart move or a bad move? Great move for Michael Dale. I've always I have thought for a long time that Michael Dell really wants to reconstruct Thomas Watson's idea that that he wants Dell to be the soup to nuts IT provider for everybody from the Fortune 5000. Can he in your estimation, can they make that happen? I don't think so. I think I think the day of companies loyally being IBM or even EMC shops is dying, that, you know, just the threat of also having public cloud alternatives means that the market is just so much more competitive that the overhead necessary to be that high touch starts to become too expensive.

So then by making this move, can Dell Technologies offer an alternative for a lot of people than going to the public cloud or the private cloud? Or I don't want to argue the definition of cloud disjunction. So this goes back to the full deal on deal is the full stack, right? You still are saying this pivotal. If you're getting spun out, I'm not going to say you're a greenfield because Greenfield is not. So let's say that you're one of these huge spin outs and you're spinning out from a Fortune 50.

You're going to spin out a company that's going to be a Fortune 500 company and you need to start fresh, relatively fresh with it. You're not going to look towards you're probably not going to look towards cloud. You're probably going to look towards a traditional type of architecture, but gives you the flexibility to give you agility moving forward. Well, especially since you're not really starting fresh, because a lot of times you're spinning up a new instance of the same app that the parent used to use to do exactly.

You're just migrating data. But, you know, you do have an opportunity to to flex your muscle in your imagination in some areas. So in areas where you say, you know, I would have normally went public cloud in this instance. You know what? Maybe the pivotal on top, the pivotal on top of VMware and PKS on top of Dale hardware makes sense. Or, yeah, but but there you're talking about a development environment. Well, not just the development environment, the publication of a production app.

OK. Yeah, I just I know every time I've been involved, even in a data center move, you way too frequently make the we're involved in something really big. And while it would be nice to change the way this little thing works, just duplicating it is going to take six items off my punch. Yeah, that's why I don't like this scenario. You don't want to change anything when you're doing that. You want to get done as quick as possible. Yeah, I have a whole I have a whole I have a whole blog post around that, which is interesting.

I wholeheartedly agree with you guys. So I think I think the answer is I guess the answer to your original question, Howard, is I'm really stretched to find a scenario in which, say, I build a completely from soups to not grant from from ground up implementation of a stack or nothing. So let me think of this one scenario. Right. If if you're moving, if you have a developer and you're getting ready to refactor an app. Right. And for whatever reason, you want to host it inside your own four walls.

Would it make sense for most enterprises to buy some servers or build some virtual servers and throw Kubernetes on it and all the ecosystem that you need around Kubernetes or to buy pivotal on a VX rail or VX rack or whatever they feel like calling it today and go soup to nuts for that stack? So I think there's a legit argument for that in general, but I think the pushback would be, why not go as your stack? So I think there's legit. I don't think I don't think it's a yes or no question.

All right, guys, we could talk about Dell Technologies forever. It's over one hundred billion dollar entity, well over one hundred billion dollar entity, even by conservative notes. But we got to end the podcast at some point. Yes, sir. So I'm sure that folks can follow you guys online. Give up the the the online presence to the team, guys. Best way to find me is at Sensi Storage at Twitter. All right. And you can find the CTO advisor, the CTO advisor.

I'm at CTO advisor on Twitter. And of course, I don't know if you've noticed, there's a new site. CTO Dose, where you can find all of the CTO Dose videos. Talk to you next CTO advisor. Thanks for watching.