With the announcement earlier this week of its new IaaS partner ecosystem, it appears that Dell has gotten out of the business of directly providing public cloud IaaS services itself. While Dell still may eventually return with its own OpenStack based offering, it appears it’s out of the public cloud IaaS game for now.
With the acquisitions of Enstratius and Boomi, Dell appears to be focusing on management and integration of multi-cloud environments. While this will likely end up being an attractive place to play in the market, at the end of the day Dell had several strategic assets that could have allowed them to be well positioned in the public cloud IaaS space. In fact with the potential exception of Microsoft, Dell was perhaps best positioned to provide public cloud IaaS among legacy enterprise IT vendors. Why?
- Direct customer relationships – unlike other traditional enterprise IT vendors like IBM and HP, Dell has direct, relationships with nearly all its customers across consumer, SMB and enterprise segments. Amazon started by providing IaaS to SMB customers, and has been moving upmarket into the enterprise as it comes up the learning curve from both a technology and business perspective. Dell similarly could have leveraged initial offerings in the SMB market to evolve into enterprise-ready services as the offerings and market matured. Also, early on the Dell brand and trusted relationship potentially could have convinced customers who were concerned about the risks to try the public cloud.
- Upgrade cycle visibility – Dell has a unique advantage over Amazon AWS and other IaaS vendors in that it has visibility into the server upgrade cycle across tens of thousands of customers. This visibility could have been used to proactively migrate customers into public cloud IaaS via targeted sales and marketing vehicles. Dell could have offered incentives to customers going through a refresh cycle to migrate to VMs on their public cloud IaaS, and also offered unique services and support around it.
- Data center expertise – from working with customers Dell has developed deep IP and expertise around designing, deploying and managing webscale data centers. While granted much of the IP that Amazon has developed is actually around business models and management algorithms for IaaS services, Dell certainly had the technical chops to develop the data centers required to deliver public cloud IaaS. Dell also had data center operational experience through the Perot Systems acquisition.
Hindsight is of course 20/20, and it may turn out that public cloud IaaS will only end up being an attractive business for Amazon and maybe Google. Committing to public cloud IaaS would of course required Dell to aggressively cannibalize the server hardware business, which is probably the biggest reason why it never happened. It also would have required Dell to develop new skills and platforms that Amazon did with AWS, which is much easier said than done. Despite these factors it’s still interesting to think about how the public cloud IaaS game would look today if Dell had played some of these cards differently.
Interested in reading more about competitive dynamics in the enterprise cloud market? Check out our recent post on why it’s too early to count Microsoft out of the enterprise race , and our earlier post on why Amazon’s AWS enterprise strategy is deceptively simple.