The Acquisitions + Shake Ups That Redefined Dell’s Storage Strategy

Dell is known for its manufacturing of computer hardware, but along with the hardware, it offers customers a full software stack and a whole range of services. Over the past year, Dell has acquired eight software companies, including SonicWall, specializing in IT security, and Wyse Technology, engaged in the production of both hardware and software thin clients. A week after, the company purchased Make Technologies, with solutions designed to assist in the transfer of the workload from the mainframe to the mainstream server architecture.

Indeed, Dell has changed in recent years to become a major player in the data center marketplace, beginning its conquest of the storage market by reselling EMC technology. Coming to its own with the second annual Dell World in full swing, let’s recap at the Dell storage developments over the past 12 months.

Staggering Storage Revenue

Dell’s storage strategy to stop reselling EMC storage and promote its own line up began with the acquisition of Compellent and EqualLogic gear, but the converged solution is not paying off as planned.

The company spent more than $2 billion building up its storage portfolio (with new products and various acquisitions) and an additional one billion to strengthen technology in the data center, cloud and mobile environments.  But Dell’s net storage revenues were $386 million compared to $2.32 billion from servers and networking in third quarter for fiscal 2013 results.  Storage used to be 30 per cent of total revenue, but there’s been a decline in the last two years, sliding down to 15 per cent from October 2011 onwards.

“Dell storage revenues overall declined 16 per cent year-on-year and 11 per cent compared to the previous quarter. Excluding EMC, Dell-owned IP storage at $378m was down 3 per cent on the year and 9 per cent compared to the previous quarter. The Dell-EMC reseller revenue declined to about $8m for the October quarter, down from $18m and $72m in the prior and year-ago quarters, respectively,” said Aaron Rakers, a Stifel Nicolaus analyst.

Major Changes in Leadership

As a major blow to Dell’s storage strategy plan, Darren Thomas, head of Dell’s Storage Group, is leaving the company to pursue a new opportunity outside of Dell. Darren Thomas had a nine year carrier with Dell, where he was instrumental in buying suppliers like EqualLogic (iSCSI SAN), Compellent (Fibre Channel SAN), Ocarina (data compression) and Exanet (scale-out NAS) to build the present storage products group.

Dell recently hired Marius Haas to be its President for Enterprise Solutions and Dario Zamorian to be its VP and general manager for Enterprise Systems and Solutions, the converged and integrated systems.  Dell also hired John Swainson to be the president of its software group, and most recently Suresh Vaswani as new head for the services division, replacing Steve Schuckenbrock.

The executive shake-ups are indicative of tumultuous times for Dell as it experiences growing pains and the pressure of growing its own portfolio, facing new demands from an evolving enterprise space.  Dell will need to establish a firmer grasp on the storage market to ensure a safe transition away from consumer PCs, where the manufacturer’s seen a decline with the rise of mobile devices.

The ability to layer software products and services on top of its storage portfolio will also be key to Dell’s enterprise strategy moving forward, and that will require a collaborative leadership team.  We heard from Dell’s new line-up at a Dell World panel this week, each department head touting a streamlined approach to stitching all these components together.

Fluid Data Architecture

Facing tough competition, particularly in the storage space, Dell is strengthening its storage offering by expanding its Fluid Data architecture.

The Fluid Data architecture has been designed to allow customers to manage information more effectively, responding to three of the greatest challenges facing IT departments today: the exponential growth of data, the different requirements which arise from changes in IT, and the rigidity of the traditional storage infrastructures.

The same way that HP intends to make its StoreOnce deduplication technology standard for all of its storage equipment, Dell wants to generalize the use of its Fluid Data technology to all its PowerVault, EqualLogic, Compellent and DX storage solutions.

The New Storage Strategy

Dell’s future lies in an approach that goes beyond the PC, a market in which the company has already demonstrated its prowess. During the past three years, Dell has taken important steps to expand its storage portfolio to offer customers a full range of products and solutions for world-class storage.

Through the recent acquisitions of EqualLogic, Exanet, Ocarina and Compellent in the last three years, Dell has grown from a storage distribution company to be a major competitor in this market, especially within the IP storage industry.

Dell provides customers with solutions that help manage the growing complexity of information technology and the rapid explosion in data. Currently, Dell offers a comprehensive portfolio of storage area networks and network-attached storage based on Fluid Data architecture, and complements these offerings with security, data compression and backup, and recovery capabilities.  Dell simplifies the technology to make storage products more accessible to companies of all sizes.

Emerging revenue opportunities

Dell is hoping it’s messaging on converged servers, storage and networking infrastructure will drive sales. The company has recently expanded its enterprise storage portfolio with updates to the software platforms for Compellent and PowerVault MD3 storage array products. The Compellent Storage Center 6.3 array software offers double the performance of previous releases when handling enterprise workloads on Compellent SC8000 controllers. The PowerVault MD3 arrays enhancements include dynamic disk pools, remote replication capabilities as well as integration support for VMware vStorage APIs.

Dell is emphasizing the increasing adoption of converged solutions in which storage is finding itself within the server architecture. With technology moving towards the blocks, files, objects, back-up or recovery, Dell want to play up its storage strengths by combining wide range of services and infrastructure, server division and network division and security.