Can Dell survive in the cloud era despite killing its public cloud offering?

Partner approach

The partner approach offers increased value to Dell's customers and is part of its cloud strategy to deliver end-to-end solutions, Orakwue said.

Acting as a single-source supplier, Dell will offer customers a choice of suppliers and technology, free from being locked in to a single platform or pricing model.

"We are committed to open source. We want to give enterprises tools and enable them to pick the cloud platform of their choice," Sam Greenblatt, chief architect at Dell's Enterprise Solutions Group told Computer Weekly.

We are committed to open source. We want to give enterprises tools and enable them to pick the cloud platform of their choice

Sam Greenblatt, Dell

Dell's focus is to integrate hardware and software and simplify datacentre products for its users, he added.

"Cloud is a whole new computational model and AWS [Amazon Web Services] has destroyed the economics of public cloud.

"But there will always be a need for hardware to power the cloud services and we are committed to make our hardware compatible and make it work to deliver any type of cloud service," Greenblatt said.

While Dell will discontinue the sales of its in-house, multi-tenant, public cloud IaaS, it will continue providing private cloud services.

"If you are not good at delivering a specific IT service or are a late entrant, it is always a good decision to back off," Randy Kerns, senior strategist at analyst firm Evaluator Group, told Computer Weekly. 

The price to pay

Kerns pointed out how IBM is buying cloud computing company SoftLayer Technologies for an estimated $2bn.

SoftLayer is a major cloud computing infrastructure provider, which IBM hopes will strengthen its position in cloud computing. SoftLayer, which has 21,000 customers and operates 13 datacentres in the US, Asia and Europe, will become part of a new cloud services division at IBM.

While IBM did not disclose the cost of the acquisition, it could be worth $2bn, according to Reuters.

"That's a lot of money and that is the price IBM had to pay to catch up with competition in the cloud segment," Kerns said.

"Dell may not be willing to invest that much to compete with the likes of Amazon and Microsoft."

But Dell's future depends on its investment in research, development and testing, according to the analyst.

"There will always be a need for good hardware that will be the underpinning infrastructure for cloud services. If Dell can continue to deliver good hardware, then they'll have a future," he said.

Dell's U-turn in the public cloud segment could also be down to its customer base too, say some of its users.

Despite the growing popularity of the cloud, certain industries cannot move to the public cloud, according to Kurt Telep, storage engineer at FTI Consulting.

"Take us for instance, we are into e-discovery services and for reasons around data security and privacy, we will not adopt the public cloud. We will always need a datacentre and products that can help us make our IT robust, agile and capable of high performance," Telep said.

"Dell is good at providing datacentre infrastructure products such as storage, servers and management tools. If they diverged into other areas such as the cloud, they will not be able to do well what enterprises such as ours need from them."

Another Dell customer, Whitney Gray, an IT architect at Relay Health agreed. 

"A majority of Dell customers still prefer private cloud infrastructures. Even if it is managed services, they want Dell to host it privately and not want to put it in the public cloud.

"Dell can still survive in the cloud era with the help of good hardware products," he said.

In January, Orakwue told Computer Weekly that Dell's primary focus will be on its private cloud services. "Customers are showing interest in the public cloud, but when it comes to making actual purchasing decisions they are picking private cloud," he said.

But Dell also wants to be ready when its customers want to burst out to the public cloud, he added.

Analyst Deni Connor said that Dell's decision to back off from the public cloud market is a good one.

"It may be a conscious decision because if they wanted to be a public cloud supplier, they have several routes to do it," Connor said.

She pointed out that Dell acquired AppAssure which can take it to the cloud. Dell also has strategic collaborations with several technology service providers that could give them a route to the public cloud.

Competitive field

But it could be difficult for Dell to compete with public cloud giants such as AWS. "Also, one of cloud's biggest uses, for medium-sized enterprises, is for online backup and Dell can provide that, so they would be fine without their own public cloud product," she said.

At its enterprise forum, Dell emphasised its strategy is to integrate hardware and software and deliver converged infrastructure and software-defined services.

Greenblatt pointed a Gartner study which estimated a 50% year-on-year growth rate for the converged infrastructure market.

"By 2016, a third of all servers shipped will be part of pre-integrated systems and we are making strategic investment in the area," Greenblatt said.

This is because currently, there are servers, storage equipment, and CPU silos and the silos do not give enterprises the required scalability or flexibility but converged infrastructure can help them scale up and down, he explained.

"But ultimately it gets down to the fact that public cloud is not in Dell's business model. Public cloud is a service rather than a product and Dell is a specialist in hardware products," Telep said.