Dell’s change from trader to integrator
We’ve featured Dell quite a bit on this site recently – see our ideas on its homogeneous storage hypervisor approach, its IT services strategy, or its introduction of higher temperature tolerances for its servers. It’s been undergoing a slow but dramatic change in status from a trader to an integrator – fuelled by its acquisitions.
A look at its acquisition news page reveals details of its activity, including:

  • Make Technologies – application modernization software and services
  • Clerity Solutions – application modernization and legacy system re-hosting solutions and software
  • Wyse Technology – thin client computing devices and software
  • SonicWALL – network and content security, secure remote access and business continuity solutions
  • AppAssure – ‘backup anywhere, optimize everywhere, recover always’
  • Force10 Networks – high-performance data centre networking
  • SecureWorks – information security services
  • Compellent – storage systems
  • Insite One – cloud-based medical archiving for healthcare

Its change from being a reseller of other vendors’ offerings – or its own built from industry standard components – to being a supplier with a strategy built on its own intellectual property is a clear example of the change from a horizontally to vertically integrated market. Integration is also on the agenda of rivals such as IBM, HP and Fujitsu and arguably the raison d’etre for VCE.

Vertical integration – supplier push and user pull according to Michael
At its recent analyst conference I got to ask Michael about his views on whether Dell’s increasing vertical integration was symptomatic of vendor change or customer push. In his view it’s a bit of both:

  • Dell is acquiring a number of smaller companies which have developed deep expertise, allowing them to have more detailed conversations
  • Customers are looking to simplify their supplier relationships, looking for ‘one throat to choke’

He noted that there’s a mixed need for specialisation in technology and generalisation in purchasing.
Dell’s change is continuous and we had a chance to preview tightly integrated systems incorporating servers, storage and networking and hear from the head of its software division – so we expect that to be split out from peripherals in its quarterly financial statements soon. Spending on R&D will no doubt increase as well as Dell makes more of its acquired technology.

Vertical integration makes heterogeneous hypervising different in 2012
Inside v outside the box issues are important for customers’ implementation of various forms of virtualisation – in our studies of storage hypervising for instance, whether or not you can attach multiple suppliers’ arrays is a vital issue of choice. VMware’s introduction of ESX a decade ago turned out to be a ‘great leveller’ for server vendors, but this was at the height of the horizontally integrated market. For something similar to happen in storage (or even networking eventually) will be different and harder, due to the vertical integration strategies of Dell and others. Iconoclastic competitors will need to demonstrate ease-of-deployment and dramatically lower total cost of ownership for the systems in which they’re used to prevail.
Image Credit: Martin Hingley

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