Dell: Appeal of vertically integrated IT stack vastly overblown

Two Dell executives said that there's a minority of customers that want a big integrated stack of technology from enterprise vendors, but most companies are wary of consolidating with one supplier.

Brad Anderson, senior vice president of Dell’s enterprise product group, said that the company's strategy is to offer products that are modular and open to heterogeneous shops. Anderson, speaking at a Morgan Stanley technology conference with director of investor relations Rob Williams, said Dell's enterprise business is showing a steady recovery and executives are going forward with IT investments that were shelved in 2009.

Within that enterprise rebound, Dell is playing in the land of giants as everyone from HP to IBM to Oracle pitch integrated stacks of hardware and software.

Also: Dell earnings: Enterprise spending rebounds

• Server sales show signs of life in the fourth quarter; IBM remains top dog
• HP earnings: Strong first quarter results, 2010 outlook

"[Rivals] are becoming closed, proprietary and becoming more so. People want more flexibility and modularity," said Anderson. "The notion is that [IT buyers] want to consolidate on vertically integrated stack. There's a small group that likes that, but it's not where the majority wants to go."

Among the other takeaways from the Dell executives:

• Server demand was strong in December and that strength carried over into January. Customers are going into 2010 "with a budget and a plan," said Anderson.
• Intel's Nehalem EX---a low-end server chip---is expected to drive server sales in late March and early April. Anderson said the performance gains will be hard for customers to ignore. "There's a real value proposition for customers using four-socket servers for consolidation purposes," said Anderson.
• Both executives said the synergies with Perot Systems are on target. The executives said the company has been involved with 200 potential deals that neither Dell nor Perot would have been able to pull off individually. In addition, Perot is implementing Oracle financial software at Dell so the company saves on consultants.
• Dell is hiring enterprise sales people to focus on the corporate, public sector and SMB markets.
• The company is on the prowl for acquisitions, specifically ones that can build out its software capabilities to manage cloud and virtualized environments.
• Components are tight, but the hard-drive shortage has improved as suppliers add more capacity. Memory supplies---specifically DDR3---remain tight.
• The Windows 7 rollout in the enterprise will be gradual but build through the year. The Dell executives were "pretty confident" that companies will upgrade hardware and Windows 7 at the same time. The timing of this upgrade cycle will remain to be seen, but customers are planning to plow ahead with Windows 7 upgrades.