Dell Technologies hones focus on infrastructure, PCs, hardware as a service

"We're focused on fueling growth by continuing to modernize our core infrastructure and PC businesses and expanding in high-priority areas including hybrid and private cloud, edge, telecom and Apex," says Dell operating chief Jeff Clarke.

Dell Technologies is doubling down on its infrastructure and PC business as it aims to pivot to hardware-as-a-service. This pivot also includes the realization that Dell doesn't have to own software assets when it can partner.

First, Dell Technologies World kicked off with two key items. Dell Technologies rolled out its Apex portfolio as a service effort and fleshed out plans introduced in 2020. Like Cisco and HPE, Dell sees its future riding along with recurring revenue, financing and as-a-service offerings. The move is likely to speed up automation in data centers and infrastructure.

Dell's fourth quarter recurring revenue, which includes deferred revenue amortization and utility and as-a-Service models, was about $6 billion, up 8% year-over-year.

In addition, Dell Technologies also launched edge computing offerings and plans to target verticals like manufacturing.

But the real pivots have been occurring before Dell Technologies World. Dell is getting focused in a hurry.

Exhibit A: Dell Technologies sold Boomi, a cloud integration platform, to private equity players Francisco Partners and TPG Capital. Note the quote from Jeff Clarke, chief operating officer of Dell Technologies.

We're focused on fueling growth by continuing to modernize our core infrastructure and PC businesses and expanding in high-priority areas including hybrid and private cloud, edge, telecom and Apex.

Before the Boomi sale, Dell Technologies said it will spin off its 81% stake in VMware. Dell and VMware will have a commercial agreement to co-develop technology, align sales and marketing and preserve their partnership.

Michael Dell, CEO of Dell Technologies, noted that both companies will remain key partners. "Dell Technologies will continue to modernize its core infrastructure and PC businesses and embrace new opportunities through an open ecosystem to grow in hybrid and private cloud, edge and telecom," said CEO Dell.

For Dell, the as-a-service pivot will change everything for the company's infrastructure. To wit:

  • Dell will change how it goes to market and service customers.
  • Managed services will be increasingly important.
  • Dell will increasingly leverage its PC, server and storage infrastructure to target key verticals and technologies such as edge computing, 5G and work-from-anywhere.
  • Software will be critical, but the focus will be more on automating maintenance and operations in the data center.
  • Partnerships will also matter.

Jeff Boudreau, president and general manager of Dell Technologies' infrastructure solutions unit, said "there's a lot of work to do across the value chain including systems, tools, people and automation."

Boudreau said AI, telemetry streams and management tools will simplify infrastructure. He added that Dell Technologies will also look to partner more with developers and software providers as well as infrastructure players like Equinix. Cloud vendors will also play a role where Dell will partner and compete in some areas.

"A lot of customers are shifting to an as-a-service model being in a hybrid multicloud world," said Boudreau. "Customers are looking at flexibility and choice and where data should best reside."

Will focusing on hardware pay off?

By honing its focus on hardware, Dell Technologies is making a few core assumptions. The assumptions are:

  • The PC market will continue to thrive with a larger customer base.
  • Infrastructure may be able to grow somewhat better than gross domestic product.
  • Edge computing provides strong growth prospects.
  • Customers are paring vendor lists and Dell will be a winner.
  • And hardware-as-a-service can fundamentally change customer relationships.

On an analyst call following the VMware spin-off announcement, Michael Dell said:

We've been there when customers needed us and now, they're turning to us as their trusted technology partner for digital transformation. In a world where customers are narrowing their vendor list, focusing on fewer strategic partners, we are rising to the top and we have an advantage position in the marketplace.

Dell added that the growth prospects for an infrastructure and PC focused company is good. CEO Dell said:

Companies and organizations around the world recognized that digital transformation is more important now than ever. The dialogue with customers has also changed at the highest levels. They want our help to drive better business outcomes and deploy new technologies. Whether it's artificial intelligence, machine learning, 5G or automation, they want help bringing a cloud operating model to their IT infrastructure and Dell is positioned to deliver.

Analysts in research notes have largely focused on Dell Technologies' assets and putting values on individual units. Clarke was asked whether Dell Technologies will be able to grow without VMware.

Clarke said Dell will focus on high growth infrastructure including telecom, 5G, edge computing, multicloud and next-gen data centers.

Time will tell the tale about Dell Technologies' future growth. But refocusing on hardware (even growth areas) when Dell's initial acquisition of EMC was largely justified by ownership in VMware and a plan that revolved around a hardware and software stack.