from the silicon angle media office in Boston Massachusetts it's the queue now here's your host David on tape hello everyone and welcome to this week's episode of the cube insights powered by ETR you know this past week we attended the Dell technologies Industry Analysts event and in this breaking analysis I want to summarize the key takeaways and discuss some of the macro trends in the industry that are affecting Dell I'll also discuss some of the fundamental assumptions that Dell is making in its operating model and I'll talk about some of the challenges that I see for the company going forward and hopefully what is a frank manner now let me start with the event itself it was held in Austin Texas and it's clear that Austin Texas is becoming the epicenter of Dell post-acquisition of EMC it's shifting strongly back to Texas while the legacy of EMC remains what is the most critical part of Dells portfolio thanks to vmware the energy of Dell emanates from its founder Michael Dell the event was attended by about 250 press and analysts over a two-day period it was very well run with strong levels of executive access which is always very important to the analysts and lots of transparency and I thought clarity of message now the number one takeaway on this is Dell in four years the company has gone from irrelevance to a dominant and highly relevant player in the enterprise tech especially the CIOs and it's one of the most amazing transformations of a company that personally I've ever seen and I've seen several there were four other key takeaways for me that I'll show on this first slide of Alex if you bring it up first Michael Dell has put forth a set of moonshot goals for 2030 let me give you some examples by 2030 Dell says that for every product that they sell they're going to recycle an equivalent product by 2030 50 percent of the global workforce of Dell will be women and 40 percent of the managers of people will be women 25 percent of the u.s. workforce will be either Hispanic or African now most tech stories today are negative and this is a great positive message I'm not gonna spend a lot of time on this because in there's much more that Dell laid out but kudos for Dell to make for making these initiatives a priority you know particularly the women in tech and the diversity in the minorities I think it's excellent the second takeaway is Dell for Dell is the Dell is being driven by Jeff Clark and this guy is on a mission to simplify the portfolio Dell claims its reduced its product portfolio from 88 platforms down to 20 of that power platforms that powers a new brand now the reality is Dell really hasn't deprecated 68 products many if not most are still around but the RMD energy is all going into the new stuff now the third takeaway was a big announcement around power one power one is Dells new platform for the next generation of converged infrastructure now a lot of people might look at this and say well this is converged infrastructure without Cisco well it is actually and while that's true power one according to Dell is a much more of a developer friendly API and micro services based platform with a lot of automation software built in it's essentially going to be Dells go forward platform for customers that don't want to roll their own infrastructure the expectation or inference that that we took away was that power one will integrate most if not all future storage networking and server products Adela's positioning this as a complement to HCI or hyper-converged infrastructure which comprises VX rail VX flex which is the scale i/o and of course the OEM Nutanix so you can see Dell still got some work to do in terms of streamlining its portfolio and here's my lock of the day is that they'll be phasing out the Nutanix OEM relationship you could take that one to the bank now the fourth takeaway was the Dells cloud strategy is really coming into focus is it a winning strategy I honestly can't say at this point but in my view it's the only option that Dell has and and because of VMware they have a fighting chance Dell is in a much better position than other suppliers that that rely on you know Prem install bases because of VMware VMware is not only Dells piggy bank it is but it also gives Dell strategic levers with with CIOs and partners like for instance AWS now later on I'm going to share some ETR data that will give you some context but the bottom line is that the cloud is having an impact on everyone's business including Dells and I mean let me add the Dells cloud strategy in addition to relying on VMware is completely dependent on the assumptions that the world is going to be hybrid which is a good assumption and that multi cloud is going to evolve from what today I've said as a symptom of multi-vendor to a fundamental priority for CIOs again not a bad assumption but because of VMware adele has more than a fighting chance to compete for share now finally that that adele is going to be able to capitalize on the edge personally I think this is the biggest wildcard what I do think is that developers are going to be a crucial part of the edge and at this point in time Dell and VMware are not really top of mine in the developer community now the event involved keynotes from Michael Dell and other execs including including the CFO it was Tom sweet and and many other breakout sessions you know the normal one-on-ones as well now I don't have time to go into all this but there are some things that I want to share about Jeff Clark's presentation specifically he's the person that took over from David David Gordon a couple years ago he's been at Dell for more than 30 years and he was there when I think it was called pcs limited so a long time he's a trusted operational executive of Michael Dell's I'm very impressed with this guy he doesn't use a cheap prompter when he talks and in fact he has some notes but he's got these facts and figures at the in his head that he rattles off like a staccato pace he's an OBS exec and so let me summarize the his discussion now to bring up this slide the the big picture is the data sphere is gonna grow to 175 zettabytes and half of that is going to be created at the edge of that 30% is gonna require real-time processing now he talked about the mandate for simplification and he called this staying the easy button now in QA I asked him like why did it take you guys so long to figure out something so obvious which is kind of a snarky analyst question not his credit he didn't throw his predecessors under the bus rather what he did is he focused on the future and sit he said you know they shared the figures that I stated earlier about you know taking 88 platforms down to 20 and he focused on the priorities of the future so he didn't say it but I'm gonna say it for him he inherited a very messy portfolio and he had to clean up the crime scene me tell let me tell you what a buyer said about EMC back in 2018 this is from the ETR Venn survey when they go out and they probe you know specific customers and they talk to them this guy says NetApp has done a really good job of advertising and positioning itself within the cloud and within data centers themselves they've got a broad portfolio and I don't want to make comments about NetApp but so just I'm not sure I agree with all this but okay come back to his statements and and they've they've integrated fairly well here's what's relevant what he said was EMC on the other hand is not as well integrated they've got a broad portfolio but it's not necessarily - easy easy to pick and choose from the different categories okay so I agree with that you know look the mega launch product dujour worked for EMC it allowed them to carry on for another five or six years after the downturn but the lack of integration eventually caught up to that minute and it will always you know caught up catch up to large companies who rely on either lots of M&A or spinning out new products with lots of overlap anyway I digress the third thing that Clarke talked about was the big market size and the share gains pcs are a 200 billion dollar market servers are an 80 billion dollar market an external storage is a 26 billion dollar market Della's gains 600 basis points according to Clarke in pcs over the last six years 400 came in the last three years 375 basis points in storage in the past two years now of course what he didn't mention that was after a dismal performance a few years earlier so they had a pretty easy compare but my point is this when you talk to Michael Dell you talked to Tom sweet you talked to Jeff Clark and all the people folks in the company share gains are critical to Dells strategy especially because the cloud is taking so much share of wallet in the enterprise I'll make some other comments on that now finally there are two fundamental beliefs that dell has that i want to share with you one is that they can be a consolidator of these core markets in a downturn deltax they can hold their breath you know so to speak longer than the competitors and of course in an up market they think they can accelerate their leverage points which leads to the second belief that jeff clark talked about which is how dell will deliver differentiation and value so he decided four items there one is they got 40,000 direct sellers so they got a big go-to market presence they got 35,000 service professionals a 66 billion-dollar supply chain and then Dell financial services arm which you know forces Dell to carry a lot of debt but that debt throws off cash and it's not really part of Dells core debt from EMC acquisition now others have that too but but Dells got you know big presents there all right so I want to pivot to the ETR data and let's see how Dell looks in the spending survey and since market share is so important to Dell why don't we take a look at how they're doing so Alex this slide that I'm showing here what each er refers to as market share market share is defined by you TR as vendor citations in the survey excluding replacements so customers that are adding spending the same or spending more as spending less divided by the total number of respondents in the survey so it's a measure of how pervasive the vendor is in the data set what I'm showing in this slide is Dells market share and its three most important business lines namely VMware Delhi MC and Adele's laptop business and I'm showing this from the January 17 survey to October 19 now notice the survey sample overall is 960 for respondents and the three brands they show 800 and said six hundred and twenty two and three hundred and two shared ends within that 964 so there's two points one else doing pretty well I mean I'd say it's better than holding serve and as you can see it's steadily gaining now the second point is that look at the net scores here you know they're okay especially for vmware intel's laptop but Dell EMC for instance specifically their server and storage and networking business you know not so much so there's there's a mixed story here so let me make some comments on the macro and things that I've discussed with with ETR and and my narrative on demand overall some things that I've said you shared with you before as we've discussed in past breaking analyses spending is reverting back to pre eighteen levels but it's not falling off a cliff we're seeing fewer adoptions of new tech and more replacements of old tech so combine this with lower levels of spending and more citations overall we're seeing net score go down relative to previous surveys so here's what we think is happening there's less experimentation going on with the digital initiatives which started you know back in 2016 so you're seeing fewer adoptions of new tech as customers are start placing their bets and they're retiring leggy legacy systems that they were keeping on as a hedge and they're narrowing their spend on the new stuff and unplugging the stuff they don't need anymore and they're going at the serious production mode with the pocs so that means overall spending is softer it's not a disaster but it's lower than expected then coming into this year storage is on the back burner in a lot of accounts because of cloud and the big flash injection that I've talked about giving him more Headroom servers are really soft for Dell especially because they have a tough compared with previous with last year PC is actually pretty good all things being considered so where is the spending action well it's in the cloud now q how many vendors tell me that there's a big rebate repatriation trend happening ie people have cloud remorse and they're all moving back on pram not all but many M say it doesn't happen but at the macro-level its noise compared to the spending that's happening in the cloud just do the math all you got to do is look at AWS and Microsoft and what they report and compare it to any enterprise company that relies on on-prem selling I mean I don't want to argue about it you believe what you want but I would much prefer to look at the data so let's do that so here's a slide that shows ETR data on customer spending on the cloud so you got a AWS Azure and Google spenders and how their spending patterns have changed over time for dell emc servers so you got six hundred and thirty six cloud accounts 175 to 200 shared dell emc server accounts over the past three periods and yet net scores of 24% down to 16% so look at the gray bar versus the yellow bar gray is October 18 yellow is October 19 okay you get the picture the next slide is the same view for Dell EMC storage the gray bar is last year yellow bar is this year's survey so look at it 22% down to 5% that's not good so storage is getting hit by cloud and that's going to continue all right so let me conclude with some comments in general overall I like to tell strategy you know honestly without VMware I'm probably not gonna fly to Austin this week just being honest but with VMware Dell is far more important to our community so I pay more attention to it I haven't shared many thoughts on Dells financials but I think they have some upside here as they continue to pay down their debt by the way every five billion of dollars that they retire in debt it drops twenty five cents right to earnings per share Dell throws off a lot of cash it's a very well-run company they got an excellent management team we talked about their share gain lever they'll have a public cloud so they got to make on Prem as simple as possible and ideally is cloud like as they can you know the on-premise experience frankly is well behind that of the cloud but but cloud you know getting less simple and it's not cheap so on Prem in my view doesn't have to be exactly cloud it's just got to be good enough now Dell this week also refreshed its on demand pricing but it's good and it's obviously relevant to cloud not have time to go into all the detail but suffice to say that near-term there on-demand stuff it's it's going to be a small factor in their business but longer-term I think it's going to play in it's particularly to the cloud model Dell is also betting on hybrid and multi cloud they have to and but they're up against several competitors Microsoft is the is really strong in this space Microsoft's also a partner of course but you got IBM and Red Hat Cisco Google sort of and some others but VMware it gives Dell an advantage and that is the key the big hole that I see in Dell I'm going to come back to innovation you know Dell spends billions of dollars on R&D I think it's the numbers 20 billion over the last four years so that's good but you know innovation this industry is being delivered delivered by developers no those are the drivers and and it's they're taking advantage of data applying machine intelligence and cloud for scale and Dell is clearly well positioned for the data trend you know could partner for cloud it can certainly play an AI but what it lacks in my opinion is appeal to the developer community and just as Dell has become relevant to CIOs it needs this a similar type of relevance with the devs and that's a different ballgame so it's hopes are leaning on VMware and is of course its acquisition of pivotal but if I were Dell I would not sit back and wait for pivotal and VMware to figure it out here's what I would do if I were Dell I would deploy at least a thousand engineers they got twenty thousand engineers take a thousand or fifteen hundred them and point them toward developing open source tools and build applications and tools around all these hot emerging trends that we hear about multi-cloud multi cloud management edge all the innovations going on at edge autonomous vehicles etc AI workloads machine intelligence machine learning I would open-source that work and make a big commitment to the developer community big contributions and that would build hooks in from my hardware into these tools to make my hardware run better faster cheaper on these systems I want to thank my friend Peter burrows for forgiving me that idea but I think it's a great idea I think it's radical but it makes sense in this world that is really being driven by developers okay this is Dave Volante signing out from this episode of cube insights powered by ETR thanks for watching we'll see you next time