Dell shoots for number one in servers, adds OpenStack to public cloud
Ex-Prez Clinton preaches optimism, and R&D spending, to the multitudes
Dell World 2012 It is Dell World day two, and company founder, chairman, and CEO Michael Dell took the stage a half-hour late to talk, once again, about the repositioning of the company that bears his name to be a bigger player in the IT racket.
He also invited former President Bill Clinton, who spoke for what seemed like about three hours about the things that were wrong with the world and how we all need to work together, internet-style, to make it better.
As an IT sports writer who happens to like systems, the System of All Systems is, of course, the world economy and how people, technology, money, and raw materials mash up to give us all livings and products.
And if you are a policy wonk with a systems bent, listening to Clinton go on for an hour and a half about how he sees this system breaking down and how to fix it is surely more interesting than whatever server and cloud announcements Michael Dell was going to talk about. But this is an IT pub, and we take care of business first.
In his keynote, Dell, the man, said that as of the third quarter of this year, Dell was the number one server supplier in North America and had taken the number one position in Asia, too. Dell meant in terms of shipments, not revenues, of course, with IBM selling $3.5bn and HP selling $3.3bn of machines compared to Dell's $2.1bn. But, Dell counts share by shipments, and said it was only 64,000 machines behind market leader HP.
"So if everybody here buys ten servers, I think we've pretty much got it," quipped Dell, saying that Dell, the company, had been gaining share for quite a long time with competitors moving in the opposite direction.
That's true enough. But Dell doesn't have expensive and sticky mainframe and Unix systems from which to extract disproportionate profits, either.
"If you look at the trajectory, we are on a path to become number one worldwide in servers within the next few quarters."
That's not news so much as throwing down the gauntlet at HP CEO Meg Whitman's feet. The real question is not when Dell will ship more boxes, but when it will rival HP and IBM in terms of revenues.
Dell is about half the size of HP in EMEA, but is growing revenue at around 10 per cent while HP is off 17 per cent. If HP just managed to level off and hold steady, Dell will catch up with it between 2016 and 2017 in terms of worldwide revenues, and if HP keeps losing revenue share as it currently doing, Dell will catch up with HP in 2015.
If you really want to think linearly (which is foolish even if it is fun) then by mid-2016 or so HP and Dell will switch revenue streams on servers. These are not predictions, mind you, but rather more like the limits of possibilities.
It is hard to imagine all conditions remaining the same to sustain these trends in a linear fashion. The world just doesn't work that way. And if it did, we'd be spending $150bn a year on servers by now, which we most certainly do not.
President Bill Clinton showing off his boots – and his brains – at Dell World
The other big news coming out of Dell World today, which Dell, the man, didn't even bring up, was that the company was getting behind the OpenStack cloud control freak developed by NASA and Rackspace Hosting as the basis for its own Dell Cloud public infrastructure cloud as well as private clouds, which it calls Dell Cloud Dedicated.
The Dell Cloud launched back in August 2011 and comes out of its Services group. The initial cloud was based on VMware's ESXi hypervisor and vCloud Director control freak. And back then, Mark Bilger, VP and CTO at Dell Services, told El Reg to expect an "open source cloud" in 2012 and another one based on Microsoft Azure before the end of the year.
Everyone was pretty much guessing that Dell would lean more towards OpenStack and less towards CloudStack and other alternatives available in the market, especially since it has been peddling custom OpenStack clouds to data center customers on top of its hyperscale PowerEdge-C servers for nearly two years now.
Now that the "Folsom" release of OpenStack is out, which is arguably the first usable implementation of the cloud control freak, Dell is now ready to build a portion of its own Dell Cloud public cloud on top of OpenStack. But you go first. Dell is at first rolling out a tech preview of the Dell Cloud Dedicated, a mix of boxes and software all configured with Ubuntu Server, the KVM hypervisor, the OpenStack control freak, and Dell's own Crowbar configuration tool.
Interestingly, in the kitchen sink announcement Dell made, it said that for the third quarter of fiscal 2013 (its most recent quarter) were up 30 per cent, and it also added that OpenStack would be "Dell's primary platform."
It is not hard to figure out why. Dell will get the cash for supporting OpenStack, which is free and open source, while VMware will get most of the money from any cloud based on ESXi and vCloud Director, which is not.
It is also interesting that the announcement did not mention the VMware-based chunk of the Dell Cloud public cloud that has been running in Plano, Texas since October 2011 and the other chunk running in Dell's Quincy, Washington, data center and yet another chunk that was fluffed up in Ireland to serve Europe.
But Stephen Spector, cloud evangelist at the IT supplier, did remind everyone in a blog post today that these three VMware-powered regions of the Dell Cloud are up and running.
Spector said that Dell would be opening up Dell Cloud regions in Asia, South America, and in other parts of Europe next year. And the question, of course, is this: How many of those 10 million SMBs who buy servers from Dell today and barely use them are going to just say to hell with it and buy a slice on the Dell Cloud instead?
And just what does that to do Dell's server market share. Does the market share count if you build your own servers and sell them to yourself?
The announcement today also introduces naming conventions: Dell Cloud is the public cloud, and Dell Cloud Dedicated is the private cloud chunk based on the same technology that you deploy in your data center. It seems reasonable to expect Dell Cloud Managed to be a private cloud you install in your data center and allow Dell Services to manage, and Dell Cloud Hybrid will be any mix of the methods outlined above.
Next page: It's the internet of things, stupid
Remember when Dell was bragging about being on pace, and then becoming, the largest PC seller in the world... by the revenue number, not the irrelevant boxes shipped number. They accomplished their goal and then figured out that they had been rope a doped into working crazily to become the leader of a largely worthless low margin business. This is version two. x86 servers are PCs a few years removed. They have zero software value add and are just cases for Intel's technology. It is low-tech. x86 servers with no additional value add will probably all eventually go to Lenovo or another low margin provider. The people who make money on x86 servers are Microsoft, VMware, and to a lesser extent Red Hat.
In summary, even if Dell were the number one x86 server provider in the world, it would not be a great thing. Second, they are not even close to matching HP in x86 server revenue or IBM in total server revenue. IBM is practically in an entirely different market with Systems p, i and z. Those are software platforms which happen to include the hardware. Extremely high IP value add.
Oh yeah, he also emptied the White House of the taxpayer-provided decorations when he left including some stuff that was hanging around there for quite a few decades time. And IIRC, the window curtains. Just sayin'
Quand c'est foutu, c'est foutu!
"Some would say Clinton got his second term and budget surplus because of the dot-com boom, so maybe he should be Bubba Dot-Com. It has been almost 20 years since Clinton was first inaugurated, and Clinton said it was hard to believe it has been that long."
Yeah. Here's something that was written in January 2001. It still applies to January 2013. It's hard to believe it has been that long.
White House insiders have said for years that Bill Clinton has been desperately seeking a legacy for his administration – other than having been impeached and having disgraced himself and his office. At long last, he has at least two of them.
The first of these is the coming recession, his first gift to the incoming administration of George W. Bush. Like the invasion of Somalia that Dubya’s father had handed Clinton upon taking office, this is surely going to cause some heartburn for the new president, even if it provides a strong rationale to pass the tax cuts on which he campaigned.
Clinton’s second legacy will be soaring prices for oil and electricity. All during his presidency, he and his underlings conducted what amounted to a jihad against energy producers, along with owners of other natural resources. A soft economy in Asia mitigated some of the inevitable price increases, but reality finally came to bite Clinton and company this year with a vengeance. It will be up to Bush to follow more sound policies, although the same groups that supported Clinton’s anti-energy policies will hog the media spotlight if the new president follows economically-sound policies....
No such luck with Dubya of course, but let's stay on track....
Dependence upon the Keynesian paradigm keeps Business Week and its allies from understanding the nature of the current business slump. The current high-tech morass is not due to any lack of aggregate demand or quirks in the tax code. Instead, we are seeing once again the classic business cycle as first outlined by Ludwig von Mises in 1912 and again by Mises, F.A. Hayek, and Murray Rothbard in later works. This seeming cluster of entrepreneurial errors has come about because Greenspan and the Fed shoved billions of dollars of new money into the economy, triggering malinvestments that now must be liquidated. Any scheme – monetary or fiscal – by the government to reverse this current trend will only make matters worse.
Furthermore, new money does not arrive by helicopter or a Brinks truck at your door. New money comes into the economy through the banking system, as banks lend their excess reserves within the fractional-reserve pyramid. Such actions are accomplished through the Fed’s massive purchases of government bonds in its open market operations, as well as the lowering of the Fed’s key lending rate by fiat.
For much of the second term of Bill Clinton’s administration – and especially during the Monica Lewinsky scandal – the Fed, under Greenspans’s aggressive leadership, pumped new reserves into the system, with much of the lending going into capital markets. Furthermore, the Fed’s lowering of interest rates encouraged venture capitalists to pour their investments into the Internet startups.
At first, the scheme seemed to work. The infusion of new money into the high technology sector soon translated into a stock market boom, which increased both the Dow Jones and NASDAQ indices by huge amounts. Soon after came the parade of "Dot Com" multi-millionaires who saw the value of the stocks they owned zoom to unbelievable levels.
However, as Mises, Rothbard, and Hayek would have noted, the pattern of new investment did not fit the pattern of consumer spending. While the advertisements for some of these new startups made a big splash during the Super Bowl last January, they didn’t translate into consumer demand for their products and services. By the late summer and early fall, many of the once-hot Internet stocks had plunged to near-penny stock levels. The Austrian Business Cycle theory, ignored by academe and the political classes, had once again proven true.