Dell has identified what it believes is an underserved data center technology and support services market worth an estimated $6 billion per year in potential business and has developed a new business unit to go after it.
That approach is something I expect to see replicated across the wide area networking world as well as in the data center market: It's not a revolutionary model, but it's smart market segmentation for the New IP age.
The market Dell Technologies (Nasdaq: DELL) is targeting is a tier below the web-scale giants such as Google, Microsoft and Amazon, which buy customized servers in bulk and have streamlined lifecycle and management operations: Dell calls that top tier sector the "hyperscale" market and serves that market via its Datacenter Solutions unit with "fully custom and tailored solutions."
The second tier, which includes telecom operators, hosting companies and oil and gas giants, is starting to demand data center technology on a scale that is fast approaching that of the hyperscale players, according to Dell, and which need "optimized solutions" to meet their specific needs.
Basically, they need a lot of the same stuff as the hyperscale giants but tweaked to meet the different requirements (power, cooling, cabling) of each vertical and packaged and delivered in a slightly different way to meet their demands. And, according to Dell, the market is growing fast.
So Dell has formed a new line of business called Datacenter Scalable Solutions (DSS), to target that sub-hyperscale market, offering a range of servers and support services that can be tailored to a customer's needs. The vendor is highlighting how it can mix and match the capabilities delivered with its servers and the speed at which its global supply chain capabilities could, in theory, deliver an order: One company "might choose to install a non-traditional operating system and another might need thousands of additional servers around the world by the end of the week to meet unplanned demand," Dell notes in its announcement. (See Dell Unveils Its Datacenter Scalable Solutions.)
The move also comes as Dell progresses its NFV strategy, aimed at helping network operators embrace virtualization (which, of course, seeds demand for servers) and flirts ever more aggressively with the telco community (as well as other verticals): It's all inextricably linked. (See Dell Dips Toe in Carrier NFV Market and Open NFV Group Uncloaks Its Platform Plan.)
Defining a specific data center market and tailoring a new "solution" designed to meet its needs looks like a clever move, if not a new one. While telcos and others are envious of the economies of scale and lean operational models that drive the likes of Google and Facebook, simply doing the same thing -- building a network of enormous data centers and developing technology in-house to optimize connectivity and efficiency -- would not make sense for their business models. Gaining economies of scale and leveraging the data center know-how that Dell has built up in recent years makes more sense, as long as the price is right and Dell can walk the walk as well as talk the talk.
Dell will not be short of competition: HP, IBM, Cisco and others will be gunning for the same business.
What's important here is the model: Identifying a gap in the market and then creating an offering that makes sense to meet market demand. That's something each and every company needs to do these days -- just designing a product or service and engaging in traditional "It's for sale!" marketing isn't going to cut it, especially in the New IP sector where even greater competition now exists.
Dell is on to something: Whether it can make it pay is another matter.
— Ray Le Maistre, , Editor-in-Chief, Light Reading