Rich Karlgaard reports in Forbes:
"There’s this enormous wave of transformation occurring with data. Data is informing better decisions. You get artificial intelligence, machine intelligence. The more connected devices you have the smarter and faster you get. (And) as you get more data and as you get better computer science, the historical data appreciates in value. Ask, 'How many of these microprocessors have you licensed?' They’d tell you about 100 billion. Then if you asked, Where are they?' The answer would be: 'Anywhere there’s electricity.'"
Michael Dell, the founder of Dell Technologies, explains how his company got to be as big as IBM and why he’s steered it toward AI and the data boom.
Q: When I interviewed you 25 years ago, you were 26. You made a bold prediction: Dell would be bigger than IBM someday. Fast forward: IBM’s latest fiscal year was $80 billion in sales; your first quarter this year was nearly $20 billion. Are you as big as IBM now?
Dell: Well, it’s pretty close. (Chuckles.) Pretty close.
Q: Explain your 2015 acquisition of EMC for $67 billion. I thought the cloud had killed storage. Did you overpay?
Dell: Looking at the cloud, I see an analogy to the Internet. The cloud isn’t a place, it’s a way of doing IT. If we were having this discussion 20 years ago, we’d be talking about the Internet and you’d be asking, “What’s your Internet strategy? Where’s your Internet product division? Who’s your vice president of the Internet?” And where’s all of that stuff now? The Internet is just a part of everything.
Well, the cloud is becoming like that. If you think about what’s really going on in IT, there’s this enormous wave of transformation that’s occurring with all the data. And the data is informing better decisions. You get artificial intelligence, machine intelligence. And what’s the fuel for all that progress? It’s the data.
If AI is a rocket ship, the data is the fuel. And the more connected devices you have--whether it’s the Internet of Things or imbedded intelligence--the smarter and faster you get. So what we see is a mass of opportunity with all the connected devices, all the data, all the new computer science. And you can put your data center here, there or wherever you want, but we don’t see all of your data going to one place.Q: In fact, most regulated industries--or any of the industries that are intensely transactional-- say they want to hedge their bets with both cloud and on-premise storage.
Dell: There was a study that came out in May from something called the Uptime Institute, and it asked people, “Where do you have all your data?” And 13% was in the public cloud, 65% was on-premise, with the remainder in co-location and managed services. So the idea that everything goes to the public cloud isn’t correct.
There are use cases where a public cloud makes sense. But when you modernize and automate on-premise systems, whether they’re a managed service or a co-lo, they become extremely efficient. That technology isn’t standing still.
Then, when you further imagine this future of the Internet of Things (IoT) and the fifth generation cellular network (5G ), you’re talking about hundreds of billions of connected devices. And a 5G cellular network isn’t so you can talk on the phone faster; it’s for low-latency device-to-device communication.
When we look at what’s going on in the automotive, medical and industrial fields, we see that all of the companies involved are embedding intelligence into their products, which creates huge amounts of data. Again, the data is the fuel. That data has to be reasoned over, using new computer science--and not just the real-time data but also historical data.
As you do that, you’re able to create a better product and a better service. Now, one really interesting thing is that as you get more data and as you get better computer science, the historical data actually appreciates in value.
We hear this from banks, manufacturers, retailers, restaurateurs and health care companies. Information from a week ago, a year ago, three years ago is becoming more valuable, allowing companies to provide a better product and service today.
Q: Because you can see trend lines or can go back and test things?
Dell: I can predict things. I can improve the uptime and the reliability. I can intervene and cause a better outcome before there’s a problem. Today there are all kinds of examples already in place of this narrow artificial intelligence. And every company in the world is trying to figure out how to use the data.
The other interesting thing is that if you ask most companies today, they’ll tell you that they really don’t do such a great job in using the data, that they only use a portion of it--and a pretty small portion at that. But they’re about to get way, way more data. We’re just at the beginning of this big, big change that’s happening.
But back to your point about the data centers. If you look at a typical company, you’ll find multiple deployment models. Let’s say you’re a company with customers, and some of your customers say, “It’s fine that you’re providing all this service with our data, but we don’t want our data to leave our company. We’re concerned with regulation, security and/or data sovereignty in a particular country.”
What we’ll see are at least four deployment models: One is at the end-customer location, another is in the end-customer location’s country, a third is that your company hosts it but not in a shared infrastructure, and the fourth is a public cloud.
Again, we won’t see only one answer.
Q: Four deployment models. Isn’t there a risk for data chaos?
Dell: Not really. 5G cell networks create a whole new wave of distributed and edge computing. Those nodes are so fast that you don’t necessarily have to have all the data coming back to a central place. The nodes can talk to each other, which, in turn, will create all kinds of new applications and things.
Q: Switching subjects, when did you change your name from Dell to Dell Technologies?
Dell: It was September 2016, when we were combining EMC, VMware, Pivotal, Virtustream, RSA, SecureWorks and Boomi. We wanted to signify that what we were doing was fundamentally different.
Q: Did you feel misunderstood?
Dell: Our customers are CIOs and the CEOs and CFOs we sell to. They generally understand the breadth of what we have. It isn’t necessary for the broad public to understand our evolution from PCs to IT.
Q: Dell started out as a build-it-your-way supplier of PCs. But now you’re a vertically integrated IT company for enterprises. What are the advantages of being vertically integrated the way that you are?
Dell: Well, if you go back to what’s going on with all the data, and how you build an infrastructure able to support that, the big opportunity is in being able to move to a software-defined data center, where the computing, networking and storage are combined. And by combining Dell, EMC, VMware and Pivotal, we have the broadest capability in terms of infrastructure and in helping to define the automated managed infrastructure of the future.
Q: I hadn’t realized that Pivotal was part of your ecology, too. So now you have the past and present CEOs of VMware under your umbrella. As you’ve been acquiring all of these companies, you’ve also been pushing the envelope on the leading edge in integration. That’s a lot of stuff to juggle without dropping balls. How do you keep it all going?
Dell: We have a unique structure, not only in being a privately controlled company at the parent level, but we have this structure in which we have some smaller, fast-moving startups. Then we have the giant scale that comes inside Dell EMC. So if you take Pivotal, SecureWorks or Boomi, these are businesses that have unique opportunities that are quite tremendous. For instance, Pivotal is, literally, the operating system for the digital transformation of a pretty high percentage of the Fortune 500. When companies think about the IoT, they need a place to be able to build cloud-native applications around that, and Pivotal has built a tremendous capability in helping customers along on that journey.
Q: Is Paul Maritz still running it?
Dell: Paul is Executive Chairman, so is involved. Rob Mee is the CEO now.
Q: Well, where I was going with that is that when you have talented people like Pat Gelsinger of VMware, or Paul Maritz and some of the other EMC frontline that you acquired, how do you keep such talent motivated and focused under the Dell umbrella when they’ve been used to operating things pretty autonomously. They have to serve your goals, right?
Dell: What you don’t want to do is hold them back. You want to let them run and do their own thing. We’re blessed to have enormously talented people. And there are some real benefits that can come from the scale and capabilities we have across Dell Technologies. But you don’t want to in any way hinder people’s creativity or their ability to imagine and dream.
Q: Do you think in that regard it helps that you were an entrepreneur, who built a company from scratch and grew it through many inflection points?
Dell: It’s the only way I know; I don’t have anything with which to compare it.
The speed at which we can operate is tremendous. What I’ve discovered is that the tremendous energy that’s created inside a company when there’s a complete alignment--from the internal innovations, the investments the company is making, its customer-focused innovations, the team members across the company--138,000 people--the leadership teams and the ownership. There are no gaps among them.
And when you turn on the TV, you don’t see pundits questioning Dell. “Ok, they should do this,” or “they should do that.” In a public company that process wears you down, right? And if you’re four, five or six layers down in a corporation, and you see an activist investor showing up, you might think that will impact your future in some way. And you’d be right.
The opposite of that is having 138,000 people passionately engaged in what they’re doing and having complete alignment all across the board. Now, I think there are some interesting models in some of the newer companies. We love what Boomi is doing.
Q: Being a public company served Dell for a while.
Dell: If I remember correctly, during the time that we were a public company, which was for about 25 years, our stock appreciated 13,500%. We beat the S&P by 27 times during that period. Not that I’m keeping score, or anything like that. (chuckles.)
Q: But does it skew things? Does the stock price weigh too heavily on your strategy, regardless if whether it’s going up or down? Does it cause you to shrink your time horizon?
Dell: I’ll say this. When you’re a private company, your horizon changes. After we went private, we asked our teams to reimagine the business in the context of three, five and ten years, and asked what they’d do differently in each scenario?
That’s a bit of a mind twister when you’ve been doing it in shorter-term increments for a long time. But as you start to think longer term, all kinds of new opportunities emerge. You start thinking about, wow, what investments do we want to make? How can we develop our people? What are the real big opportunities we want to put our efforts behind?
Q: Diane Greene recently spoke at the Forbes CIO conference. She said that Moore’s Law may be slowing at the silicon level, but that the economic consequences of Moore’s Law are accelerating. So the risk for anyone making a three-, five- or ten-year forecast is to assume that the underlying technology is going to improve at the rate of Moore’s Law, and to underestimate technology’s impact on business.
Dell: I absolutely believe the economic consequences of Moore’s Law are accelerating; I don’t see any deceleration at all. And I think you’re seeing it in the sense of urgency executives have around reimagining their businesses in the digital age.
Q: Urgency or panic for some. Ford sacked a CEO who had learned the business of running an auto company under Alan Mulally for the sole reason that he wasn’t moving fast enough with digital.
Dell: Well, imagine you’re an existing company, and you look around and see these new competitors showing up with apps that are trying to marginalize your business in some way. And you’ve got Google, Apple and Facebook trying to somehow get at the core economic engine of your business.
Q: Stick a straw into the highest margin part of your value chain.
Dell: Right. And let’s further assume that in the name of cost-effectiveness you shipped all your IT off to India. So if you’re the CEO and you go looking for the IT department, there’s nobody there, right? So you come to the realization that, wow, we have to become a software company; we have to take the essence of what we do that makes us different and special and express it in software, and then use our data with all of our customers. At the same time we have to use the skills we have to try to fight off the emergent competitors with the apps, as well as Google, Apple and Facebook.
Q: That’s a core competency they may not have.
Dell: But if they don’t figure it out, they may not be in business in three to four years.
Q: What are your customers telling you?
Dell: They’re asking for help, which is where Pivotal comes in. The discussion we’re having with a large number of our customers is on digital transformation and on beginning to assemble all the data, which is the basis of how each evolves as a company.
Q: Digital transformation isn’t a new idea. Why the urgency now, which is what you sense when you talk to CEOs in practically every industry?
Dell: It’s been gestating for a while. What you’re seeing now is artificial intelligence used in a narrow way, in which you’re taking a relatively confined problem and expressing it with some software to help reach a conclusion in, say, finance, health care or transportation.
What’s exciting is the explosion in the number of connected nodes and the massive amounts of data that are being created. It’s really exciting to see all the deep learning, all the computational power that’s being acquired. We’re building a lot of those engines and working with the companies that are out there creating the tools to be able to do that.
The fuel for this is the data. And nobody stores more critical data in the world than we do. So that, for us, is quite exciting. I absolutely get the sense that it’s some kind of inflection point.
Q: John Chambers predicts 50 billion sensors by 2020, a tripling from where we are today. You agree?
Dell: I think that number could actually be low, and I’ll tell you why. If you were to go to ARM, the microprocessor company in the UK, and ask, “How many of these microprocessors have you licensed?” They’d tell you about 100 billion. Then if you asked, “Well, where are they?” The answer would be pretty simple: “Anywhere there’s electricity. There’s a bunch of them in there, in here and in there. Anything that has electricity going through it has them; they’re everywhere. Most of them just aren’t connected yet.”
But, again, the cost of the microprocessors and the cost of the connections is asymptotically approaching zero. So you’re going to get this massive explosion.
Q: Aided and abetted by 5G.
Dell: Yes. People talk about cars, but go talk to Goodyear, the tiremaker. They’re putting enormous numbers of sensors in tires. And think about all the other companies in the automotive supply chain; the number of sensors inside any given car is tremendous. So I think the numbers are going to grow quite fast--and create huge network effects.
Q: How big can Dell get?
Dell: We’re close to $80 billion in sales now. That’s out of a $3.5 trillion global IT industry that will grow three to four times in the next ten years. So, we have room to grow. (Chuckle.)
Q: There are lots of good companies vying for that space.
Dell: Yes, but I continue to believe we learn more from our customers than our competitors do.
Q: It’s hard to believe Dell is 33 years old. Thoughts?
Dell: It’s been a wonderful journey, but it still feels like we’re at the beginning, in terms of technology’s role in the world. The last third of a century’s been pretty amazing, but I think that’ll seem like nothing compared with what’s going to happen in the next third.
Q: Your advice to entrepreneurs starting out?
Dell: We started as a company that had big ears and listened, and we’ve continued that way. I believe it’s a good way to do business, right? We learn from all the things our customers tell us. It’s not that hard to figure out.
Q: Unless the customer is telling you the wrong thing, which is Clayton Christensen’s message. The temptation is to serve a current customer with more heavily featured products, until suddenly they don’t want them, because they looked over and saw this shiny new thing and now want that.
Dell: Well, there’s an intersection between customer input and evolution at the molecular level of technology ingredients. And to be successful you have to understand both of those vectors, as well as be able to imagine the right products and solutions that emerge that can be used to solve not only existing problems and challenges but also new problems and challenges that haven’t yet emerged.
Q: Is digital transformation the CIO’s responsibility, or the CEO’s, or someone else’s?
Dell: The IT organization can’t drive or lead a digital transformation. It has to come from the business and the business strategy, because they’re fundamental to how a company or an organization evolves. That’s kind of what we’re seeing. But it also expands the importance and the role of IT far beyond what they had ever been before.
You have to imagine a world in which there’s this abundance of data, with all of these connected devices generating tons and tons of data. And you’re able to reason over the data with new computer science and make your product and service better. What does your business look like then? That’s the question every CEO should be asking.
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