Today, not long after its recent acquisition of Enstratius, Dell announced a withdrawal from the public cloud IaaS market. This removes Dell’s current VMware-based, vCloud Datacenter Service from the market; furthermore, Dell will not launch an OpenStack-based public cloud IaaS offering later this year, as it had originally intended to do. This does not affect Dell’s continued involvement with OpenStack as a CMP for private clouds.
It’s not especially surprising that Dell decided to discontinue its vCloud service, which has gotten highly limited traction in the market, and was expensive even compared to other vCloud offerings — given its intent to launch a different offering, the writing was mostly on the wall already. What’s more surprising is that Dell has decided to focus upon an Enstratius-enabled cloud services broker (CSB) role, when its two key competitors — HP and IBM — are trying to control an entire technology stack that spans hardware, software, and services.
It is clear that it takes significant resources and substantial engineering talent — specifically, software engineering talent — to be truly competitive in the cloud IaaS market, sufficiently so to move the needle of a company as large as Dell. I do not believe that cloud IaaS is, or will become, a commodity; I believe that the providers will, for many years to come, compete to offer the most capable and feature-rich offerings to their customers.
Infrastructure, of course, still needs to be managed. IT operations management (ITOM) tools — whether ITIL-ish as in the current market, or DevOps-ish as in the emerging market — will remain necessary. All the capabilities that make it easy to plan, deploy, monitor, manage, and so forth are still necessary, although you do these things differently in the cloud than on-premise, potentially. Such capabilities can either be built into the IaaS offerings themselves — perhaps with bundled pricing, perhaps as value-added services, but certainly as where much of the margin will be made and providers will differentiate — or they can come from third-party multi-cloud management vendors who are able to overlay those capabilities on top of other people’s clouds.
Dell’s strategy essentially bets on the latter scenario — that Enstratius’s capabilities can be extended into a full management suite that’s multi-cloud, allowing Dell to focus all of its resources on developing the higher-level functionality without dealing with the lower-level bits. Arguably, even if the first scenario ends up being the way the market goes (I favor the former scenario over the latter one, at present), there will still be a market for cloud-agnostic management tools. And if it turns out that Dell has made the wrong bet, they can either launch a new offering, or they may be able to buy a successful IaaS provider later down the line (although given the behemoths that want to rule this space, this isn’t as likely).
From my perspective, as strategies go, it’s a sensible one. Management is going to be where the money really is — it won’t be in providing the infrastructure resources. (In my view, cloud IaaS providers will eventually make thin margins on the resources in order to get the value-adds, which are basically ITOM SaaS, plus most if not all will extend up into PaaS.) By going for a pure management play, with a cloud-native vendor, Dell gets to avoid the legacy of BMC, CA, HP, IBM/Tivoli, and its own Quest, and their struggles to make the shift to managing cloud infrastructure. It’s a relatively conservative wait-and-see play that depends on the assumption that the market will not mature suddenly (beware the S-curve), and that elephants won’t dance.
If Dell really wants to be serious about this market, though, it should start scooping up every other vendor that’s becoming significant in the public cloud management space that has complementing offerings (everyone from New Relic to Opscode, etc.), building itself into an ITOM vendor that can comprehensively address cloud management challenges.
And, of course, Dell is going to need a partner ecosystem of credible, market-leading IaaS offerings. Enstratius already has those partners — now they need to become part of the Dell solutions portfolio.
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