Global CIO: Dell And The Pursuit Of Google

Huge buyers such as search engines have reshaped the top end of the server market. That's forced Dell to turn its traditional mass-market business model on its head.

Chris Murphy, Editor, InformationWeek

January 20, 2010

7 Min Read

Google designs its own servers. When InformationWeek editors visited Dell's campus recently, Dell exec Tim Mattox made the case for why, he hopes, that won't last forever. "When they start getting rid of the executive chefs at the Google campus for employees, that's when they probably start saying 'You know, we probably don't need to design these servers ourselves,'" says Mattox.

That's the punch line. What follows is the substance of how Dell's pursuing the modern mega-buyers of computing power, from search engines to research facilities. It's a pursuit that turns Dell's traditional mass-market business model on its head.

The effort centers on a business unit called Data Center Solutions--a group with only about 20 customers that, Dell says, would be the No. 3 seller of server units in the U.S. last quarter if it were a standalone company. The group claims every major search engine except Google as a customer, as well as giant computing consumers such as Lawrence Livermore Laboratories.

Dell formed the Data Center Solutions group about three years ago, in recognition that an emerging class of companies--primarily Internet companies such as search engines and social networking--was going to reshape the highest end of the server market. At the time, the top 20 buyers of servers made up about 5% of the total server market. Today, the top 20 is more than 10% of the market, Dell says.

Dell made its name selling standards-based computers that buyers could tweak to their needs--selling one type of machine to many. And its original vision for the Data Center Solutions group was something like that. Dell planned to craft the perfect server for about five vertical markets--the perfect box for search engines, another variation for social media, another for grid environments. That didn't work at all. One search engine didn't have anything like the same needs of another.

So DCS became more like a custom tailor -- or like a concierge catering to high rollers at the Bellagio, says Forrest Norrod, VP and general manager of Dell's Data Center Solutions. "We say 'yes'," explains Norrod. Now DCS will design a server completely from scratch to meet the very specific needs of the biggest server users. A server design might have only one customer--but a customer that buys many thousands of that one design. "It's almost a service, not a product," Norrod says.

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Customizing servers to a specific environment is critical to driving down total cost of ownership for these giants. Norrod offers an example: one search provider had a 20 megawatt data center and calculated it would run out of space before the company could build a new one. The search company had a multi-room facility, and each room held about 10,000 servers. Dell worked with the company to redesign cooling systems, change the airflow within the server racks, bring in new containments, and remove some cooling systems. By using servers designed entirely for that building's power, space, and environmental conditions, the company could put 22,000 servers per room. "That's the kind of problem we like to solve," Norrod says.

Dell has learned that, while two search engines might not be interested in the same server design, the design still may get re-used--by a big user of computing in another industry, such as an oil and gas company doing exploration modeling, or an investment bank doing financial market simulations. So now it has 30 to 40 base designs, and each is typically sold to about five customers. A secondary mission for Norrod and the Data Center Solutions unit is to probe what these giants are doing, and figure out which of those trends will spread to mere mortal buyers of servers. One trend Norrod sees is that early adopters have moved past just "experimenting and kicking the tires" with cloud computing, and are moving some non-critical workloads into cloud computing environments.

He also believes private cloud architectures will proliferate. That will primarily support new development, and in some cases be used where a major application migration--primarily for homegrown apps--justifies the cost of moving it off legacy architecture.

By private cloud, Norrod means a standard way to manage a virtual server farm, that lets an IT team produce on demand virtual machines using a very simple job schedule. However, IT managers are "fairly skeptical about the intelligent cloud," he says, meaning being able to automatically provision virtual computing resources based on business policies. Data Center Solutions' goal is to shares these lessons with Dell's enterprise product groups, who will translate them to more mass-market business server needs.

Dell's creation of Data Center Solutions reflects how cloud computing is changing the server market. Microsoft was a merely average buyer of servers only a few years ago; now it has multiple, $500 million data centers with capacity for tens of thousands of servers each. There's a limit to this consolidation of server buying, since companies aren't going to move all their computing in giant public clouds. But the ability of vendors such as Dell or Hewlett-Packard to land these "whales" will be increasingly important to their server sales.

So does Dell, or any of its rivals, have a shot at Google--the white whale of this market? It seems unlikely near term, as the company looks wed to the strategy of designing its own servers. It would take a shift in Google's culture as well as its strategy. Google has had the cash flow to chase the ideas for incremental server performance itself, Mattox says, and gotten results. But like free sushi in the cafeteria, what makes sense at one stage of expansion might not for the next.

Mattox, who's VP of relationship product management, makes the case that working closely with Dell would give Google more influence on the product roadmaps of companies that make components for servers, from disk drives to processors. Google can likely get a good deal of attention of those suppliers on its own, given its influence and insight into customer needs, but "how much influence relative to someone who has 30% of the server market globally?" Mattox asks. Dell can offer suppliers true scale -- that if a component maker develops a certain product, they can reach a mass market through Dell's sales.

The second advantage Mattox says Dell brings to this competition is innovation. It's not the first word that comes to mind when most people think of Dell. But Mattox points to shipping containers as one example of its focused innovation strategy. Companies such as Microsoft are buying servers packed in conventional shipping containers, arriving at their data center ready to plug into the power and cooling systems so they're up and running in a matter of hours. Dell's research and development is focused on specific power and cooling challenges of those environments, he says.

Those containers, however, also show the bruising competition Dell faces as it fights to win the emerging cloud giants. Much of Microsoft's new Chicago data center is built around the container approach, but when Microsoft first planned the center, only two companies had the capability of delivering containers. When the center opened this fall, six vendors could, as companies scrambled to deliver whatever this giant customer wanted.

Dell's rivals such as Hewlett-Packard can offer scale and innovation as well, Mattox concedes. But he contends Dell has and will continue to be the vendor that "pushes x86 boldly to go where it hasn't before." In the increasingly important fight to supply cloud computing's giants, that's a decent start.

About the Author(s)

Chris Murphy

Editor, InformationWeek

Chris Murphy is editor of InformationWeek and co-chair of the InformationWeek Conference. He has been covering technology leadership and CIO strategy issues for InformationWeek since 1999. Before that, he was editor of the Budapest Business Journal, a business newspaper in Hungary; and a daily newspaper reporter in Michigan, where he covered everything from crime to the car industry. Murphy studied economics and journalism at Michigan State University, has an M.B.A. from the University of Virginia, and has passed the Chartered Financial Analyst (CFA) exams.

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