Dell Storage Systems – Big Hat, Good Cattle

Dell Storage Systems Highlights

• Has shifted from a reseller to an IP-based supplier status
• Is integrating 4 acquisitions into its Fluid Data architecture
• Is moving towards a common DFFS file system
• Maintains PowerVault, EqualLogic and Compellent brands
• Has to make up for the loss of EMC reseller business a year ago
• Sees established storage systems suppliers as ‘Big Hats, No Cattle’
• Will need to increase research, development and engineering spending to maintain innovation

Darren Thomas, head of Dell Storage, brought his team to the Dell Storage Forum 2012 at ST Paul’s in London to address customers, partners, journalists and analysts. We know you’ll be interested in learning about how its status has shifted from reseller to storage systems supplier through is investments and how it thinks about the inter-relationship of its various products.

Dell’s Builds A Modern Storage Division Through Acquisition

Dell’s intention to become a storage systems supplier was signalled by its acquisition of EqualLogic, a producer of high-end SANs, for $1.4 billion in January 2008 – a brave decision given the decade of success it had experienced through a close partnership with EMC, which accounted for around 50% of its storage revenues. The recent history of Dell’s acquisitions in this area include:

• January 2010 – buying Exanet clustering assets and Intellectual Property (IP) in Israel for $12 million; it retains a development lab there and has built clustering into its storage file systems
• July 2010 – buying Ocarina Networks a supplier of storage optimisation software, founded in 2007; a specialist in writing its own algorithms, which Dell uses to build de-duplication and compression directly into its products
• October 2010 – ending the long-term reseller agreement with EMC 2 years early; this partnership had been mutually beneficial, but was clearly unsustainable once Dell had decided to focus on building its own IP into its products
• December 2010 – buying Compellent based in Minneapolis for $960 million; it added its Fluid Data storage, which automates the movement and management of data at a granular level: it had annual revenues of $147 million and around 2k customers in its last year

It also bought Force 10 Networks in August 2011, which will allow it to address many storage network issues internally. Dell does a good job of describing how the incoming IP fits together to create its ‘Fluid Data’ architecture, although we’re sure you’ll see more acquisitions in future. Dell’s storage systems approach would have been different if it had beaten HP in its attempts to buy 3Par back in 2010 of course.

Large Storage Suppliers Are Often ‘Big Hats, No Cattle’

Phil Soran, the soon-to-retire head of Compellent, described the established storage systems suppliers as men with ‘big hats, but no cattle’, accurately crediting smaller startups as contributing most to the dynamic changes in products and cost improvements for customers over the last few years.
Dell has added the IP of its acquisitions to its own PowerVault development team to build a more modern approach. It’s impressive that it is maintaining 5 development centres and investing in staff. In Minneapolis, for instance the Compellent team has grown from 500 to 1,200 since acquisition. It has also added the channel partners established by EqualLogic and Compellent to PartnerDirect.
The acquired companies have so far managed to retain their own identity (and the case of Compellent, its own Copilot customer support service) in a similar to the way KACE has been managed. It’s not just at Dell that the co-branding of acquired offerings is being supported – think about Netazza at IBM or Vertica and Autonomy at HP. It demonstrates recognition for their innovation: a very different approach to the extermination of acquired companies by many large suppliers in the past.
The advantages for the acquired company are in the ability to play on a wider stage, although their identity is clearly compromised as part of the larger organisation.

Dell – Already The Fifth Strongest Storage Systems Supplier

In our storage systems tracker we position Dell in 5^th position in the storage systems market in Q3 2011 with a 7% market share (see Figure 1). – a market worth $7.6 billion in which EMC has the largest share (21%). Dell’s dip in Q3 2011 performance is attributed to the loss of its EMC products a year before.

How Dell Fits The Components Of Its Storage Strategy Together

Darren gave a number of examples of how Dell’s storage products share common features, such as Ocarina automated de-duplication and compression, its Exanet clustering and advanced virtualisation based on its Dell Fluid File System (DFFS) In particular:

• PowerVault NX3500 and EqualLogic FS7500 NAS box both have DFFS, which provides services through industry-standard CIFS/SMB and NFS protocols over standard Ethernet interfaces
• PowerVault NX3000 for Compellent, is now based on Dell hardware
• EqualLogic PS6100 and PS4100 SANs are now based on new hardware designed by Dell’s server team
• DX6000G is an object-based storage device using Ocarina’s Exanet compression

It also designs its products to be easy-to-use and backwards compatible, which Darren illustrated by reference to Dickinson Wright, a law firm which became an EqualLogic customer in 2002, added a FS7500 in 2011 and now stores and manages 20 million client files. Phil Soran illustrated the backwards compatibility of Compellent products using The Associated Bank, Green Bay as an example, which he claims has grown its storage from an initial 300TB in 2007 to 1PB seamlessly.

Dell New Products And Future Plans

New products announced at the London show included:

• The DR4000 ‘backup to disk’ solution, it claims is to be the first stand-alone appliance to transmit compressed data; Ocarina is unusual in writing its own (rather than using standard) compression algorithms; Dell has integrated this product closely with Symantec and CommVault back-up software
• Dell Compellent Storage Center 6.0 – a 64-bit version of its ‘block architecture’ storage management software, now with better integration with VMware VAAI and vSphere – coincidentally Dell claims to big the largest seller of VMware software
• Its Microsoft Sharepoint Infrastructure Optimisation Solution, in which it is partnering with Avepoint, which has been integrated natively with its DX Object Store
• Integration of storage with its Force 10 S4810 10GB switch and Brocade’s new 16GB fibre channel SAN

We expect to see further introductions in the Compellent and EqualLogic lines in 2012. Looking further out Darren believes that with Ocarina software customers will be able to work with compressed data, ‘rehydrating’ it when needed. In terms of Cloud he realises that smaller companies are more involved today, but sees a time when Cloud storage is integrated as a tier within Enterprise storage, perhaps activated by a ‘Cloud button’. He also sees more server-less operations for data protection in future, with storage systems doing a ‘snap comply’ directly to their backup devices – whether Cloud-based or not – booting the file to get the image back when needed.

Some Conclusions – Dell Will Need To Shift From Acquisition To R&D Spending

As a sales-orientated company Dell’s immediate challenge is to make up for the loss of its reseller business a year ago – especially at the low-end, where EMC is promoting its own products of course. Its success in selling new products against the background of the Euro Crunch will be very dependent on its abilities to demonstrate significant cost savings for customers – but it shares that challenge with all other vendors.
Its engineering divisions now need to integrate through APIs with each others’ products, potentially reducing creativity – if innovation is best addressed by startups in the storage market, Dell might ‘lose its cattle’, to use Soran’s analogy.
Dell will certainly need to increase its spending on Research, Development and Engineering beyond the $665 million in its last financial year, which was only 1.1% of its revenues and compares poorly with NetApp, which spent $536 million (12.7%) – especially when Dell’s number was for all activities – not just storage.
Its opportunities are in expanding international sales, especially given the US-centric nature of its acquired assets and in building more bundled solutions with appropriate software companies, as illustrated in its newly announced Avepoint solution. Its success in many emerging markets will be dependent on demonstrating good automation and ease-of use where technical skills are hard to find.
Overall it has a convincing story, having created enough consistency between its acquired assets to begin to demonstrate a common architecture and some genuine ability to reduce its customers’ storage costs through virtualisation and in-built de-duplication and compression. Although it still has some way to go, it has already travelled a long way from its status as a storage reseller.