When, in 2006, Dell first started talking about reinventing itself under the "Dell 2.0" moniker it seemed as if "Dell 1.2" would have been a more apt tagline. Michael Dell himself admitted that "Dell 2.0 is about evolving, not revolution." Dell 2.0 was seemingly still very much tied to a historic PC worldview and remained suspicious of all but the most nominal of research and development investments.
Since that time, we've seen significant change in the IT industry. Hewlett-Packard acquired EDS and 3Com. Oracle bought Sun. Cisco and EMC got cozy. EMC brought its VMware subsidiary closer. In short, the big IT vendors collectively swung the pendulum away from the horizontal mix-and-match layers that characterized the industry since the rise of distributed computing in the 1980s. Rather, the "New Horsemen" seek to deliver integrated hardware and software stacks that shift the effort of making things work together from the customer to the vendor and, not incidentally, gives the winning vendor a bigger slice of the IT pie.
For Dell, this was not a welcome development. Dell, after all, was the consummate horizontal player. It sold x86 boxes and it sold them cheaply, aided by a finely honed supply chain, a Web-based direct sales model, and a tightly controlled cost structure that didn't leave room for fripperies like R&D. But now the focus is shifting to integrated stacks and solutions. Making matters worse, other Tier 1 vendors have evolved their own supply chains and channels to the point where they can sell against Dell fairly effectively on price so even Dell's traditional differentiation isn't as strong as it was.
However, last year Dell, a large services company. It's steadily beefed up its software portfolio and its ability to work with enterprise companies in ways that go beyond just shipping them servers and PCs. In short, while Dell's identity remains clearly distinct from the other Tier 1 system makers--indeed it relishes that fact--it has evolved into something much more akin to them. This was clear during the day I spent with them at an analyst summit last week in San Francisco.
Dell is trying to position itself as delivering "virtual integrated solutions." Its fundamental message is that Dell too can deliver complete hardware and software stacks for those customers that want them--but, unlike the other guys, Dell isn't locking you into one vendor's in-house solution. Rather, pieces from Dell and a variety of partners can be combined in a way that is open, offers choice, and is affordable.
This is a pretty good play for Dell. On the one hand, it does explicitly recognize that an increasing number of customers don't want to just buy components that they have to connect together themselves. It furthermore recognizes that the modern Tier 1 systems vendor does need to make at least some level of investment in areas such as systems management. On the other hand, Dell doesn't have the sort of intellectual property or, indeed, company mindset to compete with the likes of Oracle, IBM, HP, and Cisco/EMC on their own terms. So Dell is effectively making a virtue of the fact that it doesn't go to the same level of stack integration that those other vendors do.
That said, Dell is also throwing its competitive darts at a bit of a strawman. Oracle CEO Larry Ellison may evoke the 1960s mainframe when describing his Exadata database appliance but that's really just rhetoric. Even if we flash forward as late as the mid-'80s, minicomputer makers were still creating everything from processors to disk drives to operating systems to networking protocols and melding them into stacks that interoperated with exactly no one else. When we speak of the most integrated of today's stacks, it's worth remembering that they're not really in the mold of yesteryear's mainframe; they're built around many more standards than the most open system of decades past. Thus, Dell's positioning of itself as the open alternative rather exaggerates the degree to which its opponents are closed.
The initial Dell 2.0 ultimately paid too much homage to what had made Dell successful in the past and made too few fundamental changes. Today's Dell still reflects and leverages its history. But Dell 2.1 transcends it as well.