Michael Dell On Apex’s $1B Q4 Performance, Public Cloud Repatriation And Fallout From ‘Massive Pandemic-Led Expansion’

‘We’re running through a big, wide-open door here, and we see lots of growth,’ Dell Technologies CEO Michael Dell tells CRN regarding the partner opportunity with the company’s Apex cloud platform.

Dell Technologies wants partners to sell more of its Apex cloud solutions, and no one at the company is more bullish about that opportunity than founder, Chairman and CEO Michael Dell.

“We’re offering a consumption model and the ability to automate the infrastructure, which is what public cloud offers, but with much more favorable economics, which is why it’s growing so fast,” Dell told CRN during an interview last week. “Great opportunity for our partners. … Ultimately, when a customer has infrastructure, what they want are the outcomes and the solutions that the infrastructure provides their business, not the infrastructure itself.”

Dell Technologies is giving partners incentives on the front end of Apex deals as well as market development funds on the back end, structuring them to increase partner participation within an offering that is designed to drive cloud-like ease of use across any type of data environment.

“More and more customers are talking about multi-cloud, or repatriation, or really understanding what the financial implications are of where different workloads go, and Apex is certainly helping with that,” Michael Dell said.

In the interview, Dell discussed the broad economic trends in the market, including tech layoffs and PC spending, Broadcom’s merger with VMware, and his take on Dell’s channel progress.

“We like to say pleased, but never satisfied,” he told CRN.

Dell Technologies has kept its leading position in selling servers and storage, and it managed to top the record revenue it achieved in 2022 last year, but only barely. The company’s 1 percent growth was further tempered by a warning that it was looking at a significant revenue slowdown ahead, which was anchored by lagging end-user PC spending. PC sales have been in a marketwide decline since 2021, reaching four consecutive quarters of lower sales at the end of 2022, according to research firm IDC.

Dell was not immune. Sales inside the company’s PC-focused Client Solutions Group (CSG) unit were down 5 percent for the year, with consumer PC spending down 40 percent year over year in the fourth quarter.

Michael Dell said the Round Rock, Texas-based company’s historic demand cycles indicate that the slowdown could be reversing course, adding that it has grown market share an average of 1 percent every year.

“We’re about five to six quarters into that valley,” Dell said. “Typically, that’s where it stops going down and starts to go back the other way. We’re seeing encouraging signs in certain sectors like small business, which is one of the first to come back. We’re definitely more optimistic about the second half and expect from the first quarter you will start to see some sequential growth going forward.”

That optimism from Dell carried over to him saying that, after laying off 6,650 workers earlier this year, no more job cuts will be needed at Dell for the foreseeable future. He also said he was “confident” that Broadcom and VMware will get their deal done.

Here is more of what Dell had to say in his exclusive interview with CRN, edited for length and clarity.

You chimed in on a LinkedIn comment from an executive about what he viewed as excessive costs causing him to reconsider the move to the cloud. It just seems as though even smart, well-run businesses haven’t cracked the code on how to best use the cloud. How is Apex helping them do that?

The growth that we’re seeing here is quite substantial. Our orders for Apex in the fourth quarter were roughly $1 billion. So to put that in context, our ISG [Infrastructure Solutions Group] business was roughly $10 billion. Call it 10 percent. And it’s growing super fast.

If you step back from this and think about what’s happening, there was this, ‘Let’s move everything to the public cloud’ idea, including lift and shift. Three years ago if you asked a bunch of CIOs about lift and shift, they would have said, ‘Oh yeah. That’s the thing. Let’s lift and shift.’

Well, they did lift and shift, and the economics of it were horrible. They’ve all kind of figured out now that lift and shift is a bad idea. They are using cloud for cloud-native apps, but there, again, it’s very workload-specific. It turns out they can’t do it in just one cloud, they need multiple clouds, so sometimes on-prem[ises] and colo[cation] works out better. Now they have the edge.

You’ve seen it on LinkedIn. More and more customers are talking about multi-cloud, or repatriation, or really understanding what the financial implications are of understanding where different workloads go.

And Apex is certainly helping with that. We’re offering a consumption model and the ability to automate the infrastructure, which is what public cloud offers, but with much more favorable economics, which is why it’s growing so fast. It’s a great opportunity for our partners.

On the partner front with Apex, partners say Dell has done a good job of listening to them and incenting the program the way they want. Is this going to be the year of Apex?

Not just this year, but every year is the year of Apex.

Ultimately, when a customer has infrastructure what they want are the outcomes and the solutions that infrastructure provides their business, not the infrastructure itself.

Again, Apex is helping customers more quickly get to that result and allows them to apply more of their energy to the things that create differentiation for them. So I think we’re running through a big, wide-open door here, and we see lots of growth here.

That’s why we’re continuing to add more and more capabilities and seeing our partners lean in with us here.

I talked with numerous partners who said the channel program on the ISG side is fantastic. They love it. But they don’t feel that same level of love and engagement from Dell on the PC side. Is there a pullback from that, or more of a focus on the infrastructure side with regard to the reseller partners?

Certainly there are more opportunities for channel partners to add value on top of ISG than CSG. We certainly have partners who are very successful with CSG, but it’s absolutely true that ISG has been growing faster and has more channel opportunity.

Is there relief on the way for the slowdown in spending on PCs? Dell Co-COO Chuck Whitten recently said he expected as much based on how Dell has historically performed. Do you foresee greater growth in PC sales?

Let’s understand the context, first of all. You have a tight labor market. Even with some of the slowing down in the economy, you still have a tight labor market for key skills. What organizations have figured out is that the thing that is right in front of the user is what the user, or the employee, most associates with the company’s commitment to being a technology-forward organization.

If that’s a great experience, the employee feels good about the tools they have to be successful, and if it’s not, well, they don’t feel good about that. All that is to say is that companies are investing in that end-user experience.

Now, if you look at the market, it certainly went up during the pandemic. There was tons of remote, hybrid work. What’s really interesting about all this is if you look over the last 10 or 11 years, we have gained a point of share every single year ... whether the market is going up or down. That’s our job. We think the opportunities are there. Certainly we’re about five to six quarters into that valley. Typically, that’s where it stops going down and starts to go back the other way. We’re seeing encouraging signs in certain sectors like small business, which is one of the first to come back.

We’re definitely more optimistic about the second half and expect from the first quarter you will start to see some sequential growth going forward.

On that broader economic outlook, a lot of companies have had layoffs, Dell included. Do you think going forward that’s going to be part of the regular news we hear or is that going to taper off some?

I can’t speak for all the companies out there. We don’t have any more plans to do that.

I think if you look historically, there was this massive, pandemic-led expansion, and there was some overexpansion there, and I think that’s what is being corrected.

Have you used Chat GPT?

Yes.

How did you like it? In my house I use it for bedtime stories.

I’ve done that too, with my grandson. If it can be done, I’ve tried it. And all the large language models out there— Anthropic’s Claude, Google Bard, some of the open-source models.

I think it’s incredibly exciting and interesting technology. It’s unlocking the power of data, and it’s a wonderful thing for all of us to reimagine how our organization and world will work as the cost of cognitive power goes to zero. How can we make all of our teams more productive? How can we help everyone be healthier, safer and more successful in everything they’re doing? And if you have a lot of data and you’re not using AI, you’re doing it wrong.

During Broadcom’s last earnings call CEO Hock Tan was bullish on generative AI as a driver of growth in the data center. Is generative AI’s advantage for Dell more about the individual business use case or is it in supplying the infrastructure that supports these platforms?

The fastest-growing workloads in our ISG business are AI- and machine-intelligence-driven. That’s been true for some time. And this kind of generative AI, large language models, just accelerates that.

If you think about a business like ours, let’s say you sell hundreds of millions of things out there in the world. Customers use them. They have questions. Something happens. When they contact us or they contact our partners, they’re basically repeating answers to questions that have already occurred in the past.

If we do a good job, we’re giving them the best possible answer. So if you have tools like this, and you can more accurately get the best answer to that person, think about that in the context of any activity that goes on in any company. It’s an enormous unlock of power and productivity.

It also expands the creative window for anyone who is doing any sort of creative work, whether it’s in marketing or in engineering.

For companies, it’s a big issue because they don’t want to put their confidential or proprietary data in these tools, so they need ways of doing this that protect that information. So those are the kinds of things that we’re working on with customers and partners.

The open-source large-language models that are advancing rapidly are running on our infrastructure. We just introduced our PowerEdge servers that support eight of the Tensor Core H100 Nvidia GPUs. These are perfect for these AI models. We were the first in the industry to provide that, and customers are spinning those up right now to create that kind of capability.

Now if you are a company like a bank, you don’t need this thing to write poems or to tell you who won the Super Bowl. You want it to do things for your bank. So it’s actually an easier problem. So you train it with all this information, and your people are going to become more productive. They’re going to be more successful, and you’re going to be a better organization at whatever it is you are trying to do. So that’s kind of the plot. We’re seeing that. That’s why these AI workloads are the fastest-growing part of our ISG business.

We’ll have a lot more to say about this at Dell Technologies World in seven or eight weeks.

According to filings Broadcom made with the SEC, you were one of the first people Hock Tan spoke with about the VMware deal. One of the things that solution providers are having trouble understanding is what is Broadcom going to do with VMware? You’ve got such a good perch from where you sit. Can you give us any insight on this?

Well look, I can’t speak for Broadcom, but what I heard from them and from Hock is they’re going to invest heavily in the core VMware platform.

Certainly, Dell Technologies has had a long partnership with VMware even before the combination with EMC, and that will continue. And VMware continues to be a vital part of the multi-cloud ecosystem.

VMware has great capabilities. I think you’ll see Broadcom invest in those to continue to grow it.

Last Broadcom question. We’ve watched this deal churn through different regulatory agencies, it’s still in front of three of them. Are you confident that this deal is going to happen?

Yes. I mean, based on everything I know, which is probably a little more than most, I would say, hopefully. Yes, I’m confident it’s going to happen.

In 2013, you said at a BoB conference that you wanted the Dell partner program to be the best. How close are you to realizing that?

At Dell Technologies we like to say, ‘Pleased, but never satisfied.’ We have a tremendous program and it’s grown tremendously thanks to the partnership with the fantastic partners we have been able to cultivate. We haven’t looked back too much. We’ve looked forward. Relationships have continued to grow, so we’re super happy with what we have achieved, but we’re looking forward to continuing to grow.

Who has a better channel program than Dell Technologies?

[Global Channel Chief] Rola [Dagher] and I were with a pretty massive group of our partners this past week, and they seemed like a pretty happy bunch. There’s always more to do. But very, very happy with the progress we’ve made.

Certainly if you told me 16 years ago [when Dell’s channel program launched in 2007] that we’d be at this point, there’s a lot to be proud of there, but we are continuing to look forward.