Michael Dell: 'New Way' SDN Opens Door For Dell To Shake Up 'Old Way' Cisco

Software-defined networking is disrupting Cisco Systems' legacy business and opening the door for Dell to act as an "instigator" in a major paradigm shift, said Dell founder and CEO Michael Dell.

In an exclusive interview with CRN at the company's Round Rock, Texas, headquarters, Dell said SDN is following the same path that redefined compute and storage with a new openness, choice and flexibility in the market.

"If you look at what happened in compute, what's happening in storage, you see it coming into networking," Dell said. "It's a big disrupter, and we're an instigator for sure."

[Related: Partners: Dell Is Making Dramatic Gains In The Data Center]

Solution providers said the Dell SDN future ready offerings are replacing the high priced, proprietary Cisco IOS and NX-OS switches aimed at locking customers into a complete Cisco solution. They said the Dell networking offering provides customers with a more open, flexible, economical, programmable and dynamic network environment.

"It's all about how you provide great value to customers," Dell said. "How do you embrace the new way, not the old way? Other guys have built some fabulous businesses in the old way, but the old way works until it doesn't work anymore. Then you've got to change it."

Dell, for its part, is touting its SDN offering as saving customers up to 65 percent in capital expenditures versus Cisco with switches that deliver as much as 14 times greater density and an 86 percent reduction in time to design and deploy network fabrics with Dell Active Fabric Manager.

One sign the Dell networking offensive is taking hold: 13.6 percent year-over-year Dell growth in network switching revenue in the first quarter of 2015 compared with 8 percent year-over-year sales growth for Cisco, according to market researcher Dell'Oro Group.

"I think we're starting to see the change coming, and certainly when you think about virtualization, software-defined, containers, all of the momentum in the next-generation infrastructure, it's very disruptive for the old way," Dell said. "We've always fashioned our business to say the first principle is if something is really good for the customer, we like it, and we're not going to stand in the way of it, even if it means it's going to change our business."

Cisco, San Jose, Calif., declined to comment.

Paul Neyman, president of Houston-based Dell partner Waypoint Solutions, said that overall Dell's networking offerings have become more competitive with Cisco’s in the past several years.

"Before the Force10 acquisition [in 2011], we thought Dell was a small-office or branch- office-type vendor, not necessarily enterprise-grade," Neyman said. "After the acquisition, we started working more seriously with it. It made it possible to go in and say there's a real alternative to having Cisco in your data center."

Waypoint has been all in with Dell for the past two and a half years, and networking makes up about 10 percent of its $13.6 million business. "We've grown tremendously because we essentially started from zero with Dell," Neyman said.

Waypoint has had success moving customers from Cisco to Dell networking, according to Neyman. "The old saying is nobody gets fired for buying Cisco. There are some people that are real diehards, but the number of people willing to move away from Cisco has gotten very big. They're like, 'Hold on a second, we're spending a heck of a lot of money, are there alternatives out there? Things that are as good or better?' "

For Neyman, the answer is yes. "We see real traction in setting up a branch office. Maybe [the customer] likes Cisco in the core but is willing to do something else on the edge. When they're exposed to it, they get comfortable, then next time they're more receptive. They say they've had good luck with Dell networking and they're willing to give it a chance," Neyman said.

Customer demand for open software-defined networking and data center standards is driving big gains for Dell, said Mike Souza, senior vice president of sales and marketing for San Francisco-based solution provider FusionStorm.

FusionStorm's Dell software-defined infrastructure seminars are consistently jam-packed with 50 customers or more at each event, according to Souza.

"In the hardware market, Dell has become a very good general-purpose platform for customers to do all of the software-defined and hyper-converged infrastructures," he said. "Dell is much more open [than legacy data center competitors]. What I have seen is a metamorphosis with HP, Cisco and EMC in particular getting bigger, manufacturing more of their own stuff and becoming more naturally closed."

Dell is a lot more willing to embrace disruptive technologies including hyper-converged servers, said FusionStorm Regional Vice President Jason Myers. "A lot of the siloed companies are less reluctant to move to disruptive technologies because they have a huge legacy base of customers and are still making a ton of money to sell private platforms," he said. "You had industry people stuck in the business for 25 years used to doing things the old way. People at Dell were willing to innovate and try new things. Dell was hungry to get into the data center. We wanted to be hungry with them."

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 232 on the CRN 2015 Solution Provider 500, said the company’s Dell networking business is growing at double digits as his Cisco networking business declines. "It's all about the long-term cost and ROI you get from Dell vs. Cisco," he said. "The maintenance alone on Cisco networking gear is costing customers 33 percent more and sometimes even greater. Dell feels Cisco is vulnerable and is doubling down on networking."

In the past year and a half, Dell has launched its Open Networking Initiative and signed partners Cumulus, Big Switch Networks, VMware and Midokura. More than 30 deployments have been done in the cloud, financial, telco and midmarket verticals, with 10 pilot deployments under way, according to the company.

While those numbers many not be eye-popping, they give Dell a fast start on a course that's likely to take years to develop, said Christopher Wahl, independent analyst and president of Austin, Texas,-based Wahl Network.

"SDN is likely more of a 10-year road map," Wahl said. "When an SDN player can start showcasing 1,000-plus customers using the SDN, NFV options in production, then we'll know it's roughly the second or third inning in the SDN game."

Cisco is the networking market leader, controlling a 62.4 percent share of the global market in the first quarter of 2015, compared with 2.5 percent for Dell, according to Dell'Oro Group.

But Dell's efforts haven't gone unnoticed. In fact, Gartner last month called Dell "the most innovative and disruptive mainstream data center networking vendor in the market over the past 12 months."

Gartner called the Open Networking Initiative "radically new," and said it "sent ripples throughout the networking industry and caused other vendors to consider and/or respond with similar competitive offerings."

In a recent report, Gartner said Cisco is threatened on a couple of fronts: The company needs to protect its large installed base, keep pace with market changes and contend with the market perception that its portfolio is high-priced, over-engineered, overly proprietary and confusing.

Cisco Chairman and CEO John Chambers, meanwhile, has argued that Dell has missed every major market transition and compared the company to now-defunct minicomputer power Digital Equipment Corp.

At Cisco Live this week, Chambers listed Dell on a chart of companies including Digital Equipment Corp., 3Com, Nortel and Alcatel-Lucent as having been disrupted. Chambers also placed Dell on a list of companies with IBM, Hewlett-Packard, Intel, Oracle, Microsoft and SAP as likely to go through another disruption in the 2018 time frame.

Dell, who took his company private in a near-$25 billion leveraged buyout in late 2013, refused to respond to Chambers' public attack on the Dell business. "I don't want to get into a name-calling exercise," he said. "I think we don't have anything to apologize for in our success. What I see happening in compute and storage and networking is very much in line with our strategy, and we're well positioned to grow, outgrow the market. We see a strong embrace from partners."

Steven Burke contributed to this story.

PUBLISHED JUNE 10, 2015