Seriously, there’s a part of me that doesn’t believe what we’re doing here. I think it’s ballsy, but I also think it’s awesome. We could seriously disrupt our business, the industry – that could be good, bad… or GREAT. I like that we’re playing for all the marbles :-)
Michael Dell challenged the team with a simple crystal clear challenge based on some strategic observations.
- We are the leader in HCI – outgrowing everyone else, and pulling out even further.
- HCI has an intrinsic architectural benefit vs. traditional stacks (including CI) – it’s easy to start small, to grow in small increments, and SDS approaches eliminate big “migration events”.
- Unlike some of the HCI players – we have leading server platforms, leading software IP of our own, as well as leading partnerships.
- Customers like the new economic choice that the public clouds are providing – 100% OPEX (pay as you go). It’s not always the right choice, the lower cost model by any means (sometimes CAPEX models that depreciate over time are better) – but the choice opens up whole new thinking, de-risks moving fast and starting, learning, changing.
- We are uniquely a private entity – not beholden to short term thinking. Our main debt holders are playing the long game, and Michael name is on the building.
Michael Dell’s challenge was this: 1+2+3 = we should disrupt ourselves and the industry with a simple, ridiculously compelling operational expense model for HCI. Team: do it fast, and lean in, and do it in a way that is simple enough to scale globally for all customers – not just some.
We did. World, say hello to Cloud Flex for HCI!
Cloud Flex for HCI, provided by Dell Financial Services is ridiculously simple:
- 100% OPEX model. Customers can choose to consume Dell EMC VxRail and XC customers can chose the traditional capital expense or leasing models – or with Cloud Flex for HC – they can go with a 100% opex route, paying monthly per appliance.
- No obligation. The customer can return any or all of the equipment after the first year.
- No up-front costs on the product. None. This is not a lease, and doesn’t require lease terms.
- Built-in price decreases over time. Wow – while public cloud costs tend to decline over time, they don’t commit to it in advance. Cloud FLEX for HCI decreases the monthly payment up to 30% each year.
As an example – if the HCI appliance cost was $50K, in the first year, you would pay $1500 per month, in the second year, you would pay $1125/month, in the third year $850/month and so on.
Here’s another example, this time visually.
BTW – 9 VxRail P series appliances can run thousands of beefy VMs.
Customers can do some quick math and see that on VxRail and XC (each appliance capable of running many VMs) – the per VM cost per month is VERY price competitive with the public clouds. Now they have the 100% opex option to make that economic comparison clear.
Let us help you get started. Here’s our math – what’s yours?
I want to be clear - it’s not that “public cloud bad”, rather – “hybrid cloud good”. We are just completely making a point very clear…
MYTH: public cloud is intrinsically cheaper than on-premises choices due to their scale. This is FALSE.
FACT: people go cloud for agility and operational simplicity - not economics.
FACT: Hybrid cloud is the way to go. There are workloads that are best for off and on-premises clouds for economic reasons, for governance reasons, for data gravity reasons.
FACT: HCI underpins the on-premises part of hybrid cloud – because only HCI with “cloud inspired” architectural models can have the architectural underpinnings for the economic and operational agility to pair with public clouds.
Yes, there are lots of other examples of things that SEEM like this, but when you double-click, they aren’t in the same league. Go ahead – double click. They are always some form of a lease, and the vendor goes there kicking and screaming.
When you do the math over a multi year period – you’ll find that Cloud Flex for HCI, unlike other offers or leases, while there is some premium over just buying the capital outright for a depreciation period – the delta is small.
I’m not aware of anyone doing this as aggressively as we are. There is nothing like Dell EMC Cloud FLEX for HCI. Period.
Now, consider and reflect… The industry response here is going to be interesting.
IT pros like many of my readers often don’t spend a lot of time thinking about another business/finance dimension to things. It’s important as IT professionals to have awareness and comprehension – it creates a lot of “aha moments”.
Let me explain.
AWS was born in a massive retailer with huge cash flows and internal IT demands and could take the balance sheet hit as AWS grew. Azure was born in a massive company with huge ELA revenues to offset the massive investments as their business transitioned to consumption models. Google Cloud Platform was born inside a company with massive infrastructure spends to support Google search and YouTube.
For public companies that are in the business of on-premises infrastructures – whether it’s big players (like Cisco, HPE and others), or startups (like Nutanix, Pure and the bevvy of new players that come and go like fireflies)… for them, if their customer base demanded consumption models like Cloud Flex for HCI – it would crush their cash flows, revenues and earnings. They would only recover in time-frames that are measured in years. Doing models like Cloud Flex can be great in the LONG game (customers love it), but in the short to mid timeframes, their shareholders would kill them.
Heck, it’s hard as Dell EMC. But it is POSSIBLE. Why? Because we’re private – and we’re in it for the long haul.
If it turns out that customers LOVE Cloud FLEX for HCI – yes, it absolutely causes near term bookings problems for us. After all – as pointed out in the example, in the first year, the customer pays 61% LESS than with traditional models capex models. I want to make it stark by stating something patently obvious: with traditional capex models, 100% of the revenue comes in all at once.
If you are vendor who is customer focused vs. quarterly earnings focused, then you’re calm cool and collected about giving the customers the OPEX/CAPEX choice – if your stuff is good (if it’s bad, all customers will return it :-).
If you are quarterly earnings focused – well, it’s a different story.
If our competitors want to compete with this model, they better warm up on their responses to their shareholders and be prepared for massive share price compression.
Dell EMC competitors – BRING IT ON.
It also highlights something interesting at the macro level view for those who think big, and stretch their minds – because it reveals a deeper, more broad truth. Public markets and shareholder interests are not always aligned with customer interests – particularly during times of technology and economic disruption.
For all of these reasons, most importantly because we think our HCI offers are great, and as customers use them, they will love them – we are also making sure our salesforce “leans in”.
HERE IS WHAT LEAN-IN LOOKS LIKE. Our field teams are compensated the SAME for a Cloud FLEX HCI as a traditional CAPEX model. PERIOD. So simple, it’s stupid :-)
We’re going to pause for a bit, see customer/market reaction, and then we will continue to evolve and refine. What are we dreaming up?
- We are thinking to expand this to all HCI (including the VxRack Family)
- expanding the idea to our Cloud offers (Enterprise Hybrid Cloud for VMware, Native Hybrid Cloud for Pivotal+VMware, Azure Stack, RedHat OpenStack Ready Bundle)
- Doing creative things to make sure the customer is not only economically protected, but technologically protected (automatically getting new goodies over time).
… But first, we want to see what YOU our customers think. So… What do you think?
Great post, thank you!
Posted by: HeathHamm | June 09, 2017 at 12:36 AM
Love it, great post!
Posted by: Greg Griffiths | August 06, 2017 at 10:53 AM