Dell entry shows cloud computing is becoming a commodity

Cloud computing goes from leading-edge to 'must-have' on IT shopping list.

It's not fair to compare Dell to Wal-Mart. True, it made its name on direct sales and comparatively low prices for PCs, and it uses its incredible reach to drive down component prices from overseas manufacturers as far as possible.

But Wal-Mart has a kitchen utensils department, so it always has products with a cutting edge, if not any that are on it.

Dell has traditionally offered very little with a dangerous edge, even after buying 2-xtreme-4-u gaming PC company Alienware, then damping down Alien's specs, neon-and-weirdness case designs and, ultimately, reputation.

It has also been only middling successful at squeezing into corporate data centers as more than an x86-based server vendor, despite buying virtual-storage company Equallogic and white-shoe professional services company Perot Systems to give it an extra push.

So you have to figure cloud computing has jumped the shark when you see the dominant middle-of-the-road IT vendor discussing the cloud intelligently, launching its own cloud-integration service, buying a company that connects SAAS apps and cloud platforms to existing IT infrastructures, narrowly misses acquiring sophisticated cloud-oriented storage technology, builds its own integrated virtualized-infrastructure hardware stack to compete against the more-specialized Cisco and HP, and hot virtual-infrastructure- and systems-management companies to try to match the cloud-SAAS-legacy integration capabilities of long-term suits-in-the-datacenter companies like HP and IBM.

Not everyone believes Dell can pull off a strong push for the data center.

Dell's strong suit has always been interoperability and promise of no vendor lock-in, which is angelic singing to CIO ears, but doesn't provide the kind of margins and upsell opportunities slightly less open systems do.

Still, it's made a good business selling commodity servers, and made a lot of progress on HPC and streaming-media sales through its Data Center Solutions and streaming game service OnLive.

Three-quarters of Dell's revenue comes from businesses, rather than consumers. That, along with revenues depressed along with the economy, prompted it to focus on business IT rather than "shiny objects" as Dell's VP of strategy refers to smartphones and tablet PCs.

Can a box company do not only services, but cloud?

It doesn't seem to have much choice. Cloud computing is becoming the new normal, so any IT vendor who can't play up there will be locked into a much smaller, much poorer on-premise-only niche that will probably always make up the bulk of IT assets, but will give up increasing percentages of the CPU cycles or MOPS- or FLOPS-equivalents to the cloud.

With the cost of components rising, pressure to cut prices increasing and nowhere else to go, Dell plans to increase the chunk services contribute to its total revenue from 10 percent now to 25 percent in three years.

Dell faces the same hard competition for integration, consulting, systems management and all the other high-priced data-center services it always did from IBM, HP, Oracle, SAP and the big outsourcing and services companies that usually close the glass door in its face.

The cloud computing market is so undeveloped, the eventual winners so unclear and the need for interoperability and standardized platforms so great, that Dell is starting on a much more even level than it does in most other service markets.

It has an earned reputation for pretty good quality and decent responsiveness (middle of the road all the way; good at everything, excellent or terrible at almost nothing). Very few companies are leery of working with it, though most are not attracted to it by much more than the stability and price of its hardware.

Dell will probably never become a driving force in cloud computing, but it could easily become a solid second-tier provider, along with other companies that are primarily product vendors who are also pushing into cloud hosting -- IBM, Novell, Oracle, Microsoft.

What that says about cloud itself, though, is that the market is still so immature that many customers don't really know what they're getting when they talk about "cloud," but that the desire for it is so widespread that most companies with any kind of IT budget figure they're going to have to get some before long.

In TV jumping the shark means you've worn out all your creative potential for one product; in the market for products and services -- think of how designers down-market their haute couture for housewives and competitors knock it off -- jumping the shark (or crossing the chasm) means it's not only the cognoscenti who realize you offer something valuable. Everyone else does, too.

Most of them just prefer it in a nice, predictable package rather than something sharp and dangerous in neon colors they have to figure out before they can actually use.

Kevin Fogarty writes about enterprise IT for ITworld. Follow him on Twitter @KevinFogarty.

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