Dell and Red Hat OpenStack: Turning IT into a Strategic Asset

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    2015 Tech Trends: A Critical Crossroad for IT

    Dell and Red Hat decided to form an alliance to address the mid-market with a solution based on OpenStack, a market that they felt the other big players left unserved. Dell was one of the founding members of OpenStack and I had a chance to interview Dell IT as to how they implemented this tool internally. Dell has been a big advocate of the concept of “eating your own dog food,” and since I’ve seen huge product problems at firms that don’t follow this policy, I find the subject interesting and hope you do as well.

    Innovation Lab

    The impetus for this effort was the development of an internal Innovation Lab and the staff needed a private cloud platform to build and showcase the offerings they would be using internally. They weren’t initially sold on OpenStack as a team. But Michael Dell personally advocated this path. Initially, they chose a Red Had competitor as their partner. However, after a series of failed trials, they switched to Red Hat, which performed much more successfully. Coincidentally, Dell was also launching a broad partnership with Red Hat, and a lasting partnership was formed.

    You need a very diverse set of skills to pull this off. Most companies, particularly in the mid-market, don’t have all of these skills, making a central lab that could collect them valuable both internally and externally (likely to both firms).

    IT, as you would expect, drove the effort and it was driven to completion, eventually forming a foundation for both internal and external related offerings. Dell IT and Dell Software development then worked hand-in-hand to create the offerings. This lab is unique in this regard, sitting both within the internal and external development efforts.

    Once the Innovation Lab was opened, a number of incubations started where proof of concepts were built and tested against users and requirements: 25 in 2013 and 33 in 2014, and about half of those made it eventually to become internal offerings.

    Midokura SDN

    One of the interesting results was that they identified a series of gaps that needed to be filled in OpenStack software-defined networking. They then used this to identify a networking partner, Midokura, which sells a platform-agnostic SDN solution. This was Midokura’s first large enterprise partnership and it allowed that company to move into this new market, in a move reminiscent of what IBM did for Microsoft and PCs years ago.

    External Solutions

    This move next resulted in a series of external offerings that range from kick the tires kind of small OpenStack offerings to full-on production systems based on what was developed both for the Innovation Lab and on it. To make the solutions function for customers and to resolve both external and internal problems, people from Red Hat have been placed in Dell and Dell employees reside at Red Hat. This provides deep coordination between the two companies through all phases of this effort. It reminds me a lot of what has been done in the past at firms like Microsoft. It’s something that newer firms like Google don’t seem to grasp.

    Sales have been in Fortune 500 companies to create similar development environments to the Innovation Lab. They are using this to transform their own IT organization, but they are as yet unsure what to move onto OpenStack and use the platform to vet the efforts.

    In addition, sales have been made to large banks, which apparently are farther along and use the platform to develop OpenStack applications that they already know they need. It is interesting that banking seems far more aggressive on OpenStack than other industries. One of the reasons is that the banks tend to have a lot more internal development staff focused on moving very rapidly to newer platforms in order to be competitive.


    What’s Next

    Next up: Moving to more of a Platform-as-a-Service (PaaS) architecture using OpenShift, and for Mobile Microsoft Azure, making it far faster and easier to roll out to an even more diverse set of customers. Then wrapping it up better with a set of analytics so the results can be more easily measured and improved over time and the overall offering is more sustainable.

    Wrapping Up: Making IT a Revenue Center

    When you see an effort like this, you are likely to think more of newer firms like Amazon than firms like Dell or HP. It isn’t a great deal of fun to work in IT when it is a cost center, as it typically had to be. But in a technology company like Dell, there is always an opportunity to make IT a strategic part of future offerings. That is what we have in Dell’s OpenStack effort, while for customers this becomes an important option that is fully vetted now by both Dell internal IT organizations and other customers. It showcases a way that IT can be used strategically, making it a far more interesting and likely far more fun place to work. These two elements are critical for both getting and holding top talent, and that talent is key to the success of the firm.

    It is interesting to note that Dell is also using its CMO, Karen Quintos, far more strategically than other firms, suggesting that Michael Dell is able to fight with all his resources far better than his peers, which should pay off rather well competitively. In most firms, both marketing and IT are seen as more liabilities than assets, and that likely limits both what the firms can accomplish and who they can hire and retain.

    Michael Dell seems hell bent to make sure those limitations don’t apply to him. He seems to have taken “thinking out of the box” as a career objective.

    Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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