Dell Unveils Subscription Model To Counter Amazon, Microsoft (bloomberg.com) 29
Dell is planning to offer business clients a subscription model for products like servers and personal computers, "seeking to counter the lure of cloud services from Amazon and Microsoft," reports Bloomberg. From the report: Dell and its hardware peers have been under pressure to offer corporate clients the flexibility and simplicity of infrastructure cloud services. Public cloud titans such as Amazon Web Services and Microsoft Azure have cut demand for data-center hardware as more businesses look to rent computing power rather than invest in their own server farms. Rival Hewlett Packard Enterprise said in June that it would move to a subscription model by 2022. Research firm Gartner predicts 15% of data-center hardware deals will include pay-per-use pricing in 2022, up from 1% in 2019, Dell said.
Dell is making it easier for clients to upgrade their hardware since they don't have to spend a large amount of capital expenditures upfront, but can pay a smaller amount each month that counts toward a company's operating expenditures. For the consumption programs, customers pay for the amount of storage or computing power they use. Companies can also hire Dell to completely manage their hardware infrastructure for them. While Dell's overall sales climbed 2% in the quarter that ended Aug. 2, demand for its servers and networking gear dropped 12% in a reversal from last year, when there was unprecedented customer interest in the products. Dell still expects the vast majority of customers to pay upfront for products in the next three to five years, Grocott said.
Dell is making it easier for clients to upgrade their hardware since they don't have to spend a large amount of capital expenditures upfront, but can pay a smaller amount each month that counts toward a company's operating expenditures. For the consumption programs, customers pay for the amount of storage or computing power they use. Companies can also hire Dell to completely manage their hardware infrastructure for them. While Dell's overall sales climbed 2% in the quarter that ended Aug. 2, demand for its servers and networking gear dropped 12% in a reversal from last year, when there was unprecedented customer interest in the products. Dell still expects the vast majority of customers to pay upfront for products in the next three to five years, Grocott said.
The 90's called... (Score:2)
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The advantage of the cloud is that if your particular server has a fault you just switch to a different one. It can be done automatically and users might not even notice.
If you rent a server from Dell and it breaks down you will have to wait for Dell to send someone to come fix it. Actually first you get to talk to Dell tech support who want you to unplug it and plug it back in again just to make sure it's not a problem with your kit before they send someone.
That's why companies love the cloud. They don't c
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Amazon, Microsoft et al put the onus for security on the customer, look at the contracts, they aren't liable for anything and tell the customer passwords, encryption and server security is their problem.
Re:The 90's called... (Score:5, Informative)
They manage physical security at their datacentres, they manage patching and hardening the OS, they manage some intrusion detection, and if you have them run things like an Exchange server for you they handle spam, blacklisting and virus scanning.
It's the IBM mainframe model (Score:5, Insightful)
I don't think Dell is going after the cloud providers like they say they are. They're just adopting the IBM mainframe model, which is currently a never-ending cash machine for IBM. Customers generally don't buy mainframes, they rent them and pay by the MIPS monthly for using them, along with whatever OS and product licenses they activate. In return, IBM's army of needful-doers comes on site and fixes any problems. Hardware is often over-provisioned (because it's cheapish) to encourage customers to turn it on and add to their bills.
I was wondering how long it would take all the x86 vendors to get on board with this. It stinks for customers who may no longer be able to buy hardware outright once businesses have been softened up enough. In the software world, it's only a matter of time before all products are subscription-only, and often cloud-only. I fully expect we will be unable to get standalone Windows licenses in a few years without paying monthly. Now, companies will have to pay the Dell/HPE/Lenovo bill every month or their on premise hardware will turn into a useless lump of metal.
I fully admit I'm not a business person...but the whole OpEx thing boggles my mind. Why can't companies own assets? And on what planet does it make sense to pay a third party every month forever for the right to use a product or service?
Re:It's the IBM mainframe model (Score:4, Insightful)
If you are a certain kind of CEO, your attention span is approx. 5 years or less before you find you can switch for more money and perks. Owning equipment outright is a pain because now you must deal with all the people it takes who deal with the equipment, software, licenses, security, etc. It's much easier for you to farm it out anyway you can get your organization to swallow. You only need a few years grace period before squandering your alleged "leadership" on another company.
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'The Cloud' is not the answer to everything. Some things have to be on-premise for various reasons. In those cases, managing both hardware and the provision of hardware is not necessarily what the organisation wants to be doing, and
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Literally all the reasons it makes sense are due to taxation schemes. It's a sign of how convoluted the tax code is that it makes economic sense to pay a premium to rent hardware, which is what ends up happening. You don't actually save money on the hardware, you just pay less taxes on it.
Corporate taxes should be income taxes, not taxes on profit. Then there would be less bullshit shuffling going on, and there would be less overhead in the taxation. It also makes it harder to use a corporation as a tax dod
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Once you get to the higher ends of management you will understand. You can't get capex every 3 years so hardware replacements become 5 years, 7 years and eventually its 2020 and you're still dealing with Windows XP and Pentium 4.
Give me the 3 year Dell plan any day, finance will accept it because "it's only $100k" and promptly forget this is a yearly expense and you can tell everyone it's upgrade time and they can't say no because we don't own the equipment, you automatically get people caring about backups
Re:It's the IBM mainframe model (Score:4, Interesting)
Opex helps small businesses... Let's say you're going to start your awesome new social media platform. You need to run it on some servers, but you don't have any money. You talk to your friends and raise a few hundred bucks. Great! You can deploy your app, burn through your few hundred over a few months and (hopefully) make some money in that time to fund the next few months of hosting.
Now, scale that up to a big company. You need 10000 servers - you have three options:
1) Spend money in your current account (assuming you have enough)
2) Borrow the money (and pay interest on it)
3) Wait a while and save up the cash to buy the servers later
(1) works if you're already rich. You'll need enough money to buy the servers, and some more so that you can pay for things you also need (eg. your employees salaries etc).
(2) works, but you're paying interest, which might put up your costs
(3) not so good, because your competitors can move faster than you
Of course, once that money's spent, you cant use it for anything else. In other words, your money is tied up in hardware when it could be getting used for other stuff. That other stuff will have to wait until you've earned some more - and that slows you down.
Hence, opex works well for all these cases - although it costs more over the long term, it costs less right now.
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Thanks! That's a very helpful description. It's been unclear to me about the pros/cons of capex vs opex and this helps clarify in simple terms.
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I think there are also some tax advantages as well, but I really try to avoid that world where possible so someone more versed in corporate taxes may be able to fill those details in.
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I disagree that this works well for the small business owner generally. I believe that for most small businesses, computer hardware is not the primary expenditure or focus. Most small businesses are concerned with things like running a gas station, supermarket, metal fabrication, automobile repair/sales, etc., things that typically aren't pure computer technology focused. For these businesses, it makes a great deal more sense to buy the few computers and licenses they need and then use them for a very long
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In the software world there is a strong movement toward open source.
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The thing is, hardware often has a expiry date. For businesses, that's about as long as they can get support for, for example, how much to get 4 hours support (it dies, the repair person will get it fixed in 4 hours from your call).
For a brand new server, it's cheap and tossed in. But when the server is around 5 years old or so, well, it costs big bucks and you pretty much have to shell out for a new one. After 8 years or so, you can't buy support for that machine no matter how much you pay. And it can be a
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I don't know about that. I'm in charge of purchasing servers where I work. I've always bought Dell servers, but it's unlikely I will be buying any more. It's not Dell. Boxes from other manufacturers are very similar. The one thing Dell does better than the others is support. If something breaks they have a man onsite with parts within 24 hours, which is what you need if a company of 1000 people stops i
Two things it still doesn't address.... (Score:1)
The gutting of in-house IT competency continues... (Score:4, Insightful)
Of course you can trust these guys, (in India or some other place) to manage your hardware and software stack, right?
Totally.
Not like any of these guys have ever been caught stealing data either, right?
Good luck getting "John" over the 'phone to reformat & reload your PC when you're already late for a flight or customer appointment.
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Well, it's Microsoft and Dell, what really are you going to do about Customer Support in India? Moreover, if something happens, liability lies elsewhere. We've had a number of instances of data theft and industrial espionage over the last few years, the only way to defend is not hire foreigners which is illegal discrimination or heavily monitor every data transaction which probably isn't worth it for most of your data.
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Call me crazy, but I don't believe it's illegal discrimination to hire only US citizens.
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It is unless you're under federal contract (eg DoD). There are plenty of regular, legal non-citizens (eg permanent residents) that it would be illegal to discriminate against.
SOX and PCI Compliance Nightmare (Score:5, Informative)
pay for local storage? so over pay for disks and t (Score:2)
pay for local storage? so over pay for disks and they control your raid and other stuff?
also can't have admin to trun off 100 meg a day logger service.
Lease servers to build your own cloud (Score:2)
Does it go "ping!" (Score:2)
"Aah! I see you have the machine that goes ping. This is my favourite. You see, we lease this back from the company we sold it to, and that way, it comes under the monthly current budget and not the capital account."
But the real cost is salaries (Score:2)