Dell will launch its first cloud infrastructure service later this year through a partnership with VMware, continuing its push to move beyond PCs and into higher-margin software and services.
The service will be based on VMworld's vCloud platform and delivered from Dell's data center in Plano, Texas. Customers will be able to rent compute and storage capacity on a pay-as-you-go basis, or on longer-term contracts that include reserved or dedicated hardware.
Dell will also offer consulting services for companies to build private clouds in their own data centers, also using vCloud. And it will offer to build "hybrid" clouds using VMware's Connector software, which links private and public cloud environments.
Dell planned to make the announcements Monday at VMware's VMworld conference in Las Vegas.
The moves will intensify Dell's rivalry with IBM and Hewlett-Packard, which are also building public cloud services. And they will put Dell into competition with service providers such as Amazon Web Services, Verizon Business and Terremark -- some of whom are also its customers.
Still, Dell must offer the services to stay competitive in an industry where cloud services are becoming the norm, said Arun Taneja, founder and consulting analyst at Taneja Group. All the major IT vendors will be be offering cloud services of some form in the next three years, he predicted.
Dell's "unique value proposition" will be the managed security services it will provide, derived from its acquisition last year of SecureWorks, said Mark Bilger, vice president and CTO of Dell Services. They'll be a standard part of the service, not sold as an add-on, he said.
The service will be aimed primarily at large and midsize organizations, Bilger said. It has the unwieldy name of the Dell Cloud with VMware vCloud Datacenter Service. A beta program will start in a few weeks, with general availability planned for the fourth quarter in the U.S. and next year in Europe and Asia.
Dell plans to add a platform-as-a-service offering next year using Microsoft's Azure software and another cloud infrastructure service based an open source platform -- possibly OpenStack or Eucalyptus, but Dell hasn't decided yet, Bilger said.
Through its Perot acquisition, Dell already provides application hosting services that generate about $1 billion per year in revenue. As those customers' contracts come up for renewal, Dell hopes to move them onto its standardized public cloud, Bilger said.
The more modern, VMware-based environment should mean lower costs for both Dell and its customers, he said. Many of Perot's customers were in the health-care industry, however, and Dell will need to make the service HIPPA compliant before they can switch over. It plans to do that next year, Bilger said.
Dell will offer three tiers of service: pay-as-you go, which will carry the highest cost per virtual machine; reserved, which guarantees server availability; and dedicated, where customers get their own servers. The latter two will require a one-year service commitment.
Dell wouldn't disclose pricing yet. Bilger said the services will be "competitive" with those of Dell's rivals, but he also said they will carry "a small premium" for the included security features.
Using vCloud is something of a strategy shift for Dell. It has spent the past year building its own virtualization stack, including its Virtual Integrated System (VIS) and Advanced Infrastructure Manager (AIM) software. It will now be selling those alongside VMware's software.
Customers need to use the same software platform for their private and public clouds, in order to link them together into a hybrid cloud, Bilger said. "But in the future we also want to offer mix-and-match, including our AIM and VIS technologies, and plug those into our public cloud technologies," he said.
Partnering with a big vendor like VMware is important for Dell, said Jeffrey Kaplan, managing director of ThinkStrategies.
"They've recognized that the cloud is a major part of the future of the company," he said. "To succeed, not only do they have to build their own solutions but they also have to team with industry leaders and this is an example of that."
Dell has done better than Kaplan expected at reinventing itself as a software and services company, he said. "I was not a big supporter of the Perot acquisition, but they've really made that work," he said.
The services will be hosted on Dell M610 blade servers, powered by six-core Intel Xeon processors, Bilger said. Dell will deploy the hardware in blocks of 17 racks at a time, with 192 blades and 2,300 physical CPUs, he said.