FULL DISCLOSURE: I finished my Dell career in April 2012, but this article is based solely on publicly available information and a little reflection.
Yesterday, Dell announced a $60 million venture fund to invest in start-up storage companies. You can read the announcement here.
This is interesting on several levels. I was struck that they named it the Dell Fluid Data Storage Fund. I was also struck by the fact that $60M isn’t, on the face of it, much money, compared with the money they’ve spent on storage acquisitions.
But I don’t think the amount of money is the point. This is the smartest way for Dell to find the cement they need.
That’s a little obscure. Let me explain.
It’s no surprise that Dell has been pursuing storage acquisitions since 2008, starting with EqualLogic. In doing so they’ve gotten a collection of distinctive technologies embedded in products, and in a couple of cases (notably Exanet), they’ve purchased technologies that weren’t embedded in products.
Many outsiders (and Dell customers) saw those acquisitions independently as point-products. But over the past couple of years, Dell became serious about integrating all the acquisitions into a distinctive vision for storage.
They took that vision public back in May 2011, shortly after finalizing the Compellent acquisition, and took a trick from Compellent, calling the vision “Fluid Data architecture”. If you’re curious about it, you can learn more here.
Simply put, Fluid Data Architecture is about building a data infrastructure that seamlessly optimizes and moves data, from server to cloud and back, without manual intervention or custom service engagement via a holistic management approach.
Imagine a byte that starts in server Flash, then SSD, then it’s compressed, moved to SATA, is split three ways, a copy sent to the cloud, another copy sent to a DR site, and then it’s moved back to SSD or Flash when needed by a service or application.
Not a bad vision. But it requires IP. And Dell is notoriously bad at spending on research and development. If you look at their 5,000 or so patents, only a relative handful relate directly to storage.
R&D is essential to all three tenets of the Fluid Data architecture.
Their acquisition strategy delivered some nice R&D capability. And over the past year, you’ve begun to see some results from that — Exanet technologies integrated in EqualLogic or Compellent arrays, for example. And of course they’ve only acquired innovative technologies.
That’s all good. But now they mostly need technologies to help drive innovation ACROSS the products so that everything is integrated into one Fluid data architecture.
They need seamless data movement from EqualLogic to Compellent, from primary to secondary to cloud and back again. They need holistic management. They need to extend their capabilities that optimize performance, capacity, and reliability.
To use a metaphor, Dell wants to build a building. To do that, you need three things.
1. A blueprint
2. Building blocks
3. Something to hold the building blocks together.
Dell has the blueprint. It’s been stocking up on bricks. Now it needs cement. Or, looking at it from another angle, it needs code that holds the architecture together by running well on Dell.
It’s apparent in the land of commodity hardware that special sauce makes the customer hungry. And by funding storage start-ups, they have a great opportunity to guide development, foster integration, and deliver distinctive capability that makes Dell more fluid — without the full risk of acquiring these technologies.
Jim Lussier, who is heading the fund, acknowledges that Dell brings something special to these start-ups.
We plan to invest more than just money; we will contribute with sweat equity too, bringing the power of Dell to startups. Unlike pure financially oriented VCs (whom we plan to co-invest with), we bring a global brand and footprint, technical expertise and IP, OEM and go- to- market capabilities.
So this is an exercise that goes well beyond the $60 million investment. Dell is supporting start-ups who can provide leveraged R&D for the Fluid data vision — which costs a LOT less than acquisition. Smart move, Dell.