Dell bets on Linux to capture enterprise market

In the Wintel-systems market, Dell is king of the hill. But what do you do when your hill just isn’t big enough?

“To some extent, Dell is seen as more of an SMB kind of player,” says Judy Chavis, director of business development for the enterprise products group at Dell.

If Dell is to continue to grow, making inroads into the enterprise market is essential. Chavis wants the world to know that her group is doing just that, with the help of an unlikely ally: Linux.

I spoke with Chavis about Dell’s enterprise strategy at last week’s Oracle OpenWorld conference, and she couldn’t have picked a more appropriate forum. The event, which this year filled all three buildings of San Francisco’s Moscone Center, drew an estimated 39,000 business and IT professionals from all parts of the globe — a fact that made Dell pleased as punch.

“If you go back and check with Oracle, we are their No. 1 reseller globally,” Chavis says. “We’ve seen the revenue year on year literally double.”

Beyond just bringing in revenue from software sales, however, Dell’s partnership with Oracle is strategic for another reason: It creates the perfect opportunity for Dell to gain a toehold in the enterprise — something it’s never been able to manage before.

Unlike Apple Computer or Sun Microsystems, Dell has never tried to market its own operating system for its hardware. In the company’s humble beginnings as a mail-order discount PC vendor, licensing Windows — far and away the desktop OS leader — was a no-brainer. Later, when Microsoft built a server platform around Windows, Dell went along for the ride. The result was a healthy business selling PowerEdge servers to the SMB market.

Still, the enterprise market remains elusive for Dell, and the problem is more than just perception. Chavis never uses the words “commodity hardware” to describe Dell products. She prefers the term “industry-standard servers.” But to enterprise IT departments, where proprietary Unix boxes from the likes of Hewlett-Packard, IBM, and Sun handle the heavy lifting, it’s six of one and half a dozen of the other. If x86 hardware can’t handle your workload, it doesn’t matter who’s trying to sell it to you.

That’s why, when Oracle began to view Linux as a viable alternative to Unix platforms, Dell jumped on the opportunity.

“I call it ‘degrees of separation,’ ” Chavis says. “When you look at customers, they’re running big boxes, Unix servers. You’re asking them to move to a different [hardware] platform, and you tell them to also move their whole entire infrastructure to another operating system. It’s easier for them to move to Linux than, say, one more move to Windows.”

But the OS alone isn’t enough. What makes the Oracle partnership particularly attractive to Dell is Oracle’s RAC (Real Application Clusters) software, which delivers enterprise-grade scalability in a way that’s a perfect match for the hardware vendor. Rather than scaling up, RAC encourages you to scale out. In other words, instead of buying a bigger box, you simply add more small ones — music to the ears of Dell’s sales force.

And this force has been selling. Last year Dell shipped more Linux servers in the United States and Japan than any other vendor. At OpenWorld it announced that it’s taken the No. 1 spot worldwide, as well, displacing rival HP.

It may seem ironic that a free OS could become such an important profit driver for a company the size of Dell, but Chavis takes it in stride. Asked where Linux will take Dell next, her answer is simple: “All the way up the food chain.”