Michael Dell: On-Premises Solutions Are More 'Cost Effective' Than Public Cloud For 85 To 90 Percent Of Workloads

Dell Technologies CEO Michael Dell said that with the rise of the software-defined data center on-premises solutions are more cost effective 85 percent to 90 percent of the time compared to the public cloud.

"What we have seen when you automate and modernize the infrastructure, software-define everything, and move up to the platform level, is that for the predictable workloads – which are for most companies 85 percent to 90 percent of their workloads – an on-premises solution is much more cost effective," said Dell, in an interview with CRN Thursday.

While public cloud vendors have built software-defined/automated IT services creating a very attractive interface for developers, those great technology advances are "not unique to the public cloud," said Dell.

"So what's happening is this idea of automating everything and software-defining everything, and getting to kind of autonomous operations of infrastructure is occurring all across the computing spectrum," said Dell. "So it's happening in the private clouds, it's happening at the edge, happening at the distributed core, public clouds, Software-as-a-Service, managed services – everybody's going in that direction."

Dell said the issue of public vs. private cloud is a workload-dependent discussion. He pointed to Dell Technologies' massive deferred revenue growth as evidence of the rise of on-premises private cloud/hybrid cloud momentum.

Dell Technologies this month reported deferred revenue of $22.2 billion for its fourth fiscal quarter, up $3.6 billion year over year.

[Related: Dell EMC VP Envisions IaaS, PaaS And Container Services Running On VMware Cloud Foundation]

"If you look at the growth that we had in deferred revenues or you look at the growth that we had in Dell Financial Services – with originations up 38 percent for the year – a lot of that is driven by variable usage, consumption-type models," said Dell. "So we're definitely embracing that rapidly. With Pivotal Cloud Foundry, with VMware software-defined data center and Dell EMC infrastructure, we're completely unique and advantaged in our ability to do that."

Solution providers said they can typically deliver on-premises private cloud/software-defined data center solutions for enterprises that are at minimum 40 percent cheaper than public cloud.

Dan Serpico, CEO of FusionStorm, one of Dell's top Titanium Black partners, No. 46 on the CRN 2017 SP500 list, said more and more enterprise customers are opting for on-premises solutions with a hybrid approach.

FusionStorm, for example, recently sold thousands of servers to a large telecommunications company with a mix of Dell Technologies products along with FusionStorm services that kept the telco from moving some of their workloads to the cloud. "There are lots and lots of examples that show that the world has existed, and will continue to exist, with or without Amazon," said Serpico.

"We're having great success because of the advancement in technology, because of the managed services we have to support Dell infrastructure and others, because of leasing initiatives that Dell Financial Services provides – the combination of all those things makes for a very attractive, very cost-effective and very safe on-premises solution," said Serpico. "Then if you need to burst to cloud for seasonal spikes or something, that's a very responsible play. ... We feel really good about these companies not going to the cloud and not leveraging the cloud."

Stephen Monteros, vice president of sales for public sector at Eagan, Minn.-based solution provider and Dell EMC partner ConvergeOne, said depending on the workload public cloud can be costly for organizations.

"If you look at the cost in some of the public clouds, maybe some of the AWS models, the cost can be very expensive," he said. "These predicable workloads seemed to be managed well by internal groups, and this is the best way they want to keep it as opposed to maybe going to an AWS or Microsoft Azure model. You obviously have to do the math and see what the costs are."

One-time AWS stalwart Dropbox recently revealed in its S-1 Securities and Exchange Commission filing that it saved $74.6 million in operating costs over two years by moving from public cloud storage to its own lower-cost, custom-built infrastructure.

Future Tech, a Dell EMC Titanium partner based in Holbrook, N.Y. that is focused on the Fortune 1000 market, is seeing a minimum 40 percent delta between public cloud and on-premises solutions.

"When you look at public cloud the piece that everybody looks at is the tip of the iceberg," said Future Tech CEO Bob Venero. "What they don't see is all the stuff under the water where an on-premises/hybrid cloud solution is much more cost effective," he said. "In the public cloud you pay for usage. There is a cost associated with every drink you take from the public cloud well versus having your own well where you can produce all the IT water you want for your business."

Over the last 12 months, Future Tech has seen a double-digit percentage increase in the number of customers that went all in on public cloud coming back to an on-premises/hybrid IT model, said Venero.

"I think a lot of enterprise customers a finally realizing that public cloud isn't the miracle cure for their IT woes that they thought it was," said Venero. "The issue is it cost twice as much to bring them back to on-premises as it did to move to the public cloud."