Dell To Spend $1 Billion Deploying Cloud Services

Dell plans to spend $1 billion over the next nine months to open 10 data centers worldwide and broaden customer service, as the computer maker looks to take advantage of the growing market for cloud computing.

Dell said Thursday it will open 12 "Global Solution Centers" this year and an additional 10 during the next 18 months. The centers will bring Dell engineers together with customers to help the latter optimize their applications for Dell hardware, while giving the vendor an opportunity to introduce customers to new products.

Dell plans to introduce integrated hardware and software for companies building cloud computing environments in their own data centers. The new products include vStart, which is a "complete virtual infrastructure" capable of running up to 200 virtual machines from a single management environment. Dell launched the first of such turnkey cloud-computing packages about a year ago.

Dell has also entered into a three-year partnership with Microsoft to help customers deploy and manage virtualization and private cloud technologies using Dell hardware and software and Microsoft's technology, including its Windows Server Hyper-V. A Dell spokesman said in an interview that Dell customers are interested in Microsoft's Azure cloud-computing platform and that the two companies are working together on it.

Dell is not new to cloud computing. The company launched its data center business practice four years ago, customizing hardware to meet the needs of large Internet companies, such as Facebook. The latest announcement shows how Dell is taking what it has learned and applying it to the mainstream market.

The timing is right for Dell to start launching data centers that customers can eventually tap for disaster recovery, storage, or running Web applications on Dell servers. That's because enough companies have been working for several years on building virtualized environments that provide the experience for taking the next step and using services remotely from a vendor working off a similar platform, Matthew Eastwood, analyst for IDC, said in an interview. "We're early on in this, but over the next 10 years that's' really the transition that's happening in the market."

The market for providing infrastructure as a cloud service will rise from $3.7 billion this year to $10.5 billion in 2014, according to market researcher Gartner.

Dell, which is competing with Hewlett-Packard, IBM, Oracle, and others in cloud computing, is focused on mid-market companies with 250 to 5,000 employees, Eastwood says. From that point, the company can scale the technology down or up to target small or large companies.

"The SMB market is one of the ones that's most intrigued with cloud because they just don't have the resources to throw at technology the way a really large customer would," Eastwood says. "To me it becomes kind of a table stakes thing for Dell. They had to do this (the latest initiative), because if they didn't they knew HP and others would. They really needed to do this to cement the relationship they have with customers in the middle."

Dell has set a goal of doubling its data center business to $30 billion by fiscal year 2014, which begins in February of 2013. Three of the new data centers Dell is building will be in the Americas, with the rest in Europe and Asia.

The Global Solution Centers will be located in Austin, Texas; Washington, D.C.; Chicago, Northern California, Brazil, Shanghai, Singapore, Tokyo, Sydney, Limerick, Ireland; Frankfurt, and Paris. In Northern California, Dell plans to consolidate four offices into one center that could employ up to 1,500 people within five years, a spokesman says.