Dell Technologies Inc. (DELL) Earnings Call Transcript & Summary

Hi, everyone, and welcome to today's PowerMax launch event. I'm your host, Scott Delandy, and we're joined by some very special guests. We've got Caitlin Gordon, who is Vice President of Product Marketing for Dell EMC storage. We've got David Tuhy, who is General Manager and Vice President for Intel's Data Center Optane Division; and we have Travis Vigil, who is Senior Vice President for Product Management for Dell EMC storage.

So before we get into the highlights of the launch, Caitlin, I know you're out there talking to users and partners. What are you hearing in terms of the overall Dell EMC storage strategy?

Yes. I think customers are overall really excited. And one of the leading things we have the opportunity to do in Dell EMC is talk to such a breadth of customers because of the breadth of our portfolio. The unstructured space filing object is growing massively. There's a lot of excitement there. And in the primary storage space, the dynamics of what people are really looking for continuing to evolve really quickly. And we have so many different unique conversations with our customers that we're really excited to help solve problems for them.

So it really is the power of the portfolio that differentiates us from any of the other providers within this space?

Yes, it really is. And that's really what's lending our leadership -- continued leadership in this space and continued share gain and share growth in this space.

So speaking of leadership, so Travis, talk specifically about the PowerMax system. So this is a technology that we introduced well over a year ago. We've been getting great traction with the platform. We've had a lot of success with it. So what are you hearing from customers?

Scott, we couldn't be happier with the way that PowerMax is performing in the market. If you look at the enterprise storage market overall, I mean, PowerMax really is the gold standard. 94% of Fortune 50 companies have deployed PowerMax or the predecessor to PowerMax, VMAX. If you look at the market overall, we have 48% market share from these products. And if you look at the transition of this product versus the successor product, it's the fastest we've ever seen. These are enterprise storage systems, transitions take a long time. Over the last year, we've gone from 0% to 80% of our mix coming from PowerMax. So we couldn't be happier with how things are going, and I think customers agree.

Let's talk about the launch, right? So we've got some big things happening in the PowerMax space. What are the highlights?

So the first piece is that we have the SCM technology, we talked about being ready for it, and the original launch is now available. And that's specifically something that we codeveloped with Intel. That is the storage class memory drive powered by Intel Optane, and it is truly unique in the industry. At the same time, we're also now shipping the NVMe over Fabric support for Fibre Channel. And then on the other side is that customers are using these platforms in more ways than we even ever imagined. They want to use it for more workloads. So we have support for Kubernetes or container support. We have new integrations and plug-ins for automation, so vRO, Ansible because people need to use these platforms more efficiently than ever. And finally, we have a number of things we have done on the cloud side as part of the overall Dell Technologies' multi-cloud strategy. So there's some of the announcements in that space as well.

I think one of the key highlights that I know a lot of users have been really anticipating is, yes, the new media option around the Optane technology. So David talk to us. Why is this so cool? Why is there such demand for the levels of performance that we can now achieve with these new drives? I mean, what's going on? What have you guys done over there?

So Intel -- we're geeks. We totally love technology. And the Intel Optane technology is really the first new major and nonvolatile memory innovation in 25 years. It's a breakthrough technology, ridiculously fast speeds, great consistent performance over time, right? It's 10x faster than our best-in-class NVMe NAND SSD, which is only introduced in 6 months ago, right? And so this technology is fundamentally better. It really unleashes latency and speed. And I've been in the business a long time. I'm an electrical engineer. Bandwidth is hard. You can aggregate to get bandwidth, but speed kills. Speed is powerful. Speed is money. And that's what this unleashes. Technology -- the Optane technology unleashes speed.

Right. And so Travis, talk a little bit about some of the requirements that users have for these new levels of performance. What types of applications can really take advantage of now systems that can deliver response times, not measured in milliseconds, but now literally measured in microseconds?

Yes. I mean, I think to answer that question, Scott, you have to look at the market at a macro level. You and I and Caitlin and Dave have been doing this for a while, and it seems like there's one truism out there: It's users are going to generate more data. They're going to want access to that data anywhere at any point in time, and frankly, they're not going to wait. And that's really where this Optane technology shines. If you look at the performance of the PowerMax system with Optane drives versus the performance of the PowerMax system without Optane drives, we're able to reduce the latency of that system.

This is just not a drive qualification. We're not just taking -- here's the latest technology and we're sticking it into the system and kind of here we go, right? There was a lot of deep development on both sides, between Intel and Dell EMC. So David, talk a little bit about the Dell EMC-Intel relationship.

Obviously, anything in the enterprise space requires a significant amount of quality, right? And we've been in the PowerEdge servers for a while now. But to be in PowerMax, you take that to a whole logarithmically different level. The idea of 6 9s, 99.9999 uptime requires an amazing level of focus on durability and reliability. So what we did is we actually added a whole new mode to our SSD. We call it dual-port. That's the geek speak for having 2 paths into the SSD to allow redundant access in case you need to do anything else in the system to either upgrade or upgrade firmware, change the CPU, any failovers. And not only we have to add those 2 paths, but they had to be active -- activated, be consistent over time and be up over time, right? And so we codeveloped the dual-port technology with Dell EMC, with the PowerMax team. And then we also had to meet the bar of their quality level and under pressure, and they do an amazing job of finding every single corner case in an SSD, exercising it, and we just have to root it out. And so not only is it a quality experience, it's also a 6 9s durability experience. So that's the collaboration we started in 2016?

Yes.

2016, 3 years later, a lot of work.

Caitlin, I know when we talk about the strategy around NVMe and what we've done on the platform, we did some things that were pretty unique and different from some of the other providers in this space that are delivering similar types of technologies. So talk about why do we go that direction? What are the things that we did that, again, give us an advantage in being able to be first to market with use of the Optane technology?

The Optane technology, and the fact that we really codeveloped that with Intel, allows us to do something extraordinarily unique, right? We talked about the dual porting, David mentioned that as well, which is critical. That's a requirement as enterprise storage. The reason it's so critical is that the way we're implementing it into the system isn't actually as a cache. It's as a persistent media for user data. So it has to have that resiliency that our enterprise customers expect. The other piece for us is the fact that not only do we have end-to-end NVMe all the way to persistent Optane, but we also have the intelligence within the system to leverage that without adding any additional work to the storage team. That's the machine learning engine that we had talked about originally at launch that really is able to intelligently, automatically place data on those Optane drives to use it for the workloads that really need it. And overall, that's going to give us some great new hero numbers. I love to talk about a good hero number. So we've got 15 million IOPS on here, 350 gigabytes a second bandwidth, and the latency, as we talked about, has been seriously cut down by up to 50%.

The microsecond is now the new millisecond when it comes to...

Now we're talking quarter millisecond or 250 microseconds, or at least.

Right. You know what? I can tell you, as an engineer, we work on these devices. We try to perfect them, but it really takes the solution software and system expertise of the PowerMax team to be able to harness and unleash it. We can plug these drives into existing systems. They don't run any faster because the software doesn't benefit. You have a lot of work. And this whole movement to storage class memory to transpose it from a traditional IO to a memory semantic with the machine learning, that's really amazing. And that's something, I think, that the PowerMax team should be really proud of.

So Travis, talk a little bit about some of the things that we're doing around the automation front.

There's been a lot of engineering effort put, a lot of innovation put into our machine learning within the PowerMax system. We love these Optane drives, but they're not the world's least expensive drives, let me put it that way. So the great thing about having built-in machine learning and artificial intelligence is, basically, we can put in 10% to 20% Optane drives and have the rest of the system be NVMe drives and get that performance but not have the entire system be at SCM prices. So we got a great blend of performance and price that customers really appreciate.

And then talk a little bit about just the overall ecosystem, right? So we're not just running storage just for the sake of running of storage. People are connecting it into their environment. They're using it as a part of their overall infrastructure. They're supporting applications and different types of workloads. But they don't want to actually manage these things as disparate components. They want to basically automate everything that they can in their environment, and I know that one of the initiatives that we've been really focusing in on is how do we plug into all these different parts of the ecosystem to make this as simple and as easy as possible for users to be able to take full advantage of the technology.

Almost without fail, every time you talk about integration into the ecosystem, customers lean into that conversation. I mean, they love the speeds and the feeds, and they love the performance numbers. But when you start talking about, hey, I'm actually providing plug-ins that -- for your VMware vRealize orchestration environment, for your Ansible environment, for your container environment with the container storage interface with the CSI interface, that we can provide these plug-ins so that the PowerMax system integrates seamlessly into those environments and provides that on-prem cloud-like experience that everybody is looking for, that's where customers are really talking to us and really appreciate the work that we've done over the last year to bring those capabilities to market.

And that's really cool because it even extends even further than just the on-prem user experience because now we're connecting into off-prem or hybrid cloud types of environment. So Caitlin, I know that there's a big part of the strategy that we've been working on that side of it as well. So can you tell us a little bit about what's going on there?

Yes, absolutely. So we've been talking a lot about the Dell Technologies' level cloud strategy, and there's a couple of pieces that go into that. There's the Dell Tech Cloud, there's Dell Tech Cloud-enabled infrastructure, and then there's really the cloud consumption. And with PowerMax, it really fits into all those different pieces. Within Dell Tech Cloud, we just announced at VMworld, the Dell Tech Cloud validated design, which is being able to use PowerMax or even Unity, through Fibre Channel and actually managing that all through VCF. So you have that consistent cloud experience across your on-prem infrastructure into all of the VMware partner clouds. The second piece is really that cloud-enabled infrastructure, which specifically is about our new Dell EMC cloud storage services offering. Think of this as consuming PowerMax as a service as the storage alongside public cloud compute, so things like disaster recovery, leveraging multiple public clouds with PowerMax in your main data center.

So Travis, I know that you've been talking to lots of users about the things that we're delivering today is when they were -- just on the road map. So there's a bunch of things that people have been anticipating. So what are the key takeaways for this? I mean, what are the highlights? What's going to get users really excited about what we're actually delivering today?

I think there's 3 things. We talked about 2 of them. One of them, obviously, is the Optane capabilities, in the reduction in latency. The second is the cloud operating model, whether that be via the plug-ins that we're providing for vRO, Ansible, CSI and all of the cloud integration that Caitlin talked about. And the third one that we haven't really hit on yet that I think customers are very interested in hearing about is NVMe over Fabric. And we've been talking about NVMe over Fabric for a while in the industry now, and the support is ramping. So with this release, we're releasing 32-gigabit per second Fibre Channel support and we have end-to-end NVMe capability. And it's really impressive because if you look at what we were talking about previously, which is the reduction in latency, we're in the low hundreds of microseconds, end-to-end latency, from the application through your infrastructure to the storage array.

Now that's impressive.

You do say so, yourself.

I do say it's impressive.

Yes, that is very impressive. If you look at it versus when we first brought out SSD drives in the PowerMax class system, it's a reduction of 10x, order of magnitude. I know you're a geek. It's a order of magnitude reduction in the latency.

As we would say in Hopkinton, it's wicked fast.

Wicked fast?

Wicked fast, right? Okay.

The other thing about NVMe that's really amazing, by the way, is Dell actually was the originator in helping create that as an industry standard with Intel, and it's the first new super modern way of talking to media, right? It removes basically 40 years of hard drive-based, frankly, bloat of code of all these exceptions and issues and scuzzy and all these things that we've had to deal with, that basically slow down the response to the system. So by having NVMe all the way through the infrastructure, you now have a truly modern way of talking to this. And it unleashes the technology again, which is why I get excited because old media, old standards slow down the technology.

All right, guys. This is all really, really cool information. Caitlin, what are the key takeaways for today?

Yes. We heard a few things, right? We talked about the Intel Optane drives, the performance that gives, the NVMe over Fabric, also giving that true end-to-end NVMe. We talked about our integration to support Kubernetes with containers, to support automation and all the work we've done in the multi-cloud space to really support that hybrid cloud model. Overall, we are really excited because PowerMax is not only the flagship in our portfolio, but really, it is the standard in the industry. Boston Scientific is a customer of ours. They called PowerMax the crown jewel of their data center.

Absolutely. Absolutely. So I know that there's a lot of information that's being provided out there. Where can people go to learn more?

Pretty easy, dellemc.com/powermax. We've got brand-new analyst papers, a lot of new collateral out there to really learn a lot more about what we even talked about today.

Awesome. Awesome. So Caitlin, David, Travis, congratulations once again, on really, an amazing launch. The levels of innovation that we are delivering today are really, really at an all-time high. And thanks for everyone for joining us. And again, for more information, go to dellemc.com/powermax for more.