Partners That Ignore Flexible Consumption Options Risk 'Missing Out,' Says Michael Dell

Dell Technologies Chairman and CEO Michael Dell said his company's flexible consumption models would bring partners some significant business.

"I think it's going to grow a lot, and we're embracing it," Dell told CRN in an exclusive interview. "One of the things we saw in the second quarter is 57 percent growth in Dell Financial Services originations, which is pretty staggering. Partners that don't know about Cloud Flex, or don't know about flexible consumption, or don't know about DFS, they're missing out."

Dell Technologies introduced its Flex on Demand and Cloud Flex models in May as a way to help customers make cloud-like IT purchases that don't require huge upfront capital investments. The plans cover storage solutions and hyper-converged infrastructure solutions, respectively.

[Related: 'We Want It All:' CMO Burton Defends Dell EMC's Storage Market Position And Discusses David Goulden's Departure]

Under the flexible consumption models, DFS pays solution providers up front for deals and then takes payments from customers over time, and in certain cases, based on consumption. DFS did $1.6 billion in customer financing in the second quarter compared to $1 billion a year earlier.

Infrastructure chief David Goulden said during a recent conference call to discuss the company's second quarter financial results that flexible consumption deals already, make up a "mid-teens percentage of total storage demand." Not long after that call, however, Goulden announced that he would leave the company at the end of its current fiscal year in early February. Storage revenue was flat during the quarter, and orders were down.

"Michael [Dell] and I have told the team to lean into these things," CFO Tom Sweet said during the conference call. "They're great arrangements, they build customer relationship for a period of years, and they're nicely profitable."

Michael Pearson, CEO of Elk Grove, Calif.-based solution provider DSA Technologies, said using flexible purchasing models allows solution providers to present on-premises alternatives to moving workloads to the cloud. "As long as these are being compared to the cloud, they can provide a viable alternative," Pearson said, "but a solid data center managed services provider is a required piece of the puzzle, in my opinion. It's not something you can compare to a traditional purchase or lease option, since the economics and measuring of usage is very different in those cases."

That's a real sticking point for some solution providers: flexible consumption models for on-premises solutions may still fall short of the public cloud when it comes to simplicity and predictability.

"It's not a whole lot different than leasing a car," said a top executive at a national solution provider that works with Dell EMC. "You get a price based on 15,000 miles a year, and guess what happens when you use 18,000? They charge you, and if you only use 12,000, nobody's going to write you a check. Thanks for playing."

"That's the challenge they have," the solution provider executive said. "A customer that uses 1TB of data, and come Christmas time, for two months, because you're focused on the holiday season, uses 2TB of data; in order to support the spike, you really need 2TB of storage around, but you only really need it for two months, not 12. Why would they want to eat 5/6 of the year of underutilized storage? That's why cloud works. If I have that dramatic of a shift for that period of time, I'll burst to Microsoft [Azure] or someone else's cloud, because the remainder of the year with that underused TB, they just sell it to somebody else. Do you want 1TB? We'll give you 1TB and bring our Azure team in, and you can figure out how you can burst to Azure, even if you need a lot."