Dell Dives in on Cloud Computing Frenzy

Dec. 13, 2010
As purchase of Compellent shows, storage needs are growing across all industries, especially in manufacturing.

Evidently, there's a lot of money to be made in offering new and more efficient ways to store and access the ever-growing amounts of documents, data and media compiled by companies.

The data storage industry has become a Wall Street favorite and each month has presented a new high-profile takeover, as evidenced by Dell Inc.s $820 million deal for Compellent Technologies on December 13.

In recent months, Dell rivals such as Hewlett-Packard and IBM have been in a merger fever with companies that specialize in enterprise cloud computing, which allows users to run applications in virtual machines on a pool of servers rather than on dedicated hardware. The technology allows companies to save money on hardware and IT management, while offering more flexibility to employees.

Only three months ago, Dell lost a high-stakes bidding war against Hewlett-Packard for another data-storage provider, 3Par. Since then, speculation abounded that Compellent would be purchased, leading to its stock shares to triple since August.

Dell is being faced with many of the same pressures as HP and IBM. Dell's consumer business has slowed dramatically, as revenue growth has shifted away from hardware to software.

The shift into cloud computing has made a significant footprint in the manufacturing space in areas such as enterprise resource planning, supply chain management and product lifecycle management.

According to Ralph Rio, research director for ARC Advisory Group, the adoption rate of cloud computing among small- and medium-sized companies has been accelerating "because it doesnt require nearly the same amount of infrastructure and technical talent."

Larger enterprises have made the shift as well, Rio notes, as a corporate IT department will host the applications, given their resources and security.

That trend by both companies both large and small is only going to grow, says Rio, as software shifts to a by-the-cup model.

"If you're a small to medium-size manufacturer, you don't have the resources for an ERP system in-house," says Rio. "So there is a huge interest in having your ERP hosted by a third party."

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