Cloud Wars and Company Wars: Play Nice But Win | Michael Dell on a16z Podcast with Marc Andreessen, Martin Casado, and Sonal Chokshi

Check out The a16z Podcast Episode Page & Show Notes

Key Takeaways

  • It is not a question of “either-or” but “both-and” (public and private cloud), and beyond that- it is about edge computing
  • “There are estimates that say there will be more applications and more data at the edge and it is not all going to come back to the center of the universe,” – Michael Dell
  • The massive shift to SAS (software for statistical analysis and data visualization) could be cloud wars 2.0
  • Because of AI and ML rise, programmers will have to deal with the software on a new level of abstraction
  • Innovation is the main reason a startup should use cloud computing
  • Dell’s company went public, then private, then public again
    • They hired tons of engineers, salespeople, invested organically and it worked really quickly
    • The demise of the PC narrative gave them an incredible opportunity to buy the company back
    • Mergers and acquisitions are the No. 1 reason to go public
  • Leaving college to start a business: “It is not for everybody; you need to be deviant, mischievous, and a rule-breaker,” – Michael Dell
  • Get something up and running and then decide to leave or not – this is much better advice
  • There is something about the times we are in; the pull and drive of the moment (think about cryptocurrency)

Key Books Mentioned

Intro

  • Michael Dell (T: @MichaelDell and IG: @michaeldell) is the founder, chairman, and CEO of Dell Technologies
  • Martín Casado (@martin_casado) is a software engineer and co-founder of Nicira Networks
  • Marc Andreessen (@pmarca) is a software engineer and co-founder of a16z Podcast
  • This is a chat between Michael Dell, Marc Andreessen, Martin Casado, and Sonal Chokshi about innovation, tech platform shifts, cloud and company wars, and how to start, keep, and transform a company
  • Host: Sonal Chokshi (@smc90)

Is Computing Moving to the Edges?

  • Everything moving to one public cloud is not likely according to Dell
  • It is not a question of “either-or” but “both-and” (public and private cloud), and beyond that- it is about edge computing
  • Customers appreciate the consumption models, AI and ML services of public clouds, but they are not all going to be committed to one cloud
  • The question is; what is the right place for any workload?
    • Data sovereignty, security issues, cost issues all play a part
    • Is all computing moving to the edges (power to clients and devices)?
  • “There are estimates that say there will be more apps and more data at the edge and it is not all going to come back to the center of the universe,”– Michael Dell
  • Information technology is currently in the expansion phase; explosion around data, faster connectivity, edge computing, and devices
  • “The domain of technology used to be the IT department and now it’s the whole organization, the whole company,”– Michael Dell
  • Regardless of what you want to do in a company, e.g. sales, marketing, product development, etc., technology is the center
    • The demands and opportunities for the industry are big because of this
    • There needs to be a foundation of some sort of infrastructure, e.g. clouds are infrastructure, AI is eating software, software is eating hardware.

Cloud Wars 2.0

  • The first cloud war was the cloud vs internal IT
  • In the early 2000s, it was good to have an alternative like cloud computing
  • During that time, infrastructures have grown so much that it does not matter who won the war or if you are running your own IT
  • The massive shift to SAS (software for statistical analysis and data visualization) could be cloud wars 2.0
    • In SAS, infrastructure becomes cogs
  • The colo (colocation center) model is growing faster than the public cloud model

The Rise of Artificial Intelligence and Machine Learning

  • The nature of software development is about to change dramatically
    • There will be less incentive to write “deterministic” code, traditional style
  • Google is now using a new AI system; they are calling it MUM – Multitask Unified Model
  • With this recent shift, the nature of development changes
  • Programmers will deal with software on a new level of abstraction
  • Understanding how AI works is going to be difficult for a lot of programmers
  • The demand for processing power is going to increase leading to the explosion of GPU and CPU demand
    • Because of this, cloud computing will be a good choice for scaling processing needs

Early Stage Model Vs. Mature Model

  • Innovation is the main reason a startup should go to the cloud
  • How does a company remain innovative, going from an early stage to becoming “mature”?
  • Cloud computing has a lot of benefits for startup companies
    • If you are a startup, you can do it incrementally
    • You get the cost benefits of something that is already on the scale
    • You get all the latest software and tools
  • If you are a new startup, e.g. building a SAS application, it makes a ton of sense to use cloud
    • There is a lot of value in cloud computing
  • The problem is that we are no longer in the old enterprise world
    • We are in a world where most software is run as a service
    • That is a different world because the infrastructure becomes the part of your cogs
  • The paradox is: when you are at an early stage it makes sense to use the cloud, but as you get larger, you are reselling the cloud and you have to figure out what you are going to do about it
  • These are recent phenomena, you have companies built entirely on the cloud and they did not have to worry about market pressures

Dell + EMC + VMWare Story

  • Dell’s company went public, then private, then public again
  • How do you stay innovative in the market environment today?
  • They had a lot of successes, they needed to invest in new software and capabilities, acquiring companies
    • The market did not appreciate the changes
    • It created an incredible opportunity to buy the company back from shareholders
    • They hired tons of engineers, salespeople and invested organically and it worked really quickly
  • Going private, net debt was zero within 18 months
  • Year after that, they had an idea of combining Dell, EMC, and VMware
  • The backdrop was the incredible growth of the data
    • Infrastructure and clouds; nobody wanted to assemble components by themselves
    • Customers did not want to be a system integrator
  • The demise of the PC narrative gave them an incredible opportunity to buy the company back
  • When you go private, the company is put up for the sale and many things can happen at that point
    • Other bidders come in
    • The price of stock can increase
    • There are various forms of recapitalizing the company such that it is no longer practical or necessary to go private
  • Many buyers could have come in and said they wanted to pay more than Dell and Silver Lake, but nobody did
  • “You only want to go public if there is an objective reason to do it,” – Michael Dell
    • Mergers and acquisitions are the No.1 reason to go public

Lessons Dell Learned From Buying His Own Company

  • Dell is one of the few remaining founders that is still the CEO of the company
  • Get yourself an excellent lawyer and follow the proper procedure carefully
  • The public market does not like it when you take their product
  • It is way harder than you ever imagined
  • Founder gets extra permission to drive change
    • Founders need to create a sense of crisis within the company, inspiring and motivating, a tricky balance
    • You have to be honest with people to motivate change, transformation.
    • You need to project trust and credibility

Leaving College to Start a Business

  • “It is not for everybody; you need to be deviant, mischievous, and a rule-breaker,” – Michael Dell
  • Dell had little to lose – understand risk and reward if you want to leave college
    • He was already making $80,000 a month in his dorm room
    • The idea of everyone having a personal computer compelled him to make his move
  • Many successful people say “do what I did” to succeed
    • But you do not hear about people who didn’t make it
    • The people who are really going to do this; they will not listen to advice
    • Dell didn’t ask anyone and did not care
  • Get something up and running and then decide to leave or not – this is much better advice
  • There is something about the times we are in; the pull and drive of the moment (think about cryptocurrency)
  • The energy of the moment and the feeling of community is super important

How to Manage Transformation?

  • Don’t fight to keep the company, but to change the company
  • The pace of change in the industry is only getting faster
  • This is the kind of industry where 80% or more of revenues come from things that are introduced today
    • You have to imagine how your company is going to be in 5 years, and how to drive that change
    • You need the right assets and to be able to make the right investments
  • Going private for Dell allowed them to reignite the entrepreneurial spirit of the company
  • Think about how to build the future of your company based on what is happening
    • Where is the world going with edge computing, multi-cloud, 5G, AI, and ML?
    • Think about how to build a future that encompasses these changes
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Notes By Dario

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