Dell Unveils Subscription Model to Counter Amazon, Microsoft

(Bloomberg) -- Dell Technologies Inc. will offer business clients more flexible, on-demand buying options for products like servers and personal computers, seeking to counter the lure of cloud services from Amazon.com Inc. and Microsoft Corp.

Customers will now be able to use Dell’s hardware based on their consumption, as a service, or through a subscription, the Round Rock, Texas-based company said Tuesday in a statement.

Dell and its hardware peers have been under pressure to offer corporate clients the flexibility and simplicity of infrastructure cloud services. Public cloud titans such as Amazon Web Services and Microsoft Azure have cut demand for data-center hardware as more businesses look to rent computing power rather than invest in their own server farms. Rival Hewlett Packard Enterprise Co. said in June that it would move to a subscription model by 2022. Research firm Gartner Inc. predicts 15% of data-center hardware deals will include pay-per-use pricing in 2022, up from 1% in 2019, Dell said.

“We really think it’s an important time for Dell to simplify the way we offer our portfolio and meet customers’ needs,” Sam Grocott, Dell’s senior vice president of product marketing, said in an interview. “This type of a model – as a service – was born in the cloud. As organizations have leveraged this model in the past, they have come to like it.”

Dell is making it easier for clients to upgrade their hardware since they don’t have to spend a large amount of capital expenditures upfront, but can pay a smaller amount each month that counts toward a company’s operating expenditures. For the consumption programs, customers pay for the amount of storage or computing power they use. Companies can also hire Dell to completely manage their hardware infrastructure for them.

While Dell’s overall sales climbed 2% in the quarter that ended Aug. 2, demand for its servers and networking gear dropped 12% in a reversal from last year, when there was unprecedented customer interest in the products.

Dell still expects the vast majority of customers to pay upfront for products in the next three to five years, Grocott said.

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Molly Schuetz

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