By Rachael King
Dell Technologies Inc. is joining the crowded field of companies wagering big money on the so-called Internet of Things, as the computing giant looks for new avenues of growth amid a shift in corporate spending to the cloud.
The Round Rock, Texas, company said Tuesday it will commit $1 billion over three years in research and development to create hardware and software that helps manage billions of everyday devices connected to the web.
Once the largest personal-computer maker, Dell is now known as much for its corporate products like storage servers and security software following last year's deal to buy EMC Corp.
Dell is looking for areas where it might grow as customers increasingly buy computing and storage over the Web from the likes of Amazon.com Inc.'s Amazon Web Services and Microsoft Corp. while spending less on their own data-center hardware.
Corporate spending on data center hardware and software from Dell, Hewlett Packard Enterprise Co. and others is forecast to grow less than 3% to $178 billion in 2020 from this year, according to research firm Gartner Inc. In contrast, companies are projected to increase spending on cloud infrastructure services by about double to $70 billion by 2020.
As the cost of sensors in everything from thermostats to connected cars continues to plummet, Dell is betting there will be an associated boom in computing hardware and software that sits close to these devices, known as edge computing.
"We think edge computing could be 100 times bigger than the internet as we know it today," said Chief Executive Michael Dell in an interview. "That may sound crazy right now but give it a few years and I think that will be more understood."
There is some method to Mr. Dell's madness. It is cheaper and more efficient to process information coming from sensors closer to where it originates rather than sending that data back to the cloud, said Patrick Moorhead, president of Moor Insights & Strategy. An autonomous car or a robot surgeon needs to process information in real-time and they wouldn't tolerate delays that occur when processing information in a remote cloud.
Part of Mr. Dell's bet is that corporations will want to keep control of valuable data. An auto maker, for example, will want all that data from autonomous vehicles to be stored on their own equipment and not on someone else's server. That data serves as a company's crown jewels and needs to be secured, protected and managed, Mr. Dell said.
As mobile carriers begin to implement fifth-generation wireless networks, it will make it easier for edge-computing devices to communicate with one each other, Mr. Dell said. For that piece, Dell is counting on subsidiary VMware's network virtualization and security software called NSX.
Dell will also rely on another subsidiary, Pivotal, as it targets corporate customers working in the Internet of Things. General Electric Co., for example, came to Pivotal to use its software to create its Predix platform which collects and analyzes data from industrial machines.
In addition, Dell Technologies Capital, the company's venture investing arm, has stepped up investments over the past six months in related companies including Otonomo, a connected-car data exchange marketplace, and Zingbox which makes Internet of Things device security, Dell said.
Dell is somewhat late to the trend, at least in earmarking significant investment toward products. A number of tech giants including Amazon, Microsoft, Cisco Systems Inc., Hewlett Packard Enterprise and Samsung Electronics Co. have all in the past year planted their flag with new platforms or committed R&D investments.
Write to Rachael King at [email protected]