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Dell pledges to reduce IT costs by $200 billion

Speaking at Oracle's OpenWorld, Dell chairman Michael Dell says Intel chips, virtualization and cloud computing can bring IT significant savings.

SAN FRANCISCO -- Speaking at Oracle's OpenWorld Dell chairman Michael Dell pledged to do his share to take out $200 billion worth of inefficiencies from the $1.2 trillion IT shops spend every year on products and services.

Not surprisingly, one of the ways Dell says IT shops can save money is to standardize on servers using Intel processors, just the kind Dell sells in the millions each. What was surprising was Dell made no mention of Sparc-based servers, just the kind Oracle will be selling once its acquisition of Sun Microsystems is approved.

In his talk entitled, "The Efficient Enterprise," Dell said there are three key drivers for eliminating such inefficiencies: standardization, simplification and automation.

The standardization piece, of course, involves users buying almost exclusively x86-based servers to host their applications. Dell that said 25 years ago he made a huge bet on the "economics of open standards," and it has paid off for him and many of its competitors. Dell quoted recent IDC research that said 90% of applications currently run on the x86 platform.

The simplification piece involves more aggressive deployment of virtualization as a way to significantly reduce hardware and power consumption. Dell offered up the savings his own company has made through its virtualization strategy. Dell has virtualized 7,000 and will save $50 million by the end of this year and will plough those savings into developing more innovative products and solutions.

The third prong, automation, can be best be achieved by if users deliver their products and services through a cloud computing model, which, too, will save users a significant amount of money by cutting down the cost and management of expensive infrastructure components.

According to market research, Dell said, of the $1.2 trillion IT shops spend each year some $800 billion is eaten up by labor costs or "for things like keeping the lights on" and by people maintaining all the applications and legacy systems.

The remaining $400 billion or so is spent on hardware and software products with only a fraction of that spent on innovative solutions to mission critical problems.

"Users are telling us three things lately, that products are too complex, they're leaving the lights on too long draining power and there is not enough innovation to help drive solutions. We have to change that," Dell said.

In the middle of going over the cost savings 7-Eleven had gained through its cloud computing strategy -- a customer to both Dell and Oracle -- Oracle CEO Larry Ellison walked out on stage to welcome Dell back to OpenWorld and to thank him for being a "great partner and supplier." Ellison noted that Oracle runs the majority of its development and testing on some 20,000 Dell servers.

"Our partnership is getting closer and closer," Ellison said.

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