We need more chip capacity ‘basically everywhere on the planet’

In the second part of our interview with Dell, Dennis Hoffman, SVP and GM, Dell Technologies Telecom Systems Business talks about AI, the supply chain crisis, and how the pandemic has changed working culture for good.

The supply chain crisis has affected everything with regards to tech. There are lots of sectors that rely on chips now, but obviously the tech industry in particular does. How has Dell been handling that? And in general how big an impact do you think this is having on the telco and wider tech industry?

I think we’ve been handling it better than most. A lot of that is foresight of the company to build a really robust supply chain. The facts are that this industry has been faced with the global chip shortage for years, and It’s become particularly acute in certain chip type. The pandemic created this [situation] where the industry went to sleep and then and then the demand wasn’t ready for it. Because chip capacity takes time to build, the factories take years and it’s billions of dollars.

We need more capacity basically everywhere on the planet. And to your point, it’s more than IT goods and services now, it’s everything from watches to thermostats – the automobile is an incredibly complex computer at this point. But what we’re experiencing really is shortages of integrated circuits. And we’re lucky that our supply chain is really one of our most durable competitive advantages. We do $70 billion in annual procurement, by far the largest in our industry. And over the years, we’ve demonstrated an ability to be pretty agile about that, and outperform independent of the macro economy.

Recently we’re starting to see a little bit of a lessening – in the first quarter we were still seeing a shortage of embedded ICs, power supplies and network interface cards. Our backlog in our data centre business remains elevated, particularly in servers, but our PC backlog is now at normal levels. So that has been a real flashpoint – our PC businesses is roughly $50 billion of our $100 billion annually.

And so as we look forward to the second half of this year, we’re starting to see a little bit of deflation in aggregate component costs. In large part because logistic rates are beginning to decline. We’re not flying parts everywhere, we’re back to the way we typically move things around in some ways, so there’s a slight lessening, but it’s a big pervasive trend that has been going on for years and because of the time it takes to add capacity, it will keep going up.

You’ve been working with Nvidia recently on a new series of servers which were described as being designed for the era of AI. What is the era of AI, are we in it, and what is it going to change?

For years the twin promises of information technology were that we would increase labour productivity… GDP per capita has risen dramatically over the last 40 years, largely due to information technology. And there is also the second promise that within all of this data you find great insight, information, everything from the often discussed cure for cancer to many other things.

The reality is for most of this time, we’ve been more of a data technology industry than an information technology industry. That second promise really hasn’t been built. Suddenly artificial intelligence is lauded as this overnight success, but we’ve been talking about AI since the 40’s with Isaac Asimov’s I Robot novels. But it does appear at this point that our ability to clean, consolidate and correlate data and do so with machine learning is actually becoming prevalent and able to generate really interesting insight.

This, however, is one of those high performance workloads we talked about earlier. And one of the classic ways to handle high performance workloads with standard infrastructure is through accelerator cards that have the base platform of an x86 server, off the shelf infrastructure which most people then use then use cards to improve performance with respect to the workload. The most obvious example for that is GPUs (graphics processing units). At Mobile World Congress in Barcelona this year we in fact introduced our own radio product, a dedicated accelerator card, a high form factor card,  that offloads all the layer one activities from a server.

I think the notion of a server with an accelerator card is a tried and true architectural approach to handling high performance workloads. Our partnership with Nvidia is exactly that around AI. And I think you in many ways [we have] really entered the data era. And now we have the technologies that are capable of turning that data into information that helps for insights, that really has eluded IT for a long time.

The pandemic had all sorts of impacts but a big one was the culture of working from home, and it doesn’t look like its going away. Since you provide a wide array of kinds of IT equipment businesses run on, how do you think work culture has changed and will change?

We do have a pretty unique view on it as a large provider of end user devices and a large provider of data centre infrastructure. There’s definitely a post pandemic normal, a new normal. We’ve learned the hard way that if pushed we can do a lot of stuff from anywhere, whether it’s education or health, medicine, or remote work. It’s certainly led to a surge in end device buying for the PC market. Over the last couple of years we [broke records], you have to go back decades to see the kinds of volumes, as everybody needed a PC and oftentimes the one at work was insufficient. We needed one for every member of the family at home.

There was a big change, but the interesting change in some ways is what happened to the data centre infrastructure, and the security posture of the company. Most company’s business continuity plans called for 30-35% of their employees dialling in remotely in a crisis, and we started to experience 100%. Everybody had to rethink their business continuity plan, their firewall, AND security posture on their edge devices.

For companies like Dell, we had already embraced remote work pretty heavily in large part because it gives it back to the global labour pool, we really can compete for the very best talent in the world. And there won’t be really any ‘going back’. We have 130,000 – 135,000 team members And when surveyed, nine out of ten of them said I don’t want to go back to having to go into the office every day As part of my job. 70% of them however said ‘I absolutely want the ability to go into the office and collaborate. I don’t necessarily need an office, but we need ways to get together collaborate.’

We’re working to enable that as are most of our clients and customers from industries that have been pretty prominent in [saying] ‘No, no, you must be here.’ Financial services comes to mind. But certainly in the tech industry, many of our employees are knowledge workers and can do a big chunk of their job from quite literally anywhere. It’s getting used to the norms that encourage you to develop people.

Give people the human interaction they want and don’t make people who are remote feel like second class citizens in the meeting. One thing we’re learning is that when we were all on Zoom it was all equal footing, but now there are three people in the conference room and they’re all little tiny dots at the end of this camera and they’re all talking to each other, while there are a few people up on a screen.

The other big thing it did is it really put to bed the debate about leaning forward and leaning back – i.e.PCs or tablets? The dominant thesis had been tablets would kill PCs, but we just ran the experiment for two years and the exact opposite occurred. There’s very clearly a creation kind of activity and people prefer PCs hands down for that. So we learned a lot, and there’ll be a kind of permanent new normal, we’ll find the right mix of hybrid work for companies to access the labour pool, and of course to keep their business [running].

Read the other half of our interview with Dell here, in which Hoffman explains with the proliferation of Open RAN and edge computing, a merging of telecoms and the wider tech market ‘has to happen.’

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