Dell Kills Project To Build Out Public Cloud, Sends Layoff Notices

Dell has decided not to build out its public cloud and will instead rely on partners such as Joyent to provide infrastructure services. A source close to the matter said layoff notices at the company went out on Friday. The group had more than 300 people in it. It is not known who was laid off or offered other jobs in the company. A spokesperson said Dell would not comment about personnel issues.

In a press release today, Dell said its current public cloud service would be discontinued in favor of offerings from other partners. The original intent had been to use OpenStack, the open cloud infrastructure, to build out a public cloud that would compete with Amazon Web Services (AWS), HP and Google. A spokesperson said Dell will work with OpenStack partners to help customers develop the right solution. Joyent is not an OpenStack company but fits with Dell’s partner focus.

The internal forces at Dell and the pressures of the company going private have caused company executives to rethink the public cloud route. Dell will still develop a private cloud story based on its own technology, which makes sense for the company as it is focusing more deeply on enterprise solutions. It’s in this that the Enstratius acquisition┬áhas value. The startup provides cloud-management capabilities that Dell can also use when working with customers that want to use a public cloud service. Dell customers can leverage their own data center investments in some form of infrastructure that allows a degree of scaling beyond what they can do now with what they have.

The news follows several weeks of shifts in the market. After dropping its own public cloud pricing, Rackspace’s earnings came in lower than expected. The stock then dropped about 25 percent. Last week, Google made its own public cloud generally available. And then there is AWS, the big giant, which companies like Dell cannot currently compete with effectively due to the expense and resources required. It’s the kind of project only the larger vendors can afford.

The name of this game is scale and having plenty of resources to build out a cloud infrastructure. It’s a market that seems difficult for Dell to compete in considering its own financial issues.