Q. This is a really a mega-trend in the way businesses buy and use technology, and it even has implications for the Dell transaction…
A. Yes. … it refers to the idea that one physical computer can act as several different “virtual” computers for different users or for different purposes. Using “virtualization” software, a given computer can even run different operating systems, like Windows and iOS. And that’s really the essential component of cloud computing, so these enormous data centers can service so many users, who in turn can buy services on demand rather than having their own giant IT departments.

Q. And, aside from diminishing demand for servers and IT departments for many businesses, I suppose that’s one of the big drivers behind the drop in PC demand and Dell’s struggles.
A. Absolutely right. The more stuff that hosted and held in the cloud, the more you can do what you need by accessing the cloud through mobile devices. In general, by the way, there are three big models for delivering the virtiual/cloud services: Evernyone’s heard of “Software as a services” Saas, but there’s also PaaS, and IaaS.

Q. So is Dell now looking to be a provider of virtualization services? Is that one of the big ideas for resurrecting growth?
A. It has to be. Interestingly, some opportunities are being created by a combination of the cloud and open source movements.. So, for example, VMWare, a public company that sells “traditional” virtualization software and cloud computing solutions, is itself being challenged by Open Stack, a consortium promoting free, open source cloud virtualization software. Dell is a member of the Open Stack consortium, partly because that’s a model it can push going forward: use our hardware and we’ll provide the consulting services necessary for you to build your own cloud.

Q. So that would be little like the RedHat model?
A. Yes. RedHat provides a free Linux solution, but makes money because the company using it always wants it customized and installed. OpenStack will provide similar opportunities for companies that are part of its consortium. In a weird way, its sort of the ultimate “freemium” model: give away the software, but charge for the consulting services to impliment it.