Dell Technologies reported impressive gains in its most recent financial result as spending on IT in on-premises environments continues to rebound in the wake of the COVID-19 pandemic. The company recently posted record revenues of $94 billion for its latest fiscal year.

Still, Dell struggles with the perception that all workloads are moving to the cloud, even though the amount of spending for on-premises IT environments continues to be measured in the trillions.

VentureBeat caught up with Matt Baker, senior vice president of strategy and planning for the Dell EMC business unit, to gain a better understanding of how digital business transformation is creating a “knothole” through which organizations are becoming more dependent on applications running both in the cloud and on-premises IT environments.

VentureBeat: What is a digital transformation knothole? It sounds like something to be avoided.

Matt Baker: As an industry, we throw this phrase “digital transformation” around quite a bit. I wanted to talk a little bit more about what that means and the implications for companies. A knothole tends to be when an industry gets pulled through disruptively. There are a number of companies that we would call enterprises that now find themselves operating more like a cloud provider. We’ve fallen into a believing in a false dichotomy that there’s a difference between cloud-native companies that are somehow different and superior than an enterprise. Once an organization is pulled through a knothole or digitally transformed, it becomes very difficult to understand, or even see, a difference between a public cloud operator and an enterprise because their digital operations becomes a key part of their differentiation. It’s a key area for optimization and investment that drives business value.

VentureBeat: Is that just part and parcel of starting to operate more like a software company?

Baker: I think it’s a little bit more. They’ve become a digital platform of some kind. It requires innovation energy to create a solid digital experience.

VentureBeat: What is the best way to get through the knothole?

Baker: The way to not get squeezed through the knothole is to do it proactively. The last thing you want to do is to be forced to transform digitally. If you do it proactively, you’re not getting squeezed through it along with 50 of your peers. That hole becomes adequately sized to walk your way through it, versus having the entire industry painfully wrenched through it. You don’t want to get caught flat-footed. If you get through this process versus getting dragged through it by happenstance, then it’s going to be a whole lot less painful.

Venture Beat: How does all this impact Dell?

Baker: We’re fighting a perception among those who believe in this inexorable “everything’s going to go to a few public cloud players.” We see amongst companies that have gone through these knotholes quite the opposite. They’ve become more invested in owning and operating their means of production versus, in essence, renting it from somebody else. They want the flexibility and the elastic nature of the public cloud, but they also want to have control and, frankly, cost optimization.

We’re not arguing against the public cloud. In fact, we have partnerships with most of them. Instead, we’re trying to educate folks on the fact that this isn’t a total zero-sum phenomenon. We want to have a more nuanced discussion about the role of IT in business going forward. We shouldn’t think about it in these really simple, false set of dichotomies and zero-sum beliefs. It creates a certain challenge for companies like Dell, but as technology becomes more central to how companies operate and deliver value to their customers it’s actually an enormous tailwind for us. But somehow this has become a discussion on how it’s a headwind and we’re always left sort of scratching our heads. We’re just seeing continued investment in technology as the path to innovation, and that’s only going to accelerate, not decelerate. The main message is we shouldn’t create these dichotomies between enterprise and cloud.

VentureBeat: Do you think organizations have a handle on the true cost of IT these days?

Baker: Honestly, we don’t know the true cost of this pandemic from a technology perspective, because CEOs told their CIOs to “get us online at whatever cost. Here’s a blank check. Just keep us working.” Now, the CFOs are realizing just how much it cost them and they went “Whoa, we’ve got to rejigger this just a little bit.”

VentureBeat: It also appears that as organizations start to process and analyze data in near real time closer to where it is created and consumed at the network edge, the IT industry as a whole is entering a new phase.

Baker: The industry insiders understand that. I think different companies are at a different degree of maturity. Delivering real-time experiences can’t be done over 2,000 miles. There’s a fundamental law of physics that’s going to govern the ability to deliver real-time automation or real-time experiences simply because of the speed of light.

We’ve been on a great centralization tear. I think we’ve reached peak centralization and, therefore, we’re going to see a sort of swing back towards decentralization because of real-time analytics and real-time experiences. I don’t think the mainstream fully understands the implications of real time. We want to be able to point to that and say “There is a more optimal path forward that you might not be considering.”

VentureBeat: Now that Amazon is building servers for on-premises environments, how do you view them as a competitor?

Baker: We’re sort of at the beginning of this great transformation towards container-based, cloud-native architectures where each of the cloud players, inclusive of VMware and IBM, are increasingly expressing their capabilities as software platforms that don’t need to be owned and operated by, say, an Amazon, Microsoft, or whatever. I think you’re starting to see a lot of folks converging on a different model. Everyone’s reaching a logical conclusion, which is there are going to be different horses for different courses.

People are going to want to own and operate some of their infrastructure. They’re going to want to consume it as a service for other elements. We’re seeing the industry players now recognizing that it is indeed more of a hybrid and multi cloud world.

VentureBeat: Do we have enough network bandwidth to fulfill that vision?

Baker: I think a lot of the telecom stuff is solving the last mile problem. I think we do need innovation in terms of telecom networks, but I don’t think that we’re really limited once you go past that first hop. There’s plenty of fiber in the world today to accomplish a lot of this.

If the focus is on analyzing at the point where data is created, there’s not very much volume of traffic going back and forth. In fact, it’s an exception that would go back. You’re not sending all of the data. This is a big argument for this notion of decentralization. It’s not just a latency problem. It’s a sheer volume problem. You don’t want to send every video feed back to a datacenter somewhere outside of Seattle, when you could have just processed it there. It’s expensive.

VentureBeat: Will legacy batch-oriented applications then fade away?

Baker: There are no zero sums in tech. We’ll continue to see legacy batch-oriented solutions. In a lot of these modern data-centric applications, you actually are coordinating both batch-like operations with real-time operations. It’s more of a cycle. I don’t think we’re gonna see batch sort of fade away and real time take over everything. We see them being combined together more often than not.

VentureBeat: Ten years ago the industry promised IT would get easier. What happened to the easy button?

Baker: In all fairness, it has gotten a whole lot easier than it was 10 years ago. A good example of that is the simplicity of an HCI (hyperconverged infrastructure) solution. There are not as many silos. It’s far easier to operate. One of the issues with the cloud argument is no one recognizes that the cost and complexity of operating IT equipment is far less than it was when we first conceived of public cloud environments. The fact is the complexity just crept up into the application layer. I won’t say it’s trivial to operate a private cloud environment, but it’s far more trivial than it was 10 years ago.