Does DELL MD32xx support hardware VSS snapshot for DPM Backup?

Answer: Yes, but it's not official. It's best effort (due to its low cost as compared to its high cost Compellent counterpart).

Hardware VSS snapshot provides an efficient way for DPM to backup Cluster Shared Volumes (CSVs) on Hyper-V cluster. Without hardware assisted snapshot, the CSV access would be placed under Redirect I/O mode as long as the backup process is taking place (which can be a long process). This can significantly reduce the I/O performance for other VMs on the same LUN. That's why it's more efficient to keep as small number of VMs per CSV as possible for software VSS. With hardware assisted VSS, a temporary snapshot is instead created on the free space on the SAN volume. CSV would only be placed on Redirect mode for a couple of minutes.

Screenshot of VSS Hardware Snapshot (new virtual disk temporarily created denoted with a clock icon) on MD Storage Manager during DPM backup:

How do we configure VSS setting on Dell MD storage?

Step 1: Install the VSS provider given on the Dell MD Storage Manager DVD or ISO image.

Step 2: Confirm Dell hardware VSS provider is installed on the system
C:\> vssadmin list providers
vssadmin 1.1 - Volume Shadow Copy Service administrative command-line tool
(C) Copyright 2001-2012 Microsoft Corp.

Provider name: 'SmVssProvider'
   Provider type: Hardware
   Provider Id: {24e4e8a3-69cb-4370-8b7b-c5276cd49765}
   Version: 10.84.02

Step 3: Configure the default VSS behavior on the storage as shown below. Run "C:\Program Files (x86)\Dell\SMprovider\provider\SmRegTool.exe" on the console installed with Dell Storage Manager. Connect to the storage using OOB Management IP addresses.