When the news broke on Thanksgiving Monday that Dell was buying EMC, with the merger being touted as one of the largest in tech history, I had flashbacks to 2002 when HP announced it would be buying Compaq for $25 billion USD.
At the time, my colleagues and I at Computing Canada and ITBusiness.ca put a lot of horsepower into coverage from various angles as HP touted the deal as a platform to become a services powerhouse in the same way IBM had moved away from just being a purveyor of mainframes and PCs.
The synergies that HP hoped to harness by acquiring a rival were never realized, and one can’t help but wonder if the combination of Dell and EMC might meet a similar fate. However, as Dave Pearson, research manager for enterprise storage and networking at IDC Canada said, there are key differences between this mega-merger and HP swallowing up Compaq.
“HP and Compaq immediately had a lot of product lines in competition with each other,” he said, while Dell and EMC’s overlap is less pronounced and is primarily in the enterprise storage arena. “Dell doesn’t have the same breadth of storage as EMC.” This means there will be less product rationalization, and more broadly, there are lines of business that Dell and EMC both participate in, but with different customers and at different levels of IT infrastructure.
Outside of mid-range data storage, said Pearson, each are clear leaders in different areas, and it doesn’t look as though Dell will subsume the EMC brand. In addition, and the EMC Federation has worked well for EMC for years, so Dell will likely be hands-off in that regard, while being sensitive to EMC’s existing relationship with VMware.
“From a technology standpoint having VMware majority-owned by a server company would be the most painful thing for VMware’s partners to accept,” said Pearson. “If the message changes to ‘VMware only really runs on Dell,’ that could poison the well for VMWare’s partners.”
Pearson said the deal will be a boon to Dell’s network, converged and server business, and the combined entity will likely enjoy an increased number of accounts overall. “Dell has a better success rate with integrating acquisitions,” he said. And because of its semi-private nature and leadership, “Dell is in a better position to make hay of this and not be scrutinized as hard as HP.”
The irony is that HP has decided that it needs to be smaller and more agile, while Dell believes it can only compete by getting larger. On the other hand, going private has led to more flexibility for Dell. When it launched Datacenter Scalable Solutions in August, Dell executives said being a privately-held company allowed it to work in stealth mode and respond to what is saw as a growing customer segment in an agile manner.
Mark Peters, senior analyst with Enterprise Strategy Group, also sees very little overlap between the two companies, unlike HP and Compaq, which means the potential better for a combined Dell and EMC. “There are cultural differences between the companies,” he said, and they have worked together in the past – it was noteworthy when they stopped – but they are both smart enough to learn from each other. “If they are to be successful they will learn from each other.”
A lot of discussion, of course, has been about hardware, particularly storage. But what about the cloud? At Oracle’s recent OpenWorld event, it was clear it saw Amazon as the rival, not IBM, HP or Dell. “What EMC and Dell don’t have is a public cloud,” said Peters. “It will be interesting to see if coming together changes that attitude.”
Pearson said Dell and EMC are not playing in the same area as Amazon is when comes to cloud computing. “Where they will be able to play is the hybrid cloud,” he said. “Hybrid cloud is going to be dominant mode for next the five years.” While there a great deal of data going onto the public cloud, it’s not necessarily taking away from the enterprise storage market and the Dell-EMC combination can be the bridge between the enterprise data center and the cloud.
Peters said Dell and EMC need to provide more certainty around its cloud strategy – what are they going to build and what they going to connect to.
Both analysts see a pressing need for Dell and EMC to provide clarity for customers about what product lines will be kept and what will mothballed. While almost every product had an equivalent across the merged HP-Compaq entity, Peters said, the massive overlap isn’t there for Dell and EMC, but it will still need to some culling – Compellant or VNX, for example – even if some similar product sets are run concurrently for several years.
“Canadian CIOs are going to have a lot of hardware, software and services from both of these companies,” said Pearson. “What they need to be asking is what the product roadmap is going to look like.”
Enterprises should be looking at workloads they have, where those workloads are running Dell or EMC and forecast where their business will be in a couple of years’ time. They may lose support on some products in the long term, but for the most part, “it’s not going to cause a huge amount of upset among CIOs dealing with both companies.”
