SAN JOSE: Dell is under a lot of scrutiny for the financial bleeding from the PC market meltdown and the ongoing soap opera surrounding its efforts to go private, but Tuesday’s Enterprise Forum opening keynote could go down as its biggest ‘bazinga’ since Michael Dell’s dorm-room coming out party in 1984. Before an audience of 1,400 customers and partners, the company made a number of significant product introductions, and then announced a major expansion of its relationship with Oracle, topped off by a video visit by Oracle co-president and – former HP head – Mark Hurd.
Under the expanded agreement, the companies will introduce a new x86 infrastructure offering that combines Dell’s hardware with Oracle’s software, with Dell named an Oracle preferred x86 partner, and Oracle named a Dell preferred enterprise infrastructure partner.
“This partnership with Dell is an extension of Oracle’s engineered systems strategy where we simplify IT and reduce integration costs by delivering hardware and software together,” said Hurd. “We believe that by working together, Dell will gain significant market share by delivering to its customers an integrated, optimized solution designed to deploy business critical applications. This is just the beginning of a lot of great things to come.”
While products aren’t expected until the second half of the year, this will primarily be a Dell-only initiative, combing hardware, software – including Oracle Linux, VM, and Enterprise Manager software optimized for the x 86 platforms – and all support-related needs. Oracle will back up Dell with more advanced support on an as-needed basis.
“Dell is really upping the solutions approach, moving ahead of their competitors, largely because they don’t have the silo problem,” said analyst Rob Enderle, Enderle Group. That allows them to approach a problem with the full portfolio of products. For instance if a better solution would be to just change out the software and apply more efficient virtualization and management, they will do that and not bid servers at all, he said.
“Currently, while they aren’t the only firm that could do this, they are, as far as I can tell, the only hardware firm that does. They are clearly moving to play hardball even before the firm goes private.”
IDC’s Matt Eastwood called the Oracle strategic partnership “quite interesting”, providing Dell with additional differentiation in the enterprise solutions space serving Oracle customers. “Oracle still sees IBM and HP as more direct competitors than Dell. Oracle gains additional reach into mid-market accounts which they have difficulty reaching on their own.”
He added that Oracle also needed to appear more partner friendly.” Following the acquisition of Sun, Oracle spent a great deal of time focusing on their Red Stack of hardware and software, including their engineered systems. But not all companies want to buy this way and Oracle needed a partner that is both complimentary and increases their reach in mid-market.”
It’s also good news for Dell, said Eastwood. It gains additional enterprise credibility, plus the ability to sell servers, storage, networking, infrastructure software and services alongside Oracle. “Plus it’s worth noting that Mark Hurd and Marius Haas are very good friends from their HP days.”
Both companies have had their challenges in the commodity hardware business, so success is anything but guaranteed. However the expanded relationship offers significant potential benefits to both Dell and Oracle. Dell gets access to a bigger chunk of Oracle’s software, and can sell bundles – with front-line support – to its large SMB installed base, and together with its other high-end offerings like SAP and Microsoft, strengthen its enterprise appeal. For Oracle, this opens up a substantial new market it couldn’t really address.
This isn’t Dell’s first significant reseller relationship with a dominant vendor in a vertical market. During the decade or so it was an EMC reseller, back when Dell IP was primarily an Internet Protocol, it generated more than a billion dollars in revenues in storage sales. Somewhere along the line it decided that there was a lot more money – and margins – to add some intellectual property and switch from reseller to OEM.
In 2008 it bought EqualLogic and added more than 41,000 customers by the time it bought Compellent in 2011. According to the latest numbers, Dell is now one of the top storage vendors, and well on its way to its stated objective of becoming a top-three vendor.
And then there’s HP. Dell and HP are really stepping up the competition for top dog in the x86 server market, as well as going head-to-head in such areas as storage and converged systems. Add in HP’s fractious relationship with Oracle over everything from the Sun acquisition and Itanium lawsuits to Hurd’s presence, this can only be considered a terrible nightmare.
Disclosure: Yes, Dell picked up my airfare and hotel for this event; yes, it’s a marketing services client; and yes, I’ve got Dell shares in my investment portfolio. But other than that, I’m totally and completely unbiased about the company. Trust me.