Dell+EMC: Recipe For Success?

“I owe, I owe, it’s off to I go.” Michael may not be singing those lyrics, but they make an accurate refrain for the pending $60-67-billion of EMC by Dell and friends. Apparently not content with the $11 billion in debt [http://finance.yahoo.com/news/dell-filing-shows-why-really-180228619.html] still outstanding from the $13.9 billion he borrowed to complete the $24.4 billion deal to take his company private in 2013, he plans to borrow another $50 billion (actually $49.5 billion) to finance the biggest IT ever.

There are many positives about the , including:

-complementary customer bases: EMC is largely enterprise, and Dell is largely midmarket, so very little overlap;

-complementary portfolios: while Dell has a sizeable storage business, EMC has a much bigger storage business, and together the companies address everything from thin clients, PCs, servers, security, networking, software, services, analytics, virtualization, and IoT to cloud and converged/hyperconverged infrastructure; and,

-they have a history of working well together.

Then there’s the added benefit, that not only will they be able to sell to each other’s customer base, which should be a lot easier than cold calling, but they will also be much more successful when they do go cold calling. According to a recent survey of customers not currently buying from either Dell or EMC, 50% expect to work with them, with only 9% completely dismissing the notion of working with a combined Dell-EMC.

There were over 300 journalists and analysts at last week’s EMC World conference in Las Vegas, and a number of the analysts shared their thoughts with me on the biggest developments at the event, and the biggest opportunities and challenges facing the dynamic duo, which will operate as Dell Technologies, under which Dell EMC will be the enterprise business, and Dell will be the PC business.

What was the most significant EMC World announcement, and why?

Mark Peters, ESG Practice Director and Senior Analyst (Storage), Enterprise Strategy Group: Two things (if I may) – Service360 because we all often get carried away by how important service and support is to users! And Unity because it’s such a revenue engine that’s truly important to both EMC now and the new company (with a dramatically expanded channel opportunity).

Zeus Kerravala, ZK Research: There were two I thought. EMC Unity because it brings all flash storage arrays to the SMB market at less than 18K. EMC has been touting 2016 as the “year of all flash” and it can’t be that if it’s too expensive so Unity expands that market.

Also, Enterprise Copy Data Management (eCDM). The software helps customers manage all of their copies of data stored all over the enterprise. This helps customers use storage better and manage their content more intelligently

Janet Waxman, Neuralytix: The most significant announcement was the clear plan on the mechanics of the integration. This is key because it signals the roles, expectations, etc for the new company. This will help allay any concerns or questions for all parties who can now focus on the future and moving forward.

Charles King, Pund-IT: For day 1, I believe there were two high points; the new Unity platform and the Virtustream cloud service. The former replaces EMC’s VNX platform and appears to provide the company a powerful, attractively priced solution to counter flash-specialists like Pure Storage. Just as importantly, Unity’s SMB focus markets should give Dell and its channel partners a lot to love.

The latter case — Virtustream — is clearly focused on the needs of enterprise customers, companies that EMC has a lot of experience serving. While some seem to think that AWS is the competitor that EMC is setting the Virtustream service against, I believe IBM’s enterprise-class SoftLayer is closer to the mark. In any case, the new offering should provide Dell opportunities in the services arena that it currently lacks.

Rob Enderle, Enderle Group: The creation of the new company structure placing a new combined Dell EMC under a Dell Technology Group umbrella. Folks don’t like uncertainty and this clears up a lot of it.

What will be the biggest challenge facing EMC/Dell after the deal closes?

Peters: Not losing innovation to introspection.

Kerravala: Managing the company cultures. EMC is a much more aggressive vendor than Dell. EMC interacts with its customers much more directly and will get in a street fight with any other competitor. Dell, on the other hand, tends to be much more passive, leverages on line and channel sales and competes more on price than on premium features. If the cultures arent managed correctly, EMCs aggressive nature could be highly disruptive to Dell.

Waxman: The details and the execution of this massive deal. Also addressing the debt issues — get clear on what divisions will be sold etc.

King: Effectively engaging with and convincing existing customers and channel partners of the deal’s benefits is probably the biggest challenge, partly due to the size & diversity of those separate groups. But it’s also a critically important task, and one whose gravity seems apparent to both companies.

Enderle: Getting people to see the combined company as something new, different, and better. Folks build impressions over years and then, once set, these impressions are really hard to change. To be successful it will be critical that customers see Dell Technology Group as having the combined advantages of Dell and EMC.

What will be the biggest opportunity facing EMC/Dell after the deal closes?

Peters: Realizing that they have enormous opportunities to deliver “IT” rather than just multiple component parts

Kerravala: Cross selling products in the channel and customer base. EMC doesnt do SMB well and Dell doesn’t do webscale great. This should be a 1+1 = 3 from a channel perspective by leveraging each others strengths.

Waxman: Get it RIGHT! They are now the largest supplier with two different market strengths and routes to market – right now they hold the winning cards IF THEY CAN EXECUTE – BE VERY THOUGHTFUL AND CAREFUL, the opporftunity is there for them – it’s theirs to BLOW!

King: Not to put too fine a point on it, but the pairing will give Dell/EMC a chance to revitalize the concept and value of the end-to-end system vendor business model which has undergone a curious decline during the past decade. Competitors like IBM and HP have abandoned it, and outside of Lenovo, no other vendors seem inclined to pick-up the gauntlet. Dell’s leadership positions in both workplace endpoints & data center gear give it an excellent platform to make its case.

Enderle: They’ll be only one of two remaining end to end vendors. If they can turn that into a stronger strategic advantage they could effectively divide up the market with Lenovo.
Most mergers (83%) fail, and there are no guarantees that this one will beat the odds. However, as much as EMC and Dell have been struggling of late, the opportunities for success are huge, and they have a history — apart and together — of beating the odds.

Author: Steve Wexler

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