Dell 3.0 Takes Center Stage at DEW

Austin, Texas:  The critical question arising from the inaugural Dell EMC World event — at least for me, an , HP/E and // investor — is what makes Dell’s prospects any brighter than those of its two main competitors, IBM and HPE, and the trio of enterprise vendors offering more limited portfolios — Cisco, Oracle and Lenovo? IBM has seen its sales shrink for the last 17 quarters, HPE is just shrinking, and the other contenders can only offer partial solutions — predominantly networking and datacenter servers, DBMS software and appliances, and devices, respectively.

From its humble roots in Michael Dell’s college dorm room, the company has scaled the PC heights, added servers, , software, networking, security and services and, with the completion of the EMC acquisition, is now grappling with the IT industry’s largest acquisition and largest debt load. It has also added significant resources in enterprise storage (disk, flash and software-defined), virtualization (VMware), (Virtustream, and ECS), networking (/NSX), all-in-one appliances () and security ().

Of course there is a lot of overlap too, and while the combined companies may point out the differences, many others will be concerned about the similarities. We’ve already seen signs of tighter focus — i.e. the sales of the enterprise content division, services and software units, and the (lower-than-expected) SecureWorks IPO — and the first workforce reductions, 2,000-3,000 jobs are expected to be cut, out of 140,000.

On the good (?) news front, Dell moved into top spot in server shipments for the most recent quarter, while HPE held on to top spot in revenues; shipments grew 2% year-over-year, while revenues edged 0.8% lower. Even better, EMC was named a leader in integrated systems, and the acquisition should strengthen that position, although Gartner cautions that uncertainty will plague the new Dell-EMC-VMware combination that brings ‘multiple overlapping and competing integrated system strategies under one roof.’

The results were equally ambivalent for enterprise storage, where revenue was flat while shipped capacities shot up 12.9%; EMC tied for first place with HPE ($1.6 billion each) while Dell came in third place with a revenue increase of 14%, up to $1 billion.

Prior to the acquisition EMC was pushing a software-defined everything strategy, and it’s unlikely that focus will change under new ownership. The current evolution of IT is offering customers a couple of choices in pursuit of shrinking data centers, lower CAPEX and OPEX and the ability to leverage the cloud: some form of do it yourself versus an all-in-one solution, and hardware versus software lock-in (and that at the end of the day, there’s no getting away from software lock-in), Manuvir Das, SVP, Advanced Software Division, told IT Trends & Analysis.

SDE may be software lock-in, but that enhances, not reduces customer choice because software is portable, said Das. “That’s the real benefit of software defined, it makes the thing portable.

What may not be portable are the various and competing/overlapping partnerships, i.e. integrated servers and software defined networking. While Cisco and Dell are saying all the right things now, how the relationship will change once Dell servers become more of a challenge should be a cause for concern, at least for .

Dell says its ‘strong and committed partnership with Cisco’ remains the same, post EMC acquisition, according to Burney Barker, SVP, VCE Global Sales. ‘Together, Dell EMC and Cisco can continue to lead customers on their journey to cloud computing and IT transformation.’

Cisco’s SVP of Global Data Center/Virtualization Sales, Frank Palumbo, was equally optimistic about the partnership’s prospects.  ‘The foundation of our partnership is very strong, and we are confident that it will only become stronger.’

In addition to the recent Validated System for Virtualiztion announcement, Dell EMC also rolled out the Validated Systems for Microsoft Exchange and Microsoft SQL, along with new Microsoft Azure Cloud Services. The Validated Systems architecture and offerings clearly demonstrate how one vendor’s innovations can benefit itself, its partners and their common customers, blogged analyst Charles King, Pund-IT. ‘That was the case with the original VMware-focused Validated System for Virtualization, and it remains true for the new Validated Systems for Microsoft SQL and Exchange, and Azure Backup, DevTest and Business Continuity services.’

King was equally bullish about the company’s service-defined infrastructure approach. ‘Some vendors offer limited versions of their converged system solutions, but Dell EMC’s service-defined Infrastructure approach incorporates building block configuration and simplified management options that are far above the norm.’

Dell EMC has a tremendous foundation to build upon, including:

-#1 in U.S. PC sales (#3WW)

-#1 in WW PC monitors

-#2 in WW x86 servers

-#1 in WW x86 virtualization/virtual machines software

-#1 in WW cloud systems/systems management software

-#1 in WW enterprise storage systems (combines entry level, mid-range and high end)

-#1 WW scale-out NAS

-#1 WW scale-out object storage

-#1 WW all-Flash arrays

-#1 WW hybrid Flash arrays

-#1 WW open SAN

-#1 WW NAS

-#1 in purpose-built backup appliances

-#1 in storage software

-#1 in cloud IT infrastructure

-#1 in integrated systems

-#1 in data center automation software

-#1 in enterprise mobility management software

‘Plus, the companies’ integrated solutions and services portfolios will allow it to comprehensively pursue rapidly expanding markets and sales opportunities, including hybrid cloud and converged infrastructure,’ noted King. ‘By virtually any measure, Dell Technologies is starting its life in an excellent position.’

However, first and foremost Dell needs to reassure EMC customers that their investments are safe and that the future roadmap includes EMC technology. “Data storage touches a wide range of sensitive points and issues, and customers need to know they’re in good hands,” said King. Customers need to hear “that the merger is largely done, that plans have solidified and can be depended upon, and that no customers will be left in the lurch as a result,” said Rob Enderle, chief analyst at Enderle Group.

Most of the work involved with understanding how and where to bring EMC and Dell together was done many years prior to the year-long run-up to last month’s acquisition, said Michael Dell. Last evening he told IT Trends & Analysis that the 10-year distribution partnership, which ended five years ago, provided a lot of that familiarity, but it was actually a much more intense analysis conducted back in 2009 that provided the most insight. He said 75% of the work done on a possible deal — which couldn’t be concluded at that time because of the economic situation — was still valid when the acquisition was announced a year ago.

Clearly, Dell EMC’s future faces uncertainty from a technology and market perspective, including debt/flexibility challenges, but that’s true of any business. Dell started as a PC company; Dell 2.0 was Michael’s revised vision to add intellectual property (IP) to his arsenal a few years ago, and the EMC addition, brings us to Dell 3.0.

The new entity also bring with it two legacies of success and leadership in a multitude of existing and emerging markets, and a extended history of working together. There are no guarantees that this acquisition will work out — sadly, most mergers and acquisitions (70-90%) fail — but given both companies’ track records for successful acquisitions, I’m fairly confident that if this deal fails, it won’t be because of what they did or didn’t do.

DISCLAIMER: A former Dell and EMC shareholder, I’ve still got some shares of VMware, and am attending this event courtesy of Dell.

Author: Steve Wexler

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