What does the Dell Acquisition of EMC mean to the Industry?

Last month the biggest tech deal of all time took place and sent shock waves through the industry. Dell buys EMC for 67 billion dollars. EMC will go private after a long stint as a publicly traded company and will be run by CEO Michael Dell. Long time EMC CEO Joe Lucci will retire. VMware will still operate as a separate organization and will remain publicly traded. What makes this deal so fascinated is that fact that Dell is the much smaller company. Dell value is almost a third of EMC’s purchase price.

I have been on both sides of the fence as a partner and customer when it comes to Dell and EMC. Both companies from a cultural standpoint are very different. It will be interesting to see how two very large companies can assimilate from a cultural standpoint. It is my belief this could be a huge issue in the coming years which could potentially cause a lot of turnover. EMC has the reputation in the field of being cutthroat. They have no problem going around a someone even if it ultimately harms the relationship. This is typically due to aggressive numbers which puts a lot of presume on the sales teams. EMC also puts a high value on their product which typically translates to a higher price. Dell on the other hand has always been a little more laid back in their approach. It always seemed to be more about the price than the technology. Most customers looking at Dell are doing so because the reputation of being price sensitive. Which a lot of times puts them in more the commercial or SMB space which isn’t were EMC typically plays.

Neither EMC or Dell can be classified as industry innovators. They have grown through acquisitions. Some of EMC’s most notable acquisitions where Data General, Data Domain and Isilion.  Dell’s where EqualLogic and Compellent. What EMC gives Dell a more enterprise storage and backup play. With EqualLogic already being phased out. My guess that Compellent will be next and Dell will keep the majority of EMC’s storage portfolio. The Dell products will either be dropped or sold off to pay off debt. From all reports, it sounds like VMware will still operate independently like it did under EMC. I wonder if VMware will be sold off or will Dell try to control the company through purchasing shares in their stock. VMware was the majority of EMC valuation and have been the leader in virtualization for the past 10 years.

So what does the future hold for Dell? It’s hard to say how things will look after the dust settles. Dell will now have the full stack which will allow them to better compete with HP, Cisco and Oracle. I do see the EMC and Cisco relationship starting to fade long term. It sounds like in the short term VCE and the VBlock will continue to be supported but in my opinion the future is uncertain for both. My guess is Michael Dell wants to move towards a “one vendor for all” model like HP in the next several years. If that’s the case, I see the end for both VCE and VBlock.

How does Dell’s acquisition of EMC impact their competition? Well I think this is a good thing. Especially for NetApp which have had its own set of challenges. There biggest being the move from 7-Mode to Clustered ONTAP. I think for the next couple of years Dell is going to be focused on merging two very complex companies and large product line. So it’s going to take some time before they start gaining momentum. This move could make some existing EMC accounts more vulnerable. Especially, those diehard EMC accounts that don’t necessarily like Dell’s technology.

It will be interesting couple of years to see how things evolve with Dell. Dell acquired a lot of debt with this acquisition and I’m curious how this will impact R&D in the long run. Plus, it will be interesting to see how or if Dell competition will answer. Will someone else do a large acquisition of there own? I still think there is a possibility that Cisco will purchase NetApp one day. Cisco will need to make a move on a storage vendor as the industry starts to consolidate more. In my opinion prior to the EMC acquisition. The NetApp and Cisco relationship started to weaken a bit. This was mainly due to the fact that Cisco decided to diversify its partnership with storage vendors like Nimble and Pure. I guess only time will tell.

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