Dell and EMC – Sanity Check

handshakeIn our ESG Lab group, we have a saying: “It’s easy to prove something doesn’t work, but it’s really hard to prove something does.”

Even so, I’m a little surprised at the volume of naysayers that are popping up post Dell/EMC merger announcement. Some of the things I’m hearing and reading are just plain dumb. Thus, allow me to straighten you all out.

First, let’s agree Mr. Dell is not an idiot. On the contrary, he’s about 25 billion times smarter than you and I. Second, we should probably agree that Mr. Tucci is pretty smart himself. He took a ragtag bunch who appeared near the end of the customer abuse cycle, with one real product (Symmetrix), and turned it into a powerhouse that has dominated the storage world for decades, and, oh yeah, brought you VMware.

Finally (you may need to take my word for this part), the financial engineering of this deal is a bankers' (or about 73 bankers in this case) dream. Wall St. LOVES the deal financially. Michael had ZERO issue getting the money to do this. Now, you can say that Wall St. is evil, but you really have no ability to say it is dumb. It, like the others, is smarter than you and I.

So, when I hear the likes of Forrester, a firm I’ve respected, say things like the deal will end the Cisco/EMC/VMware (VCE) relationship, I think…..dumb. Why on earth would smart people, selling BILLIONS of dollars worth of kit annually, blow that up? So Dell can sell more servers? So Dell can try to sell its own converged systems? Asinine. The top 2,000 companies in the world buy Dell stuff, Cisco stuff, EMC stuff, and VMware stuff – already. Lots and lots of it. Why would anyone want to screw that up? VCE under Dell will do the exact same thing that VCE under EMC did – sell the customer what they want, support the hell out of them, and make a ton of money along the way. You think Dell will be upset because UCS is in the box? No. You think Dell will try to convince a Fortune 50 company to use its switches instead of Cisco? No. As long as customers are happy and profits are generated, the only reason to kill a golden goose like that is ego, or stupidity. Mr. Dell has exhibited neither as far as I can tell.

Now, make no mistake, the deal will take time to work out, product lines need to be rationalized (although not all that many if you look holistically), and whole businesses need to be thought through (do you keep the security biz or spin it out?). People will be overlapping in some areas. This is real life. It may get messy at times – but it probably won’t get messy because of stupidity. This is a monster deal, there will be some issues, but I for one think the potential upside for a mega-tech company like this – which is unencumbered by Wall St.’s 90 day short-sighted ethos, has the chance to be awesome. Not just good, but awesome.

Along the way, they will have to figure out who sells what, to whom, and under what conditions, but I suspect there will be a lot of “hands off” for the foreseeable future. I've known EMC for almost 30 years, and I've known Dell for more than 15, but can tell you that Michael and team are not blind – they had a nice 10 year simpatico relationship where they both made a pile of dough off of each other. The players are fairly well known on both sides, and EMC definitely offers Dell both an executive and field all-star team, specifically when it comes to enterprise selling. Dell reaches every nook and cranny of the globe, and EMC is a professional elephant hunter. Synergy, at least on paper, should not be an issue.

This is a world where less vendors are sought after – more convergence is inevitable for products and vendors. It’s also a world where a few big guys have ALWAYS dominated, and it will remain so. That doesn’t mean customers will only buy from one guy – but they will buy from a few big guys – the way they always have. Oracle, Microsoft, VMware, EMC, Dell, HP, IBM, Cisco….and then the list gets harder and harder to keep up with. Buyers care about service and support – in storage it’s the number one thing they care about. Dell/EMC has that figured out – in the most demanding shops on the planet. They want the cloud – but will they want it piecemeal? Will they stay with AWS for development but not production? I don’t know, but the data says they want more complete offerings from less and less vendors.

As far as the monsters go, they all compete, but they all also realize they are better off competing with the other 800 little guys trying to steal share than with each other most of the time. That’s how the rich stay rich.



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