1) There are huge opportunities for those not beholden to legacy technology.
Companies that are focused on innovation and new technologies and methods will win from this transaction. The merger is about protecting a legacy income stream that comes from servers, storage arrays, packaged software, client systems and legacy procurement and deployment strategies.
Disclaimer: Prior to Cloud Technology Partners, I worked at Dell in a variety of roles, including M&A, product management and Federal.
2) What does Dell stand for in the IT Market?
Dell went Private 18-months ago with the goal of using the lack of a public spotlight to better manage cash flow and increase investment in the next generation of IT products. Now that Dell has made progress in paying down the huge debt incurred, they have chosen to take on more debt ($40-45B estimated in this transaction). Dell R&D has been at a standstill for years, and will continue as the only focus of executive leadership will be revenue to generate cash to pay down debt. R&D will continue to suffer as the rest of the IT market rockets ahead in another record VC and M&A year.
3) Rekindling a Lost Relationship
Dell and EMC were close partners for about 10 years, in the early 2000s. Dell was the largest channel partner of EMC’s and the R&D teams worked jointly to develop the CX and AX line of FC products. Despite the culture clash, this partnership was very successful, driving a lot of revenue for both firms. Dell then decided to grow their own storage business organically, through purchases of EqualLogic and Compellent. This created a large rift between the companies sales forces and R&D teams.
4) Complex (Messy) Portfolio
Dell and EMC will have a combined portfolio of over 500 products, many with overlap. This leads to customer confusion, market confusion and, most of all, integration complexities. This portfolio will take years to rationalize, while customers still need to operate, grow, invest and mature their IT capabilities.
5) Storage Overlap
EMC has a dominate play at the high end, Dell has a strong offering at the low end. The challenge is mid-market storage arrays, of which the both have strong portfolios. Dell recently announced a large product transition to rationalize their own overlapping portfolio. This merger will lead towards more products being killed off, integrated or sunset. Customers know this, and transition of storage systems is complicated. Why not just buy a few Snowballs, move to AWS and let someone else worry about model numbers, failed hard drives, and network performance?
6) Smaller is the Trend
Companies like HP and IBM are doing everything they can to get smaller and more nimble, knowing that is their path to building products that focus on a specific set of buyers and allows them to compete and quickly develop new capabilities. What value does a combined company with 180K employees add in terms of time to market, innovation, research or customer satisfaction?
7) Spin-offs, IPOs, Divestitures
Dell has already begun the process of spinning off the valuable business units for the purpose of generating cash through public offerings. The Secureworks announcement is just the beginning, and will lead to more confusion from customers as to the future strategy for services they leverage or plan to leverage.
8) No Cloud Plans
Neither Dell or EMC has a public cloud play. At one time Dell sold a large number of systems to the major public providers, but that business has moved to Sanmina and Foxconn as they improved their supply chain and design teams, and as OpenCompute has picked up momentum. Dell attempted to go into the Public market, but ended up failing very badly. While both companies talk about Private Cloud, they do it through the same colored glasses of servers, storage arrays and switches they have become accustomed too.
9) Operational Nightmare
Dell and EMC are both collections of many acquisitions over many years. Many customers of both companies have to get quotes from different systems because the operations on the back end did not move quickly enough after acquisitions were complete, leading to customers cutting multiple POs to the same company for different product lines. There is no evidence that having a bigger company will lead to customers having an easier time doing business with the new Dell/EMC.
10) Now is the time to modernize with the cloud.
If you are a big Dell and/or EMC customer today you will have complex technology platform changes as a result of this deal. There will be confusion over roadmaps and there will be overlapping sales teams competing for your business.
Why not take two steps forward and modernize with the cloud, rather than incremental steps with the legacy technology that’s backed by companies desperate to survive in the changing world around them.
Forbes has covered this deal extensively and has some of the better articles on the topic.