Michael Dell plans to create an ‘enterprise solutions powerhouse' through his firm's proposed $67bn acquisition of EMC. But what will an enlarged Dell mean for both sets of partners, asks Hannah Breeze
After a year or so flying under the radar as a private company, Dell emerged with plans to complete the biggest technology merger of all time. Its planned acquisition of EMC will be worth $67bn if it gets approved - a value not to be sniffed at.
Although the proposed price is still a few billion dollars off Bill Gates' net worth of $79.2bn, it tops that of the respective GDP figures of Uzbekistan, Kenya and the Dominican Republic. The deal is the biggest tech acquisition to date and will be worth more than the combined values of HP's Autonomy deal, Facebook's WhatsApp merger, Oracle's acquisition of Sun Microsystems and Lenovo's deal to buy IBM's server business.
But size isn't everything and the merging companies will have to work hard to integrate their partner programmes to keep their channels happy. Dell and EMC have both had turbulent backgrounds in the channel - the former had to strive to ditch its once-direct-only image and the latter has recently spent time convincing its smaller partners they are important to the company after significantly raising the revenue bars on its partner tiers.
Eponymous leader Michael Dell said he is "personally committed" to the success of the new company's partners and customers. And it is perhaps a good job he is, as some partners speaking to CRN suggested big change is ahead for the EMC and Dell channels.
Rupert Mills, managing director of Dell and VMware partner Krome Technologies, asserted that there is an "awful lot of product overlap" between the two vendors, not only in midmarket storage but also in back-up and virtualisation, as well as with EMC's VCE alliance with Cisco, which he predicted may not survive for long.
"I just can't see them putting R&D into keeping all of the products running and competing with themselves," Mills said. "My concern would be how long it takes them to stabilise these two very large companies after they merge, as there's going to be an awful lot of staff and processes overlap. Dell have been through many major acquisitions, including EqualLogic, Wyse and Quest, so they are well versed, but the sheer scale of EMC has got to lead to some disruptions in the short term.
"There will be an awful lot of product overlap, which will mean there will be a lot of shedding or discontinuation of products, from one side or the other. But providing the strongest one out of each of those survives, Dell will end up with a better offering in the end."
He said the union would be the first time recent predictions of consolidation among the world's top tech giants - made by the likes of former Cisco boss John Chambers - have been borne out in reality.
"This could be the start of some dominoes happening among more vendors. I can only see Cisco, NetApp and HP looking to shore up partnerships in response to this," Mills said.
Way to go?
However, Jonathan Lassman, managing director of reseller Epaton, which works with so-called next-generation storage vendors such as Pure Storage, Violin and Nimble, described the takeover as a "defensive move" for EMC.
"They still have the same top management as when I was there in 2001. The top boys [at EMC] have had enough. They can't fend off the threat from the next-generation storage vendors so they are taking a defensive move to cash in and get out of the game," he said.
The move is a "win" for Dell, though, Lassman added, arguing that Dell is just a couple of bolt-on acquisitions away from becoming the "biggest storage powerhouse ever".
"No one gets fired for buying EMC," he said. "There are two end-user camps: those that are embracing next-generation technology; and EMC houses who will keep on buying EMC. So it's a great business. If Dell can keep that fresh and went out and bought a couple of next-generation vendors, it would be an outrageous organisation. But if they think they are buying the finished article, they are mistaken."
Another partner who is optimistic about the future of the soon-to-be-merged entity is Stuart Rae, managing director of top-level Dell partner Nviron. He said the union would benefit customers because "Dell naturally drives value in its product line".
"It's positive as it expands our product line. At the top end, Dell can't touch EMC. If we get access to the EMC product line, under unified branding, we will be able to get access to bigger deals," he said.
"From a channel perspective, I'd be concerned if the channel becomes more restrictive. Dell relies on medium-sized, technically expert partners like us and we will be keen to get access to the whole product line. I'd be disappointed if there was a new tier partners like us didn't have access to."
Brett Edgecombe, director of EMC partner 101 Data Solutions, dubbed the union "great news" for his business, which works closely with the pair. "We've been a long-term Dell and EMC partner. EMC plays well in the enterprise space and Dell is good from the entry level upwards, so there are synergies at all levels," he said.
"EMC's R&D budget is around $2bn. If you add in Dell, the combined budget pool will be formidable for competitors."
‘This is a bittersweet announcement'
"The coming together of EMC and Dell will create a powerhouse in the technology industry with more than $80bn in revenue," said EMC CEO Joe Tucci (pictured).
"The combined company... brings together strong capabilities in the hottest IT trends, including digital transformation, the software-defined datacentre, hybrid cloud, converged infrastructure, mobile and security.
"The combined company will be far more efficient and effective to operate as a private company, giving us the ability to incubate and develop new products and solutions necessary to capitalise on the opportunities I just mentioned. The new company will have more freedom to invest for the long term, an increased focus on our customers and, very importantly, the ability to attract and retain the best and brightest people.
"Of course, I will stay actively involved as CEO until we close the transaction, at which point I know Michael will do an excellent job leading the new organisation.
"This is a bittersweet announcement for me. I am incredibly proud of the business we have built here at EMC. It has been a journey that I wouldn't have traded for anything."
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