Dell has put in a bid to buy enterprise storage supplier EMC, the parent of server virtualisation company VMware. At $67bn, the acquisition will be one of the biggest in the history of enterprise IT. It comes just weeks before rival HP splits to form two separate businesses.
If Dell’s bid is successful, the combination of Dell and EMC will create the world’s largest privately controlled, integrated technology company. Dell said the combined company will be a leader in the attractive high-growth areas of the $2tn information technology market with complementary product portfolios, sales teams and research and development investment strategies.
The transaction will combine two of the world’s greatest technology franchises, with leadership positions in servers, storage, virtualisation and PCs. It will bring together strong capabilities in the fastest-growing areas of the industry, including digital transformation, software-defined datacentre, hybrid cloud, converged infrastructure, mobile and security.
Speaking two years ago, shortly after the company re-privatised, CEO Michael Dell said it would continue to expand its enterprise business: “In the past four to five years we have built an entire business in enterprise and services. Our enterprise business grew by 9%.”
He said the company had built a $21bn enterprise business outside its traditional PC business and would continue to acquire companies to bolster this part of the business.
The EMC acquisition will flesh out his enterprise vision. Announcing the deal, Dell said: “The combination of Dell and EMC creates an enterprise solutions powerhouse, bringing our customers industry-leading innovation across their entire technology environment. Our new company will be exceptionally well-positioned for growth in the most strategic areas of next-generation IT, including digital transformation, software-defined datacentre, converged infrastructure, hybrid cloud, mobile and security.”
History of Dell enterprise building
Dell’s acquisition strategy began in earnest seven years ago, as the company started its journey to focus on the IT requirements of larger businesses.
In 2008, Dell entered the enterprise storage market with the $1.4bn acquisition of Equalogic. In 2011, it bought virtualised storage provider Compellent for $940m.
A paper from Enterprise Strategy Group Dell in 2013 reported that Compellent SC8000 modular storage was four to six times lower than all-flash storage. According to ESG, Dell Compellent also provided 3.5 to 8.75 times more capacity.
While it has certainly developed a storage business, from an enterprise perspective industry commentators have previously stated that Dell’s product portfolio mainly caters for the small and mid-sized enterprises.
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- In a keynote presentation at the Dell Technology Camp in Paris, Michael Dell outlined how the re-privatised firm will target the enterprise.
- Dell still has some work to do to educate the enterprise about what it has to offer.
- In the wake of the Dell-EMC announcement, CIOs ponder their digital strategies, supplier relationships and the future of IT.
According to analyst IDC, spending on storage in 2015 rose by 3.6% to $36.2bn, while capacity consumption grew by 43% to 99.2 exabytes.
A successful bid and purchase of EMC will give Dell a much-needed boost in the enterprise storage market and enable the company to ride the wave of data growth driving the digital economy.
What will become of VMware?
But for many enterprises, Dell’s bid raises questions over the future of VMware, the market leader in server virtualisation, which is a subsidiary of EMC. To date, VMware has kept the influence of its parent company at arm’s length. Its EVO:Rail hyper-converged infrastructure can be preconfigured on HP and Dell converged infrastructure hardware.
Dell has promised to keep VMware a public company. “VMware will remain a publicly traded company and continue to provide customers value through leading software-defined datacentre technology, together with its cloud, mobile and desktop offerings. This transaction is expected to accelerate VMware’s growth across all of its businesses through significant synergies with Dell’s solutions and go-to-market channels. VMware remains committed to investing in and partnering with its strong, industry ecosystem,” the company stated.
In a recent Computer Weekly article, Quocirca analyst Clive Longbottom noted: “At the hardware level, Dell has embraced convergence. The PowerEdge FX2 system brings together server, storage and network equipment, along with management software to challenge the likes of HP’s Converged Systems, VCE Vblocks and Cisco UCS.”
Dell also partners with Nutanix on a rival converged appliance for virtualising servers. If Dell succeeds in its bid for EMC, the hardware independence of VMware will be questioned.
Combining cloud and in-house IT
Another challenge Dell will face is how to combine cloud and on-premise IT, according to Forrester research director Glenn O’Donnell. “One question that keeps popping up is how this will work with the cloud. Cloud is growing fast, but in-house technology will remain important for a long time,” he said.
“The big game for every tech giant is how they can straddle the on-premise and cloud-based worlds. The two must work as one seamless environment. For most companies, this is not yet the case. Dell can make some good progress in this direction with EMC in the fold.”