The Dell-EMC Merger: 7 Challenges

The new company must overcome some major sticking points in order to succeed.

Jim O'Reilly

September 15, 2016

8 Slides

As the Dell-EMC merger heads towards completion, it's clear that most of the integration work remains to be done. There are overlapping products galore, which will confuse the customer base and, until the unified company presents a rationalized product line, will present a barrier to new sales. After all, who wants to be stuck with one of the products that’s discontinued!

There are people issues, too. At the top, VMware CEO Pat Gelsinger missed the EMC World show, sparking a bunch of rumors of his departure, which he's since denied. But it’s down in the sales trenches that the pain starts. Enterprise operations are moving to Hopkinton, Mass., with layoffs likely. Deeper down, though, there are fundamental mindset differences between the two companies.

Just look at the prices for storage drives, for instance. EMC charges $14,000 list price for a 1 TB solid-state drive. Dell charges just $4,000, but also sells a perfectly good $300 SSD online, roughly matching Internet pricing. If Dell-EMC moves to Dell’s model, which makes sense in a commoditizing market, revenue per sale will plummet. The compensation of EMC’s salesforce, and even its very survival with the company, are based on revenue achieved. Lower prices inevitably mean lower commissions..

In the past, Dell lagged IBM and HPE in the enterprise. Dell aims to get a much better enterprise story out of the merger, with the storage armamentarium needed to complement its server and network lines to provide a complete sale. The Dell story is progressing nicely already, with a strong emphasis on software-defined networking bearing fruit and partnerships to deliver hyperconverged systems and Ceph object stores.

EMC is more focused on protecting the current businesses while delivering ways to join different storage families together. It’s worth noting that the star attraction at the recent EMC World was the VNX3 (Ultra) array, which is a remake of EMC's block storage solutions. That’s hardly embracing software-defined anything!

Looking at the businesses that make up the new empire, there is a strong sense of internal stress caused by self-protection and territorial infighting. The merger comes as the IT industry struggles to change direction. PCs are dying. The cloud is eating into enterprise sales, while the very successful ODMs delivering to the public cloud giants are entering the US market with inexpensive quality gear. Technically, we are migrating to Ethernet universal storage appliances and hyperconverged systems with data compression while SANs are following the PC into the history books.

Continue on for a closer look at the challenges ahead for the Dell-EMC marriage.

(Image: Dell)     

About the Author(s)

Jim O'Reilly

President

Jim O'Reilly was Vice President of Engineering at Germane Systems, where he created ruggedized servers and storage for the US submarine fleet. He has also held senior management positions at SGI/Rackable and Verari; was CEO at startups Scalant and CDS; headed operations at PC Brand and Metalithic; and led major divisions of Memorex-Telex and NCR, where his team developed the first SCSI ASIC, now in the Smithsonian. Jim is currently a consultant focused on storage and cloud computing.

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