There can be only one…or at least less than there are now.

Since the recent announcement  of Dell acquiring EMC, there has been great speculation on the future of the storage industry.  In previous articles I have observed that small storage startups are eating the world of big storage.  I suspect that this trend had something to do with the position EMC found themselves in recently.

Watching Nimble, Pure, and a few others IPO recently, one cannot help but notice there are still far more storage vendors standing, with new ones coming out regularly, and the storage market has not consolidated as we thought it would.  During recent conversations with some of the sales teams for  a couple storage startups, we discussed what their act two was to be.  I was surprised to learn that for a number of them, it is simply more of the same, perhaps less a less expensive solution to sell down market, perhaps some new features, but nothing really new.

Looking at the landscape, there has to be a “quickening” eventually.  With EMC being acquired, HP not doing a stellar job of marketing the 3Par product they acquired, Netapp floundering, and Cisco killing their Whiptail acquisition, we are in a sea of storage vendors with no end in sight.  HP splitting into two companies bodes well for their storage division, but the biggest challenge for most of these vendors is they are focused on hardware.

For most of the storage vendors, it is likely that lack of customers will eventually drive them out of business when the finally run out of funding.  For some, they will survive, get acquired, or merge to create a larger storage company, and probably go away eventually anyway.  For a few they will continue to operate in their niche, but for the ones who intend to have long term viability, it is likely they are going to need to find a better act two, something akin to hyper converged infrastructure, or more likely simply move to a software approach.  While neither are a guarantee, they do have higher margins, and are more inline with where the industry is moving.

We are clearly at a point where hardware is becoming commoditized.  If your storage array can’t provide performance, and most of the features we now assume to be standard, then you shouldn’t even bother coming to the table.  The differentiation has to be something else, something outside the norm.  Provide some additional value with the data, turn it into software, integrate it with other software, make it standards based.  Being the best technology, the cheapest price, or simply the biggest company doesn’t matter any more.  Storage startups, watch out, your 800lb gorilla of a nemesis being acquired might make you even bigger targets.  You better come up with something now or your days are numbered.

There can be only one…or at least less than there are now.

What is Dell really buying?

Standard disclaimer, this is my personal opinions, and does not reflect those of my employer, or of any insider knowledge, take it for what it is worth.

When I heard rumors of the Dell EMC deal, I was pretty skeptical.  I am a numbers guy, and the amount of debt that would be required is a bit staggering.  Why would a company like Dell even want to acquire a company like EMC?  Especially after we all watched the pain they went through to take the company private.  Why would EMC want to go through the pain of being taken private, by a former competitor no less?  With the HP breakup, and IBM selling off a number of their product lines over the past decade or so, this almost seems counterintuitive, an attempt to recreate the big tech companies of the 90’s & 2000’s which are all but gone.

Sales and Engineering Talent

I have many friends at Dell, I was even a customer when I worked for some small startups many years ago.  In my experience, Dell is really good at putting together commodity products, and pricing them to move.  Their sales teams are good, but the compensation model makes them tough to partner with.

EMC has a world class sales and marketing organization.  EMC enterprise sales reps are all about the customer experience.  They are machines with amazing relationship skills, and they are well taken care of.  Engineering at EMC is a huge priority as well.  EMC’s higher end support offerings, while costly, are worth every penny.  I have seen them fly in engineers for some larger customers to fix problems.  EMC products are all about the customer experience.  Even though I have not been a fan of their hardware lately, they have done some amazing things around making the experience second to none.

An Enterprise Storage & Software product

Let’s be honest, Dell has not been a truly enterprise player in the storage and software arena.  If we look at the products they have acquired, a majority of them are mid market plays.  Compellent was supposed to be their big enterprise storage play, but that is mid market at best.  From a software perspective, most of the products are low end, and they don’t tend to develop them further.

EMC on the other hand has enterprise class storage.  Say what you want about the complexity of the VMAX line, it is pretty solid.  It may be a pain to manage sometimes, but it does set the standard in enterprise storage.  EMC has also done amazing things with software.  ViPR Controller and ViPR SRM are impressive technologies when implemented appropriately.  EMC has also done quite well with some of their other software products, but more so they treat software as a critical part of the stack.

VMware

Enough said, the real value for Dell is getting a good stake in VMware.  Like it or not VMware is the market leader in Hypervisors, Cloud Management, Software Defined Networking, and making incredible strides in Automation, and Software Defined Storage.  The best thing that EMC has done is allowing VMware to continue to be independant.  If Dell can stick to that plan, the rewards can be incredible.

The reality is this deal won’t change much in the short term from an IT industry perspective.  Large storage companies such as EMC and HP Storage are getting their lunch eaten by smaller more agile storage startups.  Servers are becoming more of a commodity, and software continues to be the path forward for many enterprises.  This is a good deal for both Dell and EMC, the challenge will be not to go the way of HP.  If I could give Michael Dell one piece of advice, it would be to hire smart people and listen to them.  Culture matters and the culture is what makes EMC and VMware what they are so don’t try to change it.  Culture is the true value of this acquisition.

What is Dell really buying?