By now, you've probably not only seen the news, but you've also probably seen lots of commentary on Dell's recent acquisition.
I decided to wait a bit before posting my thoughts on this topic, just to allow for some contemplative reflection.
In many ways, Dell's move does not come as much of a surprise. I think the impact of this move will have a more significant affect on Dell's well-known competitors far more than it could potentially impact EMC over the long run.
So let the speculation begin!
Why I Think They Did It
I think this is more about servers, than storage.
If you're Dell, you're looking at HP and you're not liking what you see.
HP is making good progress with their desktop PC business, thank you. And, if I read the numbers right, HP is also doing better in the server space where Dell has traditionally done well.
In the SMB (small to medium business), bundling is king. Lots and lots of entry-level systems get sold that way, combining all the bits into a nice package.
HP has been successful with bundling their low-end MSA product with servers. I don't think it's unfair to say that there's nothing too special about the MSA, but having the product as part of the bundle has worked well, and has provided HP with a "hey, it all comes from us" positioning that's important in many market segments.
Dell probably realized that the dynamics of entry-level storage in the SMB space were very different than in larger environments. And I would expect that they felt that they needed to "own" a product in this space, rather than reselling or OEMing one.
And, let's face it, EqualLogic makes an decent iSCSI-based storage product that works well.
So, from Dell's perspective, I can potentially see the rationale.
What This Means From EMC's Perspective
EMC sells a broad range of storage, virtualization and information management products through Dell. When you look at the potential overlap between the EMC stuff Dell sells, and a future Dell/EqualLogic offering, it ends up being a fraction of a fraction of a fraction of the overall picture.
Sure, we'd love to have that business, but ...
But, even if some of this overlap gets fulfilled by Dell's offerings rather than the Dell/EMC offering, there's still plenty of good business between the two companies -- something neither organization would want to walk away from anytime soon.
We've both renewed our agreement several times -- the current one runs to 2011. We've built up many years of productive relationships between EMCers, Dell people and many, many customers.
Some characterizations I've seen that "this is the beginning of the end" are unrealistic. Makes good tabloid-style gossip, but I don't lend too much credence to this sort of thinking.
What This Means From Dell's Perspective
Simply put, it's "Dude, You're In The R+D Business".
Dell famously prided itself that it had built the business around effective distribution. It also was proud of the fact it didn't spend much on R+D.
Well, if you pay $1.4 billion for a smaller storage player, you are now a de-facto storage R+D player. As well as in the storage customer support business. And other expensive storage-related endeavors.
It's not clear to me what this means to their business model going forward. And they're going to have to sell an awfully large number of these arrays to recoup their investment.
If the customer wants iSCSI and nothing else, I can see the EqualLogic product being attractive as part of PowerVault. But if the customer might want a bit of flexibility (e.g. FC, NAS, etc.) that's not part of the EqualLogic offering.
Who Else Is Impacted?
Well, if I were one of the smaller storage startups (Compellent, LeftHand, 3PAR, etc.) I'd think the temptation would be to look at the Dell deal and see all sorts of dollar signs ahead.
I think it's a safe bet that there were other bidders, given the (ahem) rather rich valuation.
Were they server companies? Or were they storage companies?
Speculation is pretty evenly split. Neither HP nor IBM have a good, entry-level iSCSI product. But they don't seem to care much about storage, either, so the idea of one of these guys taking out a billion-dollar checkbook seems unlikely, at least to me.
However, if Dell does well with iSCSI storage, both these server players might be looking at stepping up their investment in this space.
Another persistent rumor is that NetApp was looking at them. The logic behind this one is that NetApp is getting bludgeoned by that whole raft of "storage made simple" new entrants, (as well as folks such as EMC with the NS20) and wanted to make a pure play in a different part of the market.
Maybe yes, maybe no -- but I tend to think that NetApp has to do something pretty big, pretty soon to change the game.
Much was made in some of the press around "VMware affinity" for the EqualLogic product. Now, being the skeptical type, I tried to track down some sort of fact-based nugget for this perception, and didn't find too much, other than the usual "simple, easy-to-use" thing.
I thought it strangely bizarre that somehow, parts of the investment community thought that the Dell / EqualLogic acquisition would represent a competitive threat to VMware.
Kind of scary that people would come to that conclusion, isn't it?
The Big Picture
Storage is an increasingly important part of the landscape. Dell understands this. Right or wrong, they made a big bet to own a product in a small but fast-growing piece of the market -- and one that gets sold at the same time servers get sold.
I think it's more about the servers than the storage, at least in this case.
If Dell executes well, I think the real impact will be with the server vendors who don't have a comparable offering, as well as continuing to squeeze the niche where NetApp plays.
One thing is for sure -- we'll probably see more consolidation in this market and lots of money changing hands.