DellEMC -- Bittersweet Thoughts

Today is the day Dell officially acquires EMC. Having spent 18 years at EMC (and two at VMware), my attention keeps wandering to the topic -- and its meaning -- even though I've moved on to bigger and better things.

Maybe it's time for a little writing therapy?

We all have had plenty of time to process the single largest tech acquisition in history. Today, the combined DellEMC marketing machine is fully cranked up, blasting Happy Rays into the interwebs.

All as expected.

As most big events are a mixture of positives and negatives, this one is no exception.

Congrats To Joe Tucci

I'm not shy to say, I've always been a big fan of Joe's. His plan to build EMC from a pure play storage company into something more meaningful (e.g. EMC Federation) was well-intended.

He also gets credit for the smartest IT acquisition evah -- VMware.

Many of us knew for many years that EMC as a standalone entity wasn't going to be critical mass in the new world order. Joe did the right thing, he sold the company to the right guy for the right price.

Way to go, Joe. It was a privilege to be on your team.

The Biggest IT Supermarket On Earth?

I can't speak for what Michael Dell is planning, but from here it looks like he wants to be able to sell more stuff to more people. A lot more. I keep thinking WalMart for traditional IT shops. I believe Michael Dell is one smart business dude.

But to make his model work, he's going to have to crank up the volume, and slash costs. Not to mention pay down a staggering debt.

That's somewhat at odds with the high-touch model of EMC, overlapping product lines, and lavish spending on R&D.

So EMC must change -- and drastically -- before too long.

VMware -- The Crown Jewel?

Today, VMware announced that Michael Dell was elected Chairman of the Board at VMware. Don't make the mistake of thinking this is some sort of ceremonial appointment.

Michael Dell, now more than any other single person, is in control of VMware' future - bought and paid for.

As a result, changes will inevitably occur. Perhaps at a more measured pace, but they will happen. Many VMware employees mistakenly think that, because they are a publicly held company, they can act independently of ownership.

I beg to disagree.

That's why people buy things -- they want to put them to use.

And Then There's This Cloud Thing

EMC doesn't have a viable public cloud offering. Neither does Dell. Nor does VMware for that matter.

That's a problem. Handing out one-way tickets for your customers to get to other vendors' public clouds doesn't strike me as a viable long-term strategy.

The combined DellEMC will be restrained from building out a viable public cloud offering in the near future. Why? It takes billions of dollars and years of work before you even have a hope of making money. Not exactly an attractive proposition if you're an investor.

I would think that Dell's investment syndicate would want to get paid on the existing debt first, and that's going to take a while.

What do Amazon, Microsoft, Google and Oracle have in common? All have big public clouds, all have founders still engaged with the company with serious equity ownership.  All are somewhat immune from activist investors.

Building a viable public cloud at global scale isn't for the faint of heart.

Michael Dell has stated that he sees the rise of public cloud as a great opportunity to sell stuff: servers and presumably storage. I think he's whistling in the dark. I think his play is to get increased market share in the shrinking on-premises enterprise IT market. HPE and IBM appear to be trying to do the same.

Back to my earlier comment about cranking up volumes and slashing costs.

Avoiding The Commoditization Trap

Differentiated things quickly become commoditized in our industry. That's true for both on-premises and cloudy stuff. Vendors who can't avoid commoditization get caught in a death spiral: lower margins mean less money to spend on creating new stuff that customers want and need.

Getting Really Big is one classic play to help stave off commoditization; the other is differentiating through unique IP that customers find valuable. In the IT world, differentiation usually means software farther up the stack. Oracle has chosen to invest up the stack: applications, databases, middleware, developer services, etc.

It's a very differentiated play.

IBM seems to be betting heavily on Watson. Neat technology, but I'm not sure that play can support IBM in its current form. HPE is rumored to be getting out of the software business, so we know where Meg wants to go.

DellEMC? Once you get beyond VMware's on-premises hypervisor business, and Pivotal's CloudFoundry, there's not a lot of there there. And big software acquisitions take big money, something that's in short supply these days.

The WalMart Example

Yes, I do visit WalMart occasionally. When I'm looking for inexpensive, undifferentiated and commoditized stuff, that's where I go. I make my visits as short and focused as possible. Great selection, great prices. That being said, I'm starting to like the grocery section.

WalMart is one of the two companies that has revolutionized how stuff gets into people's hands. The other, of course, is Amazon. I don't want to even think how much my family spends with Amazon Prime. It's almost too easy.

Both companies have mastered optimizing consumer supply and demand, albeit with different models. Both are masters of taking costs out of the model, and then doing it again.  Both have made a lot of money in the process.

Unlike our enterprise IT world, neither is facing an obvious existential threat to their classic business model, e.g. the rise of public cloud.  DellEMC, VMware, HPE and IBM certainly are.

Best wishes to all going forward.

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Comments

[HJRau]

Retired end of last year after 22 years (2 years extension inclusive)at EMC enterprise sales. Agree to the most of your analysis, Joe Tucci is a great CEO and a great person in addition, the right man at the right time in 2001, without him EMC would be a thing of the past since long time.
Nonetheless EMC has ceast to exist as a company just yesterday and a few stakeholders might ask if he really did the right thing and sold to the right guy at the very end. What if Joe Tucci would have followed Elliot Managements 2014 proposel, to split off VMware, dumping his firm believeand probably some emotions overboard, only company size would matter today?
Couldn´t a downsized but therefore a much more agile EMC decide in the comfort of a sea of fresh money from the splitoff (remember VMware s market capitalization in 2014), where to invest wisely in times of disruption everywhere for the next wave of unprecedented growth ?
Nevertheless, I hope for the best of the newly formed company and for my many good frieds at EMC.

[JP Corriveau]

Nice post Chuck. As a 10 yer veteran of EMC and many happy memories, I think it is accurate on the challenges, but there is room for the new company to thrive, as long as BAU is thrown out and the effort to get aligned with the new IT transformation movement gets done soon.
I will be watching as a Gartner Research Director, but wish them all the best in competing in the new IT markets.
I think their chances are much better then IBM or HPE at this point, but only time will tell.
JP

[Ruud van Zutphen]

I only see 3 scenarios, Decline, Grow or Transform.

Growth is:
- Converged is a race to the bottom, a play Dell proofed to be mastering well.
- Cloud (both massive scale on own hardware and deep touch specialised players on converged, liek Capgemini/Atos/Rackspace)
- Born in the Cloud ISV's (Workday/Salesforce/many more)

Decline is:
- Mainframe due to Fintech, Blockchain and other disruptions.
- Unix is eaten (destroyed) by Linux.
- HP, NetApp, Pure due to small portfolio and ability to slash costs out.
- Point Solutions due to costs/management and inflexibility.

Transform:
(requires a culture change form the top)
- SAP changed German leadership by US team, seen as true competition by the Workday/SFDC (Oracle isn't)
- IBM has done it many times before.
- Oracle could transform to, if Larry really steps down for a new leader/culture, if not HRM, CRM, Database en hardware business will only decline more..