Dell and EMC: What do the customers think of it?

As the world gets used to the idea that Dell and EMC are trying to pull off the largest corporate IT deal in history, there may be signs of optimism.
Written by Colin Barker, Contributor
Will the Dell-EMC deal be good for customers?

Customers and analysts are cautiously optimistic about the eventual outcome of the world's biggest-ever technology deal - Dell's $67bn acquisition of EMC.

The two companies themselves argue that the deal is a good fit. EMC's CEO Joe Tucci said the deal will create a new leader in the most critical areas of the $2 trillion IT market, "including digital transformation, software-defined datacenter, hybrid cloud, converged infrastructure, mobile and security".

Meanwhile in its letter to customers Dell talked about bringing together its strength in small-business and the mid-market with EMC's strength in large enterprises.

On the technology side, VMware, the wholly-owned subsidiary of EMC - apart from the 15 percent floated on the NYSE in 2007 - has been described by VMware CEO Pat Gelsinger as the "crown jewel" of the merger.

"To us the deal is about growth and having Dell and EMC come together in a larger entity accelerating the growth of VMware. We think is a huge opportunity for us in the mid and long term," he said.

The competition has not been slow to pour cold water on the deal. In her letter to shareholders, HP CEO Meg Whitman warned that merging the two massive companies will be a huge distraction.

And it could be the middle of next year before the deal close. Nevertheless, according to a snap survey by analyst firm 451 Research in general, customer perception is encouraging: 31 percent of the IT decision-makers it surveyed describe the acquisition as a positive move, compared with 20 percent who see it in a negative light.

But while Dell customers are particularly positive about the deal, there are strong concerns among the EMC customer base.

451 Research said that optimism among existing Dell customers is probably because they typically feel comfortable buying a variety of products from PCs to servers and see more to gain from the acquisition than EMC's storage customers or virtualization-centric VMware clients, who may simply see Dell as a PC company.

The 451 Research analysts warn that in the meantime competitors will be trying to capitalize on the uncertainty: "In the meantime, many IT decision-makers will likely be open to fielding sales calls from competitors. Dell will need to be clear and definitive about its product roadmap, and its support and organizational plans, across all product lines going forward."

On the whole, analysts have welcomed the development. Forrester research director for services Glenn O'Donnell said the deal was good for the industry.

"This will result in a well-integrated family of technologies for datacenters," he said, and argues that Michael Dell has more than proven himself with the smooth running of Dell. "He has assembled a good team around him to run the businesses [and] customers seem to be happy with the company."

As for Tucci? "Joe Tucci is a brilliant leader," he said. But while "his vision and execution has been mostly good, the Federation is largely a failure and many of his lieutenants have not run their businesses as well."

"The Federation was a bold experiment and I applaud its willingness to take the risk [but] it has confused customers and the anticipated synergies have not materialized."

As for benefits from a merger, O'Donnell thinks that Dell-EMC will be "a stronger play in integrated, pre-packaged datacenter infrastructure technology" but the downside will be the "heavy debt load from the acquisition" and, more importantly, the move "does not position the new Dell as a credible player in the aggressively growing cloud computing landscape", O'Donnell warned.

When asked which companies would feel particularly threatened by the merger, O'Donnell said, "HP, for sure, but also Cisco and Huawei." While he thinks the move may also threaten IBM, that prospect will be "far less than it would have been prior to IBM selling much of its hardware business".

Similarly, Gartner senior analyst Werner Zurcher believes that on balance this move could be good for users although the mechanics of the merger will swallow up resources that could otherwise be spent on R&D.

"It is good news for Dell, which I see as being the big winner here", he said. "For some time Dell has been pretty inactive. Now, crucially, Dell gets part ownership of VMware and that makes a big difference for them in all kinds of areas like cloud and flash storage."

"In all of this," he said, "VMware becomes a central player," and its new parent becomes a much bigger potential winner.

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