Dell and EMC one year on: How has it gone so far?

It's been a year since Dell acquired EMC. Four analysts give their view of how the combined companies have fared since.
Written by Colin Barker, Contributor

Dell CEO Michael Dell at Dell EMC World

Image: Asha Barbaschow/ZDNet

It has been a year since Dell - now Dell Technologies - acquired EMC in a giant $67bn deal. ZDNet spoke to four different tech analysts to get their perspective on how the combination of the companies -- and the creation of the Dell EMC enterprise unit -- has gone since then.

More work to be done

"I think that a year in they have done the best job of creating the impression of a single unified entity that anyone could have expected," Gartner distinguished analyst, Andrew Butler, told ZDNet, "But, obviously, there is still much, much work to be done."

It's still early days, he points out, because Dell's fiscal year runs from February 1 to January 31 so, effectively, February 1 of 2017 was really when they formally said that there is now this single company. The period from September 2016 to February 2017 was really preparing everything for that, he said, adding that in in many countries, it's going to take into 2018 before Dell and EMC can formally merge at the local level.

"I think it's going to take all of next year and beyond before you have a single unified company," he said.

"From the product perspective, I think the two companies are relatively lucky [and] there aren't too many areas of product conflict. There are obvious areas, such as the storage portfolio and the integrated systems portfolio, where there are conflicts, but I think they are working their way through them as well."

If there is a worry, Butler believes it is in future R&D investment. "Dell puts a lot of stock in its investments to encourage small start-ups," he said, "and that will stimulate all sorts of investments and innovation."

But it doesn't necessarily replace R&D investment inside the company, he said. "Last week the company said that revenue on IT R&D at Dell EMC was running at four and a half percent of annual revenue whereas last year it was six and a half. While that's not terrible it does mean that in real terms there is about a 30 percent reduction."

Challenges of a cloud based world

Matthew Eastwood, senior VP for enterprise at IDC said that overall customers maintain a positive view of the merger: "They expect that Dell EMC will continue to be transparent regarding any potential changes of plan so that they can plan their investment decisions accordingly."

Customers want predictability and Dell EMC will deliver that, he says. As he sees it, the real challenge is to keep two sets of contrasting customers happy with "somewhat unique go-to-market models".

One is EMC's "high touch model that is based on a much more prescriptive set of technology recommendations", he said. "The goal here is to maintain EMC's storage position while extending Dell's servers and building new customer support for their converged offerings."

In Dell's traditional area of strength "the company is focused on maintaining Dell's go-to-market engine which feature technology choice across a spectrum of technology partners", he said.

"The goal here is to more EMC's storage down market while protecting Dell's server installed based and increasing awareness and usage of Dell EMC's converged products," he explained.

Will it work? Eastwood is hopeful that it will. "Dell EMC is being exceptionally focused on customers so as to defend their historical strengths while extending into new opportunities that are best characterized as immediate adjacencies."

Things aren't perfect, he says, "but they have created the biggest infrastructure technology company in the world and it will be able to prosper over the next few years".

After that? "It will depend on how much it is able to keep its relevance as an infrastructure vendor in a world that is increasingly cloud based," he said.

Keeping the customers happy

"From the outside looking in, everything seems to be going on the track they set out before the deal closed last year, " said Tony Lock, director of engagement at Freeform Dynamics.

"They are keeping their customers happy and selling them new stuff and they still have the ability to invest in new stuff, particularly around the cloud and they still make acquisitions and so on."

He pointed out that Dell EMC had been continuing to put out new product, "at roughly the same pace it did beforehand". In fact, said Lock, "things seem to be going better than the people inside the company probably thought they would do".

Lock said the acquisition had gone pretty much as expected. "I wasn't among those who were very negative [about the merger] and thought it would all be a disaster. I know that many of the financial analysts were and I suspect that some of those are beginning to eat their words as the debt is being pared down."

And what about product conflicts? "I think it is that there are some areas of product overlap, rather than conflict," said Lock. "But they have been very open and very clear and very precise on what they intend to do about that."

Long term potential

"The issue the industry has today is that it is moving in so many different directions at once," said Alastair Edwards chief analyst at Canalys.

"You have organizations that are becoming much more focused, like Hewlett Packard Enterprise. Then you've got companies moving away from their emphasis on infrastructure hardware, like IBM. Any you have companies that focus on their one area, like the NetApps of this world. And then you have the companies focused on the next generation in hardware."

It's unclear what strategy will win out, he said: Dell EMC is facing all these incumbent threats and it's unclear as to what will come next.

But Edwards thinks that the company has some things in its favour. "It's the only company that has such a broad portfolio of products," he said. "Only Lenovo has anything similar and it doesn't have the software part."

"They have performed well, if not out-performed, in a number of segments. Their commercial PC business is growing very strongly and their server business and networking business are both growing well."

In all those areas things are going well, he says. But how about the problem areas? "One of their big challenges is the storage space, which is probably one of the most competitive parts of the market today," he says but it is also one of the areas that the company is seeking to address.

Edwards believes that, like most of the others, the company is going through "that transformational path of today" but with one difference to some of the other big players.

"While all the other players are seeking to exploit the cloud space, Michael Dell has come out and said, we believe in hardware and the future of hardware. So there is an opportunity for a company like Dell EMC to continue to deliver infrastructure, server, storage, networking and the client into customers for a long period of time.

"Yes, everybody believes in the public cloud," says Edwards, "but not everything will move to the public cloud and it will be a hybrid world."

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