EMC vs Dell: Bed of roses today, but war looms

EMC and Dell's relationship is rosy today but Dell's US$1.4 billion gamble on EqualLogic's iSCSI-protocol networked storage technology might change all that before too long.
Written by Liam Tung, Contributing Writer

EMC and Dell's relationship is rosy today but Dell's US$1.4 billion gamble on EqualLogic's iSCSI-protocol networked storage technology might change all that before too long.

Today, Dell's OEM (original equipment manufacturer) deal with EMC for its Clariion and Symmentrix storage area network devices is a boon to both companies. Neither company wants to rock the billion dollar boat but with the OEM contract set to end in 2011, the stage could be set for rivalry.

Last year Dell re-signed the five-year contract with EMC, which has delivered 16 percent of EMC's quarterly global revenue in 2007 and 30 percent of its Clariion CX sales, according to IDC.

It's not therefore surprising to hear EMC Australia's managing director, David Webster, say that Dell's acquisition of EqualLogic does not impact its relationship with EMC.

"EqualLogic doesn't overlap with EMC at a storage level. EMC and Dell's relationship is around the top of the low end, plus the mid range such as Clariion," Webster told ZDNet Australia.

Nor does it serve Dell's interests to rock the boat: while its global storage revenues grew 25 percent last year according to Gartner -- making it the fourth largest storage vendor in the world -- its PC and server sales have declined.

This situation can again, in part, be attributed to EMC. Dell is VMware's "number one partner", Paul-Henri Ferrand, Dell's Asia Pacific South president, told ZDNet Australia but virtualisation is having a negative impact on its server sales.

"We'll see a dip at beginning of virtualisation," Ferrand told ZDNet Australia before its EqualLogic announcement. "But if you look at what's needed to process this information that in the next five years will multiply by six -- today we have 150 billion gigabytes transiting the Internet -- how much will be required to process, to store this information? We'll need more processing and storage capabilities than we have today."

With this five year prediction in mind -- coincidentally at the end of its OEM contract with EMC -- and Dell's growth in storage, the reasons behind Dell's acquisition of EqualLogic seem obvious. So which companies will be threatened by Dell's move? According to EMC's Webster, it's HP and IBM that should be nervous.

"[EqualLogic] makes Dell more competitive and provides them with an advantage over HP and IBM for server-attached storage," he said.

US-based Enterprise Strategy Group storage analyst Tony Asaro agreed with Webster's prediction, but only in the short term -- it's a scenario that leaves EMC to focus on its "top end" fibre channel business while Dell sticks to mid-range storage customers.

But Asaro points out: "EqualLogic is not just for the SMB and certainly is not a low-end storage system. In fact, the EqualLogic (now Dell) storage system can scale to a massive solution with extremely impressive performance numbers."

Although EqualLogic's systems can scale, today, iSCSI-protocol networked storage -- which uses Ethernet networks -- is not widely deployed for larger organisations and most have already invested in fibre channel for networked storage.

But this scenario doesn't hold true for many smaller and medium-sized organisations that are yet to deploy networked storage. They do however have Ethernet-based networks, which until recently have been constrained by throughput speeds: Dell's decision shows it believes this is the future for networked storage.

In September, Dell released its first Dell-developed iSCSI-protocol SAN device, the PowerVault MD3000i, designed for the SMB market.

EMC has also acknowledged the technology's potential for the mid and lower end of the storage markets in July this year when it released the Celerra NS20 and NS40, a multi-protocol device, which supports network attached storage, iSCSI and fibre channel.

"The trend in the mid-range where EMC has opportunities is that companies want more choice -- that's why the NS20 is multi-protocol ... And Dell doesn't OEM the NS20," said EMC's Webster.

It is the mid-range storage customers that analysts believe will be best served by Dell owning EqualLogic.

"What's interesting about these fourth generation storage arrays is that they are generally built out of commodity disk drives such as serial attached storage (SAS) and SATA drives. They're also focusing on commodity network protocols like iSCSI," said Intelligent Business Research Services analyst, Kevin McIsaac.

Other appealing features of EqualLogic's storage are that software comes free with all its units and customers get thin-provisioning out of the box, said McIsaac.

But the icing on the cake for EqualLogic in Australia is that its technology is well suited to the Australian market. The majority of businesses here are geared towards the lower end of storage arrays and now, with Dell behind it -- assuming it gives the same support it offers to its own customers -- McIsaac said the brand will make a very interesting alternative to existing choices.

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