How Will Dell-EMC Blockbuster Affect The Public Cloud?
Dell's acquisition deal for EMC hit the IT industry Monday like an 8.0 earthquake, and while cloud providers might have been out of range of much of the initial shaking, the aftershocks could rattle their businesses and their channels significantly in the months and years ahead.
As competition among rival cloud providers gets increasingly bloody, post-merger Dell will have the means to change battleground dynamics through its influence as an infrastructure vendor and as a service provider, industry experts told CRN.
While plans for the amalgamated cloud assets have not been shared, in an interview on CNBC, EMC CEO Joe Tucci, sitting alongside soon-to-be co-worker Michael Dell, said the combined company will have the heft to help customers "with their cloud computing needs, both on- and off-premise."
[Related: Done Deal: Dell Buys EMC-VMware In $67 Billion Deal, Partners See New World Enterprise Order]
The deal brings together three of the top seven manufacturers of data center infrastructure -- Dell, EMC and VMware. That lifts the new company above Microsoft and HP as the largest vendor in a category that includes servers, operating systems, virtualization software, storage, networking and network security, according to Synergy Research.
In addition to becoming a majority owner of VMware -- and its still fledgling VCloudAir public cloud -- Dell also will take control of Virtustream, an innovative Infrastructure-as-a-Service platform with serious enterprise chops that EMC recently shelled out $1.2 billion for.
With two public clouds under its roof and an aggregated hardware portfolio that instills towering influence on the data center market, Dell will wield the power to cause major disruptions in the booming cloud industry.
"For sure, this would make the new Dell a much more powerful player in data center generally and cloud infrastructure specifically," said John Dinsdale, Synergy's chief analyst.
"They’ll have some organizational and product wrinkles to work through, but the result will be a company with a much stronger play in servers, storage and cloud software -- which should help it to grab the attention of public cloud operators and enterprise CIOs that may not have considered Dell previously," Dinsdale told CRN.
While many people expect vCloud Air and Virtustream "to be pulled together in some capacity," Dell hasn't exactly positioned itself for a broadside against the hyper-scale public clouds -- not unless it plans another big acquisition, said Steve Herrod, former chief technology officer at VMware and now a managing director at General Catalyst Partners.
VMware and Virtustream are marginal players in public cloud, and on the infrastructure sales side, "not much gear ends up in Amazon or Google or that kind of thing," Herrod said, so Dell can't really move the needle directly.
But one way the deal can shake up the market is by discouraging the exodus to the public cloud.
"Their biggest challenge and biggest opportunity is in allowing to bring these pieces together and make it really easy to build private clouds, really easy to buy from one vendor and get support," Herrod said. "I think that's what they have to do to push back on this momentum out of the data center."
For cloud-focused solution providers already working with one of Dell's new properties -- either reselling vCloud Air or Virtustream services, or deploying software both companies license for private clouds -- the impacts on their businesses will be more direct and immediate.
While VMware products already are tightly integrated with Dell's, Ian McClarty, president of phoenixNAP, a VMware partner based in Phoenix, told CRN he expects even closer integration of the virtualization software with Dell's hardware line.
At the same time, ’VMware will always be hardware-agnostic at its core, so I wouldn’t expect much disruption for the next couple of years," McClarty told CRN. "The biggest impact might be slower product releases if Dell tries to integrate."
McClarty's colleague, William Bell, agreed that the potential impact, positive or negative, remains unclear, and business will go on as usual -- at least for a while.
But Bell, vice president of products at phoenixNAP, said the merger also creates a potential risk "stemming from oversight or interference from one company to the other.’
’EMC has always taken a very hands-off approach with VMware, whereas Dell has a history of full integration," Bell told CRN. "With integration comes complexity, and honestly, the streamlined availability of the software core is one of VMware’s biggest selling points."
General Catalyst Partners' Herrod told CRN that the unintended repercussions of the deal could be far-reaching.
For one, both Dell and EMC have been of late enthusiastic buyers of startups building cloud infrastructure technologies. The expense of the merger could cool the market for young companies, he said.
And established partnership lines will inevitably have to be redrawn -- from Cisco's relationship with VMware and EMC on its VCE converged systems line (now that Dell's networking portfolio will be in-house) to Dell's dealings with Microsoft Azure.
"There's going to be a lot of interesting co-opetition now," Herrod said. "It'll be a multi-year effort to get it where it's intended to be."
PUBLISHED OCT. 12, 2015