EMC Exec: Michael Dell Is Avoiding Networking 'Collision Course' With Cisco
Dell Chairman and CEO Michael Dell will maintain a tight relationship with Cisco Systems in the networking market after Dell completes its acquisition of EMC, an EMC executive said at EMC World in Las Vegas this week.
Dell did not mention networking in his keynote address at the conference and, according to an EMC executive, the omission was no accident -- even though Dell competes day in and day out with Cisco in the networking market.
"It's not a coincidence that if you go back and watch the Day 1 presentation, networking was not mentioned by Michael," Chad Sakac, president of EMC's Converged Platforms division, told CRN.
EMC and Cisco have a longstanding partnership, and while their server relationship has been contentious as EMC develops hyper-converged solutions with x86 servers, some in the industry have speculated that the two companies would increasingly do battle in the networking market soon after Dell's acquisition of EMC is finalized later this year.
"If Dell had a truckload of networking, it would put us on a big strategic collision course with Cisco," Sakac told CRN. "And what is the most important thing to [Cisco]? Is it hyper-converged? No, it's switching, routing, networking. It's a huge thing inside their DNA.
"Everyone is like, 'Hey, Dell sells servers, Cisco sells servers, and when this occurs, there's an inevitable collision course.' But really, it's more like they're doing their thing, and we're doing our thing. If we went and said we're going to go to town with [Dell] Force10 [networking], our ability to partner with Cisco as an ecosystem partner would be dramatically reduced."
Cisco declined to comment for this story, but pointed to a February corporate blog post reaffirming the company’s commitment to its EMC relationships.
A Dell spokesman provided the following comment: "Dell has [publicly] communicated its intent to continue VCE’s relationship with Cisco, assuming the successful satisfaction of customary closing conditions. Michael Dell published an open letter in which he notes 'After joining with Dell, VCE's close working relationship with Cisco will continue. Vblock will continue to follow Cisco's compute and networking roadmaps and EMC's storage roadmaps to bring the latest technologies to VCE customers.' Further, 'We know that VCE is a centerpiece of EMC's 2016 plans, and we are extremely enthusiastic about VCE's future and our continued partnership with Cisco.' "
Dell's 17.5 percent market share in servers in 2015 roundly beat Cisco's 6.4 percent share, according to research firm IDC, and it's likely that Dell will need and want to preserve EMC's networking relationship with Cisco because it doesn't have a significant networking presence on its own, said Sakac. He called that a "feature" of the deal, "not a bug."
Dell, Round Rock, Texas, entered the networking market when it acquired Force10 Networks in 2011, but it finished 2015 with only a 4 percent share in the networking market, compared with a a 57 percent market share for Cisco in data center switch revenue, according to data from the Dell'Oro Group research firm.
In the short term, Dell's best bet is to make the most of the opportunity to sell Cisco networking, said a top executive at one Dell and EMC solution provider who did not want to be named.
"Why would they want to play with anyone but Cisco?" said the solution provider executive. "They're in a great spot. There are good partnerships with Cisco; VMware has relationships with Palo Alto and Arista; Force10 has its market segments. There's no reason to get into a shooting war. For a lot of old partners like us, it's a good deal. Who knows what the future is, but right now I don't think there's any reason to be nervous."
Patrick Moorhead, president and chief analyst at Moor Insights, took a similar position, saying Dell is likely to maintain EMC's Cisco relationship until new technologies take hold in the market.
"They're going to leverage Cisco and Brocade for today's stuff, and [for] tomorrow's stuff, we'll see what they can do with software-defined," said Moorhead. "They've got so many balls in the air that it sounds like they want to keep this networking thing constant until software-defined networking gets off the ground."
Gino Guidi, solutions architect at Sidepath, an Irvine, Calif.-based solution provider and longtime Dell partner that's now signing up with EMC as well, said he believes Dell and EMC will eventually develop a networking play independent of Cisco.
"Dell networking will play nicely with EMC," Guidi told CRN. "Cisco is trying to build a closed networking ecosystem that locks customers in. Dell and Brocade are trying to be open and work with other vendors' ecosystems."
As customers increasingly adopt converged infrastructure, they don't want to manage the switches, Guidi said.
Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 232 on the CRN 2015 Solution Provider 500, said he expects there to be significant incentives from Dell-EMC to sell an end-to-end Dell offering from the client to the data center.
"If I am Dell and I am one of the last companies that has a true end-to-end solution, I am going to incent my partner community to sell that end-to-end offering," he said. "There is definitely value in supporting an end-to-end Dell solution versus a multitude of vendor offerings. With a single solution, you have a single point of communication, integration and a single P&L [profit and loss statement]. If you go deep and wide with a single vendor it will be a more profitable engagement."
Furthermore, Venero said, Dell will certainly have a compelling end-to-end price-performance advantage against Cisco given the high price of Cisco's annual SmartNet maintenance contracts.
"Dell is going to be much more cost-competitive than Cisco, not only in the acquisition of the product, but in the long-term maintenance as well," he said. "Cisco SmartNet is a huge portion of Cisco's annuity revenue streams that corporations feel they are strong-armed into buying in order to obtain Cisco support."
Joseph F. Kovar and Steven Burke contributed to this story.