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Dell acquisition plan leaves users hungry for details

IT professionals hoping for a taste of what the combined Dell-EMC-VMware will serve up to them for new products and strategies, got a bowl of steam instead.

In formally announcing the completion of their $67 billion deal, executives from Dell and EMC spent most of their presentation on Sept. 7 reciting the resume of the combined companies, reminding us of how big and bad they plan to be in the IT world:

• The world’s largest privately held technology company ($74 billion in revenues);
• Holding the number one, two or three position in several major product categories including PCs, servers, storage and virtualization; and
• A corporate structure that supposedly allows them to innovate and pivot quickly like a startup, but with pockets deep enough to heavily invest in research and development for the long term.

“We are going to be the trusted provider of essential infrastructure for the next industrial revolution, so organizations can build the next generation of transformational IT,” said Michael Dell, chairman and CEO of Dell Technologies.

If nothing else, you have to admire Mr. Dell’s confidence and ambitions. On paper, the new company at least appears to have a fighting chance of accomplishing this objective. With archrivals IBM and HPE either selling , spinning off, or merging huge pieces of themselves and creating much smaller competitors, Dell Technologies could indeed end up being the biggest and baddest boy on the IT block.

But what looks formidable on paper — as we have seen in this industry time and again — ends up not being worth the paper it’s written on. For instance, Hewlett Packard execs believed they would dominate the world of desktop PCs and Intel-based servers after buying Compaq Computer Corp. in 2001, only to squander whatever advantages the latter had when dozens of key Compaq executives left and a number of key products were dropped just a year or two after the deal.

“They have enough resources to compete with just about anyone,” said one long-time IT professional with investments in both Dell server and EMC storage products. “But they haven’t specifically laid out how they [Dell-EMC-VMware] will work together to make say, cloud-based environments work hand-in-glove with on-premises environments.
Such a lack of clarity, he added, “reminds me of a certain presidential candidate with huge ambitions and few details about how he gets there.”

It’s not just the lack of specifics about how the combined companies will work cooperatively together that makes some skeptical. It is also Michael Dell’s bold claim that the new company can “innovate like a startup”. But can a newly-formed $74 billion elephant keep pace with, not just with real jack rabbit startups, but also invest enough to match the R&D dollars typically spent by IBM, Microsoft and Google annually?

Dell certainly has a history of being a fast follower in the hardware business the past 30 years, but never a company that felt comfortable making a living out on the razor’s edge.

Michael Dell’s answer to growing this now mammoth business while still delivering more innovative products faster seems to revolve around Dell’s decision to go private a couple of years ago.

“The single best way to get bigger, but also move faster, is to detach yourself from the 90-day reporting cycles that are common among larger companies,” he said. “I think going private has kicked the company into a new gear. We have had 14 quarters in a row of gaining [market] share in our client business. Dell Technologies can act fast and not be governed by short-term concerns.”

Going private indeed may have helped spur consistent growth in Dell’s client business – a business that is declining for not just Dell but all of its major competitors – but he failed to mention how it has resulted in any significant technology innovations the past couple of years.

As announced earlier this year the new company is now called Dell Technologies, with Michael Dell serving as chairman and CEO. The company is split into two groups: Client Solutions headed by Dell president and vice chairman Jeff Clarke, and an infrastructure group to be led by David Goulden, the former head of EMC’s Information Infrastructure organization. Both organizations will be supported by a Dell EMC Service unit.

The rest of the old EMC Federation — namely VMware, Virtuestream, Pivotal, Boomi, RSA and SecureWorks, — will continue to function independently and are free to pursue their own strategic agendas and develop their own ecosystems, “which is our commitment to remaining open and offering customer choice,” said Michael Dell. “But we have also strategically aligned our technologies to deliver integrated solutions like hybrid cloud, and security and seamless infrastructure technology from the edge to the core to the cloud.”

Again, all that looks good on paper. — but can this melding of two giant IT suppliers work beneficially for users where so many similar unions have failed? Maybe with the next press conference Dell can offer users at least an appetizer instead of a bowl of steam as to how this will all work.