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IT pros weigh Dell versus HP as one swells, the other splits

Dell will become a much bigger company following the purchase of EMC and VMware, begging the question of how it will match up against a newly split HP.

The Dell versus HP debate has new life as the two companies undertake polar opposite strategies with HP about to split and Dell ballooning in size through the largest buyout in tech history.

Earlier this week, Dell disclosed plans to buy EMC and VMware for $67 billion. As Dell adds two businesses, HP is set to split into two on Nov. 1, moving PC and printer sales to HP Inc. and the enterprise business to HP Enterprise.

The newly formed vendor landscape creates some new options for enterprise IT buyers such as Wilbour Craddock, vice president of IT at eHealth Saskatchewan in Regina, Saskatchewan. EHealth uses some legacy HP servers, but made a decision over the past two years to standardize on Cisco Unified Computing System (UCS).

"We have viewed greater innovation from Cisco than HP or Dell in the UCS platform," Craddock said.

His organization is a large EMC and VMware customer and with VCE's Vblock, Cisco had a strong relationship with EMC and VMware -- something he feels has waned in the past six months.

"If Dell is now able to build a Vblock-like advantage in a larger, converged offering by leveraging the EMC-VMware acquisition, that could have us rethinking our compute strategy," Craddock said.

Across the board, 31% of the 447 IT decision-makers surveyed this week by 451 Research of New York described the Dell-EMC deal as a positive move, compared to the 20% that saw it negatively.

Dell customers are far more positive about the deal than EMC customers, who are much more concerned. Of the EMC customers who don't buy products from Dell, 40% said they have a negative impression of the purchase compared to just 15% of Dell customers who don't buy anything from EMC, according to 451's survey.

Dell versus HP: Is bigger better?

It is unclear whether Dell's acquisition of EMC and VMware gives it any distinct advantage over HP, according to Geoff Woollacott, principal analyst and practice manager for software and BI at Technology Business Research Inc., (TBR) in Hampton, N.H. Neither company has ever established a clear software identity despite repeated attempts, particularly HP, Woollacott said. If either company has any advantage it might be Dell, which has aggressively collected a number of software companies since 2011.

If I were either a Dell or an EMC customer, or for that matter a customer of both -- I would be quite excited to get technology synergies, better integration, management stacks and pricing.
Tom Kunkeltechnical architect, West Fraser

Dell's software revenues in 2012 were about $850 million, according to numbers from TBR. Dell officials said those revenues have grown close to $2 billion.

"One could argue HP is splitting to disaggregate itself so HP Enterprise is free to find more relevant software assets for its portfolio," Woollacott said. "It will be interesting to see who can do a better job at cohesively integrating these assets, identifying the overlaps and creating a roadmap."

The acquisition of VMware, long the leader in virtualization, could offer Dell a major advantage over HP, but officials from both companies this week did not clearly spell out what strategic role VMware would play, except to convey that Dell has no plans to change VMware's strategic course. If this hands-off approach, at least for the short term, plays out, some analysts think it will serve both VMware and Dell well.

"[It] will benefit VMware in terms of longer-term sales opportunities," said Andrew Smith, an analyst with TBR. "When you look at the way VMware is expanding its portfolio, it could have a lot of symmetry with Dell's software portfolio in the mid-market."

The upcoming HP split could make the new Dell-EMC attractive to organizations that want one place for all of their client-server needs, said analyst Rob Enderle, an analyst for the Enderle Group in San Jose, Calif. Customers looking for "one throat to choke" may be drawn to Dell, Enderle said.

Dell positions in the eyes of enterprise customers was also on the minds of the company's employees this week, when one employee asked CEO Michael Dell, during a town hall meeting at its headquarters in Round Rock, Texas, how the merger will help Dell gain an advantage over HP.

The employee, who was unnamed in a transcript of the meeting submitted to Securities and Exchange Commission regulators, compared it to "another big merger" involving HP 14 years ago - when HP bought Compaq Computer Corp. The employee wondered how the merger will make Dell the No. 1 enterprise infrastructure company in the world.

Dell is creating new capabilities in the enterprise and the data center, Michael Dell told employees.

"And you know, in case you haven't gone up and added up the numbers, if you take IBM's enterprise business minus services, you take HP's shrunken enterprise business minus services, we are the largest enterprise company in the world," Dell said.

A move toward converged infrastructure is happening and the traditional boundaries in the data center are going to disappear as virtualization and containerization "sweep across the whole data center," Dell said.

The new company will combine "leading positions" in compute from Dell, storage from EMC, plus virtualization from VMware -- to make "a lot of really interesting things going on in terms of how the future of the network evolves here."

"We made the first move and now the others will have to scramble to kind of contend with that," Dell said. "It's go big or go home; and we're going big, baby."

Tom Kunkel, a technical architect at West Fraser, a wood products company in Vancouver, B.C., is an existing HP customer. He sees the split into HP Inc. and HP Enterprise as a minor inconvenience when browsing the websites -- that's it. But merging Dell, EMC and VMware involves "a considerable amount of overlap" in products.

"If the deal comes off, Dell will have had to change and align its product line," he said, adding that he sees "huge cultural differences" from Dell to EMC. Many acquisitions result in layoffs, and combined with the 30,000 employees from the latest round of HP layoffs, his company could net a good new hire.

Meanwhile, West Fraser will continue to use VMware and "politely say no thank you" to Dell and EMC, Kunkel said.

"If I were either a Dell or an EMC customer, or for that matter a customer of both -- I would be quite excited to get technology synergies, better integration, management stacks and pricing," he said, noting he works at an HP shop.

Dell may be able to better bundle its offerings, said Todd Antonelli, managing director at Berkeley Research Group LLC. in Chicago.

"[Michael Dell] wants to package it all together at a cheaper price," Antonelli said.

Senior executive editor Ed Scannell contributed to this report. Contact him at [email protected].

Robert Gates covers data centers, data center strategies, server technologies, converged and hyper-converged infrastructure and open source operating systems for SearchDataCenter. Follow him on Twitter @RBGatesTT or email him at [email protected].

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