Sizing Up the Newly Combined Dell EMC

Having spent the past year rationalizing its mammoth $67 billion acquisition of EMC, the newly combined company this month hit the ground running. During the Dell EMC World Conference two weeks ago in Austin, Texas, Michael Dell and the senior executive team of the new Dell EMC outlined a laundry list of deliverables that will bring together the two organizations' respective technologies.

From the outset of this month's conference, company officials emphasized their portfolio approach to bringing together EMC and the companies it controlled (including VMware, RSA, Pivotal and Virtustream) with Dell. All now fall under the umbrella of Dell Technologies, with Dell EMC consisting of the server, storage, network and enterprise infrastructure assets of the two companies.

Experts believe Dell EMC is now the dominant provider of datacenter infrastructure. But it has formidable competition from Cisco, Hewlett Packard Enterprise (HPE), Lenovo, IBM and Hitachi Data Systems, and smaller players as well.

At Dell EMC World, company officials showcased the benefits of coming together with this month's launch of a new software-defined version of its PowerEdge servers with EMC's Data Domain backup and recovery software. The company claims a six times increase in scalability and support when added to the new Dell EMC PowerEdge servers.

But Michael Dell showed he clearly wants to provide greater linkage among the assets beyond the core EMC storage business, notably VMware, Pivotal, RSA and Virtustream. Evidence of that was clear with the announcement of plans to deliver an integrated security solution that will bring together the assets of EMC, RSA, VMware AirWatch businesses and Dell SecureWorks. That's just one instance outlined at Dell EMC World.

Other examples include the launches of the Dell EMC's VCE-based hyper-converged appliances built on Cisco's Unified Computing System (or UCS),  as well as its VxRack hyper-converged infrastructure that are both now available with Dell PowerEdge servers and the new Dell EMC Elastic Cloud Storage (ECS) 3.0 modern object-storage platform for cloud-native environments. VxRack is based on the object store that runs the Virtustream public cloud for mission critical applications that EMC acquired last year and the new Dell EMC Analytic Insights Module (AIM) based on the Pivotal Cloud Foundry Platform. In addition to bringing Dell PowerEdge as an option to the Cisco-powered VxRail, Dell EMC is offering an option with VMware's Horizon client virtualization platform in December. While Dell Technologies has a controlling interest in the independently run companies, Michael Dell talked of the benefits of this structure.

 "This unique structure allows us to be nimble and innovative like a startup, but the scale of a global powerhouse," he said in his Dell EMC World keynote address. "For you that means a technology partner that can be number one in everything, all in one place."

Commitment to Cisco and Microsoft
At the same time, Dell made sure to emphasize that the new company will continue to embrace its partners that, in context of some of this next-generation infrastructure, are also competitors, notably Cisco and Microsoft.

Backing away from either company would not only alienate a formidable customer base committed to Cisco's UCS that is the core component of Dell EMC's VxRack line and the Microsoft Windows Server, Hyper-V and Azure platforms, but would undermine a substantial source of revenue that Dell needs to make this merger work, said Gina Longoria, an analyst at Moor Insights and Strategy. Like others, Longoria observed that Dell and company officials talked up the company's commitment to both Cisco and Microsoft. But like others, she agreed with my observation that the scale did appear to tip toward the Dell Technologies portfolio in terms of emphasis.

"I wasn't surprised how much focus they had on VMware but I was disappointed they didn't focus more on their Microsoft capabilities," she said. "I'm sure that's coming. Azure Stack is obviously not coming until next year, but hopefully next year they'll round that out a bit more. It's a little bit from a wait and see but I'd like to see a more balanced message.

Focus on Digital Transformation
David Goulden, who was CEO of EMC before the merger and now is president of the Dell EMC business unit, outlined how digital transformation will fuel growing demand for the hyper-converged products and new object storage platforms that will support containers and the building of next-generation cloud-native applications. While EMC had built its integrated systems with server and compute systems from Quanta before the merger, offering Dell's PowerEdge today has significant implications. For example, until now, with the Quanta server in VxRail, it was a four-node 2U system and had an entry level list price of $60,000. The new VXRail launched this month is now available in a 1U rack unit and at a starting price of $45,000 (or 25 percent lower), said Bob Wambach, vice president of marketing for the Dell EMC VCE business. The company claims the new appliances, which feature the most current Intel Broadwell-based compute platforms, are available in 250 more configurations, offer 40 percent higher CPU performance and are available with double the storage in all-flash nodes. Similarly, the new Dell EMC VxRack System with the PowerEdge servers offer two and a half times more capacity and 40 percent greater performance, the company claims. 

"There's a much wider range from entry level going down in starting configurations to significantly more processing power and performance in the larger boxes," Wambach said. "It represents a very dramatic change in scope of use cases we can address."

Bringing the PowerEdge server to its converged and hyper-converged platforms will play a critical role in Dell EMC's hybrid cloud ambitions, according to Krista Macomber, a senior analyst covering datacenter infrastructure at Technology Business Research. "Dell's legacy manufacturing prowess is another major benefit in positioning the VCE team to more quickly and cost-effectively deliver more customized hyper-converged appliances and ensure spare parts availability," she noted in a research note published last week.

While converged and hyper-converged system growth is outpacing that of traditional servers, it still is a small percentage of the market. At Dell EMC World, Goulden said the company recognizes even as the future points to hyper-converged infrastructure, the vast majority of its customers still prefer, or at least rely upon, the building block approach to engineering. "The data shows that over 80 percent of you today still want the servers and the storage building blocks to build your own," he said in his Dell EMC World keynote. "So don't worry, we are still fully committed to these building blocks."

Posted by Jeffrey Schwartz on 10/31/2016 at 3:13 PM