Following Dell’s closure of the $67 billion acquisition of EMC, CEO and Chairman Michael Dell appointed an integration team comprising executives from both firms, led by Chief Integration Officer Rory Read from Dell and Howard Elias from EMC. “Every piece of the integration was planned from the customer back,” Read said. The goal of the integration and the emergent Dell Technologies is, “To be the trusted provider of infrastructure to the next
Each component of the two firms was assessed, and a set of “strategically aligned
businesses” emerged that include a combined Dell EMC to VMware, Pivotal and SecureWorks. Instead of making markets with new technologies or spanning hardware, software and services markets, Dell Technologies is 100 percent focused on enabling customer IT transformation and migration to new models of computing.
The new company largely completes Michael Dell’s vision of a market-leading, desktop-to-data-center and cloud enterprise systems vendor. Dell Technologies partners with several firms that are making markets — notably General Electric Co. (GE) — but also competes with (and partners with) firms like Amazon and IBM, which are leading their business development with new ideas.
Dell Technologies is very clear around where and how it wants to play in the market. It is not positioning itself as a vendor of business outcomes or transformation but rather for IT transformation — tied to delivering end-to-end essential infrastructure that will enable business transformation. Dell Technologies will play to its strengths, looking to gain share and deliver the best margins for its own business. This strategy leaves white space
opportunity to consulting and systems integration partners to work with enterprises on new business models, innovation and transformation.
The continuing client business maintains the Dell tradition and is a market-leading,
profitable business. The data-center-focused lines enable resellers, cloud services providers and managed services firms with cost-effective technologies for the next wave of cloud. Finally, the strategy shows deep support for enterprise data center customers that are moving into the future one step at a time, addressing change and risk management and getting the full value out of their investments in Dell Technologies’ products and services. Five years from now, given successful execution of the current strategy and deep respect for customer evolution, Dell Technologies stands to have cleared its debt and established strong free cash flow as a profitable technology market leader.
Implications to Dell Technologies
As workloads shift to cloud, new applications and more users will dramatically increase the demands on data center performance and delivery of secured data to and from edge devices and applications, creating a technology-led opportunity for Dell Technologies. Critical to capturing this opportunity are matching the rate and pace of the workloads as they shift, enabling new cloud-native applications that may capture share from traditional solutions, and reducing implementation, management and optimization headaches.
To serve as a next-generation IT enabler, Dell Technologies has identified three core strategies it will execute:
1) Extend its market leading position in Client Solutions and IT infrastructure for traditional workloads;
2) Grow its position in IT infrastructure for cloud-native workloads; and 3) Innovate with winning technology that spans and unifies on- and off-premises applications and infrastructure. While Dell EMC will lead the infrastructure modernization charge, it will heavily tap VMware for automation and Virtustream as well as other third-party cloud service provider partners such as Microsoft Azure, Amazon Web Services (AWS) and Google to support cloud transformation.
Dell Technologies retained top talent from both firms and across its portfolio of companies. Key leaders include:
Jeff Clarke, president and vice chair, Operations and Client Solutions
Rory Read, chief integration officer
Marius Haas, president and chief commercial officer
Karen Quintos, chief customer officer
Steve Price, chief human relations officer
Rich Rothberg, general counsel
Tom Sweet, chief financial officer
David Goulden, president, Infrastructure Solutions Group
Howard Elias, president, Services & IT
Bill Scannell, president, Enterprise Sales
Rodney Rogers, chief executive officer, Virtustream
Amit Yoran, president, RSA
Jeremy Burton, chief marketing officer
Additional key leaders include:
Pat Gelsinger, chief executive officer, VMware
Rob Mee, chief executive officer, Pivotal
Mike Cote, president and CEO, SecureWorks
One of the challenges facing an integration of this scale is a misalignment of culture, which becomes obvious when watching executives interact with each other and trickles down through the organization. So far, this does not seem to be an issue for Dell Technologies, where executives appear aligned at the highest levels. It was evident the newly formed management team has developed respect and comradery and is aligned around Dell Technologies’ customer-centric positioning.
Services are a critical enabler of the newly expanded solution set. The services organization is now under the leadership of Elias, who formerly led EMC’s Global Enterprise Services. Dell EMC Services will have just two main components: support and consulting. We expect the consulting services at Dell EMC to work closely with sales early in engagements, ensuring clients’ business needs are met. These advisory services will remain closely tied to
its infrastructure and products, as it will let the systems integrators and management consultants battle for broad digital transformation engagements. To drive margin expansion as legacy products become commoditized, Dell EMC will actively pursue attached support services. Successful growth in ProSupport spawned ProSupport Plus,
ProDeploy and ProSupport One, and we expect more of these repeatable framework automated services over the next year to drive margins.
Thus, the degree to which Dell EMC will maximize its revenue and profit growth will be predicated on its ability to execute several portfolio and go-to-market elements:
Quickly building a base of direct sales staff and channel partners that are highly educated and mature, armed to sell the breadth of the Dell EMC technology stack; this will require careful ongoing evaluation of market segmentation, simplifying engagements with partners, and carefully cultivating best practices from legacy Dell and EMC approaches;
Further maturing messaging across the businesses — Dell, EMC, VMware, SecureWorks and Pivotal; the legacy EMC team set a strong foundation for the value of its family of companies in markets like hybrid cloud and analytics, and brings competencies in managing multiple brands for best-of-breed recognition in targeted markets;
Consistently delivering on pre- and post-sales services, while building a more unified approach to supporting the newly combined portfolio.
Implications to partners
Dell Technologies is highly focused on cross-selling the acquired technologies. An internal study revealed an 80 percent gap between the Dell and EMC footprints — a space both Dell Technologies and its partners can capitalize upon. A new partner program was announced at Dell EMC World. While program details, tiers and requirements are forthcoming, the four-level program will enable partners to resell the infrastructure and software from the
combined Dell Technologies.
The clear focus on supporting infrastructure also provides a set of clear swim lanes for consulting, systems integration and cloud vendors to build complementary businesses. TBR has written much in recent years about competition — in this case Dell Technologies is reducing competition between itself and its partners, and all parties should benefit from increased business as those firms develop confidence in the new model.
Implications to customers
Customer relevance is a key tenet at Dell Technologies. Under Chief Customer Officer Karen Quintos, every element of the business is being built around customer needs. The customer focus is also highly practical in a competitive market and will lead to a company that responds to customer needs (on balance) rather than leading them to new worlds. TBR believes it is a good time to be a Dell Technologies customer. The firm needs to retain its
base, cross-sell its portfolio and attract a strong partner ecosystem. These conditions are ripe for customers to meet with Dell Technologies and discuss how the new company can meet needs.
Dell Technologies’ customers will also benefit from the company’s position as a private firm. Without the fetters of a 90-day financial reporting cycle, Dell Technologies is better positioned to plan for the long term. The lack of accountability to Wall Street gives the vendor freedom to work through the integration at a pace that makes sense for both customers and its financial performance.
The go-to-market integration, one of the largest and most strategic pieces of the merger remains outstanding, but is expected to be completed in February. The challenges of integrating two global account organizations and bringing the entire sales force up to speed on the basics of the huge portfolio, so they can refer prospects to the appropriate specialists, are not insignificant. Dell historically struggled to accomplish this with its software
portfolio, which impacted its performance. While the Dell EMC portfolio is larger, it is at least aligned into a series of logical and related infrastructure pieces, which should make the process easier.
Implications to competitors
TBR believes following a brief period of reorganization, a new era of competition is arising in the enterprise IT infrastructure space — one where the capacity to serve both enterprise and the cloud-services provider markets is tantamount.
Dell Technologies will remain a data center industry mainstay for the foreseeable future, but TBR notes the company proceeds in a crowded and competitive market that is shifting as rapidly as customers’ foundational IT requirements. Dell EMC will remain a key target of a wide range of competitors, ranging from multiplatform OEMs such as Hewlett Packard Enterprise (HPE) and Lenovo, to pure play vendors including Nimble Storage in the allflash
storage space, to original design manufacturers (ODMs) serving the world’s largest cloud data centers.
Dell Technologies has not been distracted by the integration of Dell and EMC — the relative lack of competitive overlap between the two firms enables the company to take an accretive approach and to sustain current relationships and pipeline. This is a challenge for competitors HPE, HP Inc. and Lenovo, which are wrestling with their own transformations following the tumultuous reorganization and consolidation of the enterprise IT market in the last three years.
Success against Dell Technologies will arise along multiple fronts: price competition (which no one wants), reducing adoption barriers (easier to use and manage); close-to-the-box services differentiation; and specialization (in industries, innovation or account management). Each of the major competitors has the capability to align to market needs. The race is on as each firm rebuilds its customer base, its partner ecosystem and its cash flow.
Lindy Hanson, vice president; Stuart Williams, vice president; Greg Richardson, director; Krista Macomber, senior analyst; Ezra Gottheil, principal analyst; Jane Wright, senior analyst; Jack Narcotta, senior analyst and Kevin Collupy, analyst at TBR.