Dell-EMC deal could be a game-changer for mobile networks, too

Full platform for operators

The focus on IoT, big data and cloud services is predictable, but Dell is not confining itself to the classic enterprises with which it has dealt for so long. It certainly has service providers, including carriers and cloud operators, in its sights. Here, an increased software defined network and integration element will be critical for it to add value and find its place between IBM on one hand, and Ericsson or Huawei on the other. Telcos have generally been poor at building their own cloud platforms, and so a one-stop-shop will be welcome.

One analyst, Heavy Reading’s Caroline Chappell, commented: "There you have it - a complete software defined data centre solution, hardware and all. From a service provider (not enterprise) perspective, this is good for Dell which has struggled to articulate a strong telco cloud story on the grounds that it is only a box company in a market where telcos in particular want help building/integrating end-to-end cloud.”

For EMC, too, this is a chance to achieve greater economies of scale and greater differentiation as part of a broader group, though the outcome for its extremely canny and valuable VMware acquisition looks more mixed, since the virtualisation pioneer will lose its box-independent stance. Of course, as Gelsinger insisted on the analyst call, VMware will retain its deep relationships with IBM, HP and others, at least for now, but it will never again have the same clean perception as an independent. And it may restrict its ability to form new strategic alliances, particularly with the carrier suppliers. These are trying to create their own end-to-end, ‘cloud-in-a-box’ offerings and need virtualisation partners too, but if VMware is seen as the property of a potential new rival for telcos’ affections, they will look for alternatives, often in the open source world.

Particularly interesting will be the reaction of Cisco, which aims to be a powerhouse in the carrier cloud and the virtualised telco, and which has been very close to VMware and EMC in the past.

EMC, which has a famously federated structure, has other important assets, including RSA Security, Documentum and Pivotal. All of these have great potential value for an integrated Dell platform, but are likely to have to conform to a more unified and centrally driven organization. Tucci said that, eventually, VMware, EMC and their Pivotal venture would likely be public companies again.

Pivotal, actually a joint venture between EMC and VMware, is particularly interesting in the IoT. Most importantly, it powers the Predix big data analytics platform which GE (an investor in Pivotal) has created for the Industrial Internet, and which the manufacturing giant aims to turn into a global service based around de facto standards it is driving. Predix, an inhouse development which is now the heart of a cloud service, will be using Pivotal’s Cloud Foundry to enable application development, deployment and operations. Cloud Foundry is an open source computing PaaS (platform as a service) that was initially developed by VMware, but is now solely owned by Pivotal.

The combined company will, naturally, be run by Michael Dell, who took the company he founded into private ownership for about $25bn in 2013. For EMC, it will relieve pressure from activist investor Elliot Management, which have been calling for higher growth, perhaps through a sale or a VMware spin-off (EMC has enjoyed more than 40fold return on its $635m investment in VMware and Gelsinger said Michael Dell aimed to increase his holding in the unit over time). Although EMC is number one or two in nearly all its markets, its share price has been quite stagnant in recent years.

CEO Joe Tucci has agreed to stay at the company until the close of the deal and may stay longer. EMC had 21 per cent of the storage market last year, according to Bloomberg, against Dell’s 10 per cent, while Dell was second in servers by units shipped, though has been suffering from the long-drawn-out decline of its original core market, the PC. ®

For full coverage of Dell's EMC buy, click here

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