Of supermarkets, Volkswagen and the future of Dell-EMC
Consumer-style product choice or product overlap mercy killings?
Analysis September 7 sees Dell Technologies absorb EMC and its VMware holding. Storage-watchers are seeing lots of overlap between the Dell and EMC storage products and wondering if there is going to be a product cull.
So far there are no signs of this and it could be useful to ask if Dell + EMC is going to be a traditional few-products-for-broad-markets company or a storage supermarket.
A traditional storage products company has non- or minimally-overlapping products, such as all-flash arrays or hyper-converged infrastructure appliances (HCIA) or NAS filers, and pushes these as the best products in the market against competing products; Nutanix appliances versus SimpliVity, EMC VxRail or Cisco HyperFlex ones, for example.
A server company wishing to have storage software use its servers will often have a meet-in-the-channel strategy with validated software suppliers products running on, for example, Cisco or Lenovo servers, and being available to Cisco and Lenovo channel partners. These software products, such as HCIA software oroducts from Maxta and others, can and often do overlap and compete, but the server vendor does not care; whatever software a customer wants to run on its servers is fine by it.
Even when a server vendor then gets actual skin in a product category game, such as Cisco OEM'ing Springpath HCI software for its HyperFlex HCIA , then it will carry on with now-competing, meet-in-the-channel alternatives. Hold this thought, and let's consider, as an analogy, car manufacturers such as Volkswagen and supermarkets such as Walmart and others. For both, the idea of overlapping products is no problem.
Let's list a few Volkswagen car brands: Audi; Bugatti; Seat; Skoda; Lamborghini; Porsche; and VW itself. There is a massive amount of overlap:
- Prestige sports cars: Audi, Bentley, Bugatti, Lamborghini, Porsche
- Four-door saloons (sedans): Audi, Seat, Skoda, VW
- SUVs: Audi, Porsche, VW, Skoda...
- City runabouts: Audi, Seat, Skoda, VW ...
VW would argue that its separate brands have their separate identities, and the sub-segments in the car market have strongly-defined sub-sub-segments, and price band separations, such that a Porsche 911 buyer is not an Audi RS8 buyer or a Bentley or Bugatti Veyron or Lambhorguni buyer.
And the varying brands and their products prosper. Such is life in the consumer car buying market. The brands compete in a broad sense but fundamentally co-operate as sales outlets for VW automotive components. Lamborghini competes more, much more, with non-VW brands/suppliers such as Ferrari than it does with other VW brands.
A supermarket sells multiple overlapping brands in many product categories. It can even sell its own brands against the suppliers whose brands it stocks on its shelves. What a supermarket wants to do is maximise sales revenue from its floorspace. If some customers prefer main brands for cereals and others the supermarket's own brand then it will stock both kinds and give them shelf space in proportion to their sales revenue and promotional activities.
A Walmart or Tesco has no issue in recognising that different customers want different, overlapping brands in any given category. As long as different customers buy different brands then any functional overlap is obviated.
The same can be true in smaller shops, such as electrical wholesalers and decorators' merchants, which sell to tradespeople, with own-brand goods competing for business with mainstream supplier brands.
All-in-all these are business organisations which exist to sell, and mostly but not always, make products for customers to buy, and if different customers want products that overlap with separate products bought by other customers, then all is well and good.
Business is a supermarket.
EMC has been criticised for product overlap in the past and its response has been that it's better to overlap products than leave gaps between them which EMC's competitors could use as doorways into its customer base.
Object storage has been a classic case of this, with EMC offering separate Centera, Atmos, Isilon and VIPR products at one point in 2013. An EMC insider told us back then: "The thing about overlapping products is the company won't leave a gap anywhere where a competitor can grow unchallenged."
We can say that EMC's organisation almost encouraged, and certainly didn't prevent, products with overlapping functionality. Possibly its execs thought that having internally competitive products would produce stronger products and ones that developed features and functionality faster.
Dell and hyper-converged
Dell has three storage array product lines; SC (Compellent) Fibre Channel arrays, PS (EqualLogic) iSCSI arrays, and PowerVault (for SMEs), and these don't overlap that much. It doesn't have a separate filer line, preferring to overlay file access technology on top of the SC and PS arrays. Neither does it have a separate all-flash array line, or software-defined storage or in-house-developed or acquired object storage line. Instead it OEMs Scality object storage.
Nor does not have its own in-house developed hyper-converged offering. Instead it resells VMware and EMC products and has an OEM deal with Nutanix:
- VMware Virtual SAN Ready Nodes using Dell PowerEdge servers
- VMware Virtual SAN support for Dell’s Hybrid Cloud Platform (reference architecture with vRealize).
- EMC resell
- VxRail appliances which use VMware’s VSAN
- VxRack Node (SW-defined storage building block)
- System 1000 FLEX rack-scale hyper-converged system
- XC Series – the OEM’d Nutanix HCIA software on Dell server hardware
EMC and Nutanix compete strongly, as do Nutanix and VMware to a lesser degree, since Nutanix started producing its own hypervisor.
This product profligacy with hyper-converged contrasts with product parsimony elsewhere in storage. However the profligacy is par for the relatively uncommitted server vendor course; witness Cisco and Lenovo.
Now Dell, a supporter of partial product overlap in the hyper-converged space, is buying EMC, a supporter of much product overlap.
EMC, Dell and hyper-converged
Even though Dell is buying EMC, which is mounting an energetic push of its own hyper-converged VxRail and VxRack products against other suppliers, including Nutanix, Dell will not stop selling the XC hyper-converged system, with its OEM'd Nutanix software. It renewed the Nutanix OEM deal in June, and EMC Converged Systems president Chad Sakac said EMC, once inside Dell, will continue with the XC OEM'd Nutanix system. He said: "It's pretty straightforward: Dell is 20 to 30 per cent of the Nutanix business today, or about 420 customers. It's not the right customer move to sever that relationship. Therefore, we'll offer a choice."
If we apply this point of view to mid-range hybrid SAN arrays then the logic is that, after September 7, Dell-EMC will continue selling the Dell SC (Compellent) arrays as well as the Unity (EMC VNX) arrays, even though they overlap in function and market positioning. The two arrays may move to using common components such as enclosures, power supplies, fans, drives and controllers but the brands and separate engineering functions will survive.
If we apply this point of view to object storage then the Dell-Scality OEM deal will survive the EMC acquisition as well, joining ECS, ISilon, etc
In general then, this positions Dell-EMC as a storage supermarket and not a traditional storage supplier. Is this sustainable? Is Dell/EMC (Demcell?) going to function like Volkswagen?
For someone like Chad Sakac who runs the converged systems area, overlapping products are fine. If some of his customers are buying XC Nutanix systems and others VxRail, then that's fine. You don't force VxRail down the XC buyers' throats; that would be like punching them in the face Sakac memorably said. Whatever the customers buy in the converged/hyper-converged line then, as long as it's from Dell/EMC, Sakac wins. No problem. He's running a small supermarket and likes a quasi-Volkswagen approach.
Yet execs running product groups, under pressure to maximise their revenues, will be incentivised otherwise. When development budget time comes around, Exec A, making VNX, will say something like $1m invested in VNX will deliver $50m in revenues over two years, whereas $1m invested in PS will only deliver $5m over that time. So give me the PS $1m as well and I'll deliver $70m over two years.
You can imagine arguments like this up and down the company with stronger product line execs looking to strangle their weaker brethren. In EMC II CEO David Goulden did what prior CEO Joe Tucci had done and went for overlap and internal competition. El Reg's assessment is that he'll do the same in Dell-EMC with a wider enterprise storage product portfolio.
That will be fine when the company is growing but the arguments will burst out when budgets get constrained. Product line execs will be screaming out for survival if they are majorly threatened, or demanding development funding to outspend and out-develop the competition and so get back to growth – and not have their budgets reduced because weaker product lines are being supported..
When that happens, what then? Will Dell retain a quasi-Volkswagen approach or will it slough off failing brands and mercy-kill weaker product lines? We reckon they'll go for the mercy kill approach – but not this year. That's our stake in the ground. ®