EMC's takeover by Dell - a major deal...
The announced acquisition of EMC by Dell is for sure a major event for the IT ecosystem and means a noticeable change in the supplier landscape.
Thanks to the takeover Dell will multiply its software revenue by 8 and move from 22nd to 5th rank on the worldwide software market (PAC estimates) and cross the US$ 10bn threshold. Considering infrastructure software only, Dell will become #4.
Progress in the IT services ranking will be more limited with EMC adding approx. 50% to Dell's revenue. Thus Dell will enter the top 10 to become #7 (from #17 today) worldwide, and #4 in infrastructure services.
Finally, in the hardware business Dell will rank 2nd behind Apple while HP will lose its leadership with the demerger.
With this move Dell manages to decrease its dependency from the hardware business (80+% of Dell's revenue so far) and mainly to develop in the software business, which will generate 17% of total revenue for the new group (by comparison, 27% for IBM and only 5% for HP).
However, for more than five years in a row we have seen most of the "incumbents" on the IT market losing market shares towards new players... Will this merger bring a decisive competitive advantage?
Clearly in the hardware business the PC market (Dell's original focus) is not the place to be... EMC's storage business is a bit more promising thanks to ‘digital’ and big data, however the shift from on-premise towards cloud delivery models (storage on demand) is putting huge pressure on EMC's business. However, Dell may have chosen the perfect moment – just before HPC and HPE get established. HP's customers are uncertain right now – this may be a great short-term opportunity for Dell and may push HP even more aside.
In the IT services business Dell will remain much too much dependent on infrastructure services (85% of services revenue) and remain far from the leaders in application services (10% of services revenue vs. 35% for IBM; of the top 30, Dell will remain).
As already mentioned, the strongest impact will be felt in the software business. Dell will close the gap to the leaders (Microsoft, IBM and Oracle), something HP has not managed so far in spite of substantial efforts. However, the software market is a huge and very diversified market and both Dell and EMC address just a few segments.
VMware for sure has a strategic software portfolio, still generating double-digit growth. Moreover, it might also help Dell reinforce the cloud services segment – in turn generating some competitive pressure on existing VMware partners... However, VMware is increasingly attacked by open source technologies (Open Stack) – and growth on the cloud market mainly takes place in the public and hybrid segments, with the winners being AWS, IBM (SoftLayer) and Microsoft (Azure)…
Cyber security certainly is another strategic area: Dell has already been present with Quest, however RSA brings a strong product range, including SIEM.
The move can also be very interesting on the analytics side, a fast growing segment. EMC did a good marketing push in positioning itself as a contender in the big data arena, while Dell has been striving to develop its Statistica analytics business unit after the acquisition of StatSoft last year. The combination of Dell's (visualization, data mining, predictive analytics, DB management and integration) and EMC's assets (Pivotal appliances and software) makes a nice story – provided Dell finds the right pattern – for instance, by enriching the Pivotal spin-off with its own assets and throwing its weight into it.
Finally, in systems & storage management Dell will take the leadership – ahead of IBM, CA and HP.
All in all, the move makes sense on paper... However, only the ability to develop real synergies, to implement the right organization and finally to reposition towards growth markets will make it a success story – or not...