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Summary:

With the launch is its new low-end VNX line, EMC shifted focus away from its high-end Symmetrix products and down to the other end of the spectrum. And, all of a sudden, Dell’s move to acquire Compellent looks much smarter.

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This week brought the full fanfare of EMC and its “Record Breaking” launch, which some say sounded more like a broken record. Shoving 26 people into a Mini Cooper and motorcycle jumping aside, the main meat of the launch is EMC’s new low-end VNX line, which it claims packs all the features any business storage user might need at an irresistible starting price of under $10,000. In one splashy move, EMC shifted focus away from its high-end Symmetrix products and down to the other end of the spectrum. And all of a sudden Dell’s move to acquire Compellent looks much smarter than it did just over a month ago. (Disclosure: I was the vice president of marketing at Compellent from 2002 to 2005.)

Dell’s acquisition of Compellent in December ended an 18-month flurry of storage M&A that challenged even the most optimistic market projections, and made the sector red hot.  In particular, the bidding war for 3PAR that HP won over Dell reached an astronomical $2.4 billion, leaving some wondering how Dell would stack up on the high end of the market. 3PAR essentially represented the only independent high-end storage vendor, and without 3PAR’s scalable disk arrays, Dell would be left standing empty handed against HP, IBM, and EMC. At the time, I wrote that HP’s Bid Makes Sense and Dell could never realize the value that HP potentially could.

This week, however, we find EMC with guns blazing around VNX, a “Simple, Efficient, Powerful, and Affordable” offering countering the stereotypical knocks on EMC products as being complex and expensive. So, back to Dell: Would it have been better off in trying to fight EMC on EMC’s storied high-end enterprise territory with 3PAR’s products, or challenging EMC from below in a channel cage match. Dell knows the channel well, and now has an offering — Compellent — born and raised there for small to medium enterprises.

When Dell bought Compellent without even a bidding war, the deal didn’t have the excitement of the 3PAR acquisition. It also didn’t stand out as much from Dell’s existing acquisition of EqualLogic, the mid-market leader of storage systems based on the IP and Ethernet-based iSCSI storage protocol. With Compellent, though, Dell expanded to solutions including Fibre Channel, a high-end storage protocol, and a sophisticated software suite tailor-made for the storage mid-market.

Now it seems that the Dell-EMC relationship will come to an end. You can still find Dell-EMC storage on the Dell website, but with EMC’s charge straight to the low end, I cannot imagine Dell driving sales of EMC product long into the future. It is hard to imagine that they can co-exist as partners while both aiming company-branded, low cost solutions to the same customers.

The only thought that makes me pause is whether EMC is just throwing a big head fake to the industry. Perhaps the high-end segment is still all that matters, and given that this “Record-Breaking” launch was largely marketing-driven, perhaps it is just a distraction. Maybe EMC just wants to divert attention away from the billions being minted at the top of their line, and this VNX is nothing but an apparition. I doubt that is the case, but it would be interesting.

The likely scenario is a continued battle between giants for the fast growing small-to-medium enterprise segment. This is an area where Dell has excelled, and, in fact, EMC leveraged that capability by selling solutions through Dell. Now it seems like the gloves are off, and Dell looks even smarter for stocking up on ammunition with Compellent in advance of EMC’s charge.

Gary Orenstein is the Host of The Cloud Computing Show.

Image courtesy of Wikipedia Commons contributor che.

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  1. I realize you worked at Compellent but nary a word of the one (still independent) storage company that has tripled it’s stock price in the last two years and gained share at the expense of EMC in mid market seems like a pretty big omission to me. That company is Netapp. The EMC announcement has more to do with copying their successful strategy than anything else. The points related to the timing of Dell’s acquisition are interesting, but the reasons behind EMC’s moves are more about fending off Netapp than Dell.

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  2. EMC is actually in the process of stripping Dell’s EMC business away from them and bringing it to other partners/VARs. All channel account managers and other field salespeople have been more or less instructed to begin pulling Dell’s EMC business over to other VARs to keep Dell from pushing Compellent when it comes time for renewals/upgrades. In my opinion, this will most likely hurt Dell very much considering EMC accounted for around 15% of their revenue (Google it if you don’t believe me).

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  3. Gary:

    I disagree on the VNX post re: Compellent (full disclosure: I am on the board of Compellent). The VNX offering is targeted at the Dell-Equallogic solution much more than Compellent when you look at what they are trying to do with it. I don’t think it is relevant for Dell-Compellent unless EMC actually uses the VNX platform across a broader solution set (replace Clariion over time).

    That said, I completely agree about the “broken record” comment.

    My two cents.

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