When computer maker Dell announced this week it would pay $67-billion for storage giant EMC, it marked not only the biggest technology acquisition in history, but also a major shift in the information technology landscape.
EMC happens to own a majority share of the biggest cloud computing company in the world, VMWare, which will remain a listed company. Arguably, Dell was after this business, with its highly strategic positioning at the heart of the digital revolution. Analysts applauded the deal, which they believe will spur growth in EMC as well as in its underlying businesses.
The deal was announced on the eve of the annual VMworld conference in Barcelona, where 10 000 attendees from 96 countries gathered to hear company executives pronounce on the future of the cloud. In the wake of the buy-out announcement, their messages took on new significance.
“There are tectonic shifts under way and the merger is just a piece of that,” said VMware CEO Pat Gelsinger. “In the next decade, 40 per cent of the Fortune 500 companies will be no more. Inaction becomes the biggest risk a business can take today.”
He outlined several imperatives that, he said, would shape VMware.
“First, elephants must learn to dance. That means we have to innovate like a start-up, while delivering like an enterprise.
“Second, we are moving from an experimental phase to the professional era of the cloud. We are meeting the information security challenge of protecting people, applications and data, and we can deliver a comprehensive security solution for the first time in history.”
In an exclusive interview, company president Carl Eschenbach said that there was a natural affinity between VMware and Dell, as the two companies had been in a strategic partnership for a decade already.
Dell is a global leader in computer servers that underpin company networks, while VMware is a leader in systems that help companies manage data centres in which the servers are housed. The deal would make both companies more effective in meeting market needs.
“It gives us a converged infrastructure across three areas: network, compute and storage,” said Eschenbach. “We have the storage and network, but don’t have a compute platform. Dell brings that to the table, and allows us to build a converged infrastructure stack.”
From a sales point of view, he said, it was like putting together pieces of a puzzle.
“One of the biggest benefits is a non-technology one; it’s a new go-to-market opportunity. EMC has been focused on large enterprises, while Dell sells into the mid-market and small and medium businesses. Now we have the entire market segment covered to sell our solutions through Dell and EMC.”
The timing of the deal, he believes, could not have been better, as businesses are waking up to the strategic importance of information technology and the move into the cloud.
“The IT organisation needs to change and transform. People think of IT as just a cost centre, as just the plumbing that keeps a business up and running. In the past, most senior executives would ask for more costs to be taken out of IT.
“Now people are realizing that, if we can build new agile frameworks and bring products and services to market faster, it can be an enabler for growth. If you listen to the next generation of CEOs, they talk about digital transformation, and how it can drive top-line growth.”