Executive Summary
Dell surprised the IT market with the announcement of its bold move to acquire EMC. When the deal is approved and through all the regulatory approvals, Dell Technologies, as the future company will be known, will be the largest IT acquisition deal to date. The two companies are largely complementary in products and markets served – proving that the sum of the parts is greater than the whole. The next steps are integration and execution which will be key.
EMC hosted its annual EMC World 2016 event in May 2016. Given that EMC still required China’s final blessing on the deal, EMC was not able to articulate many details of its go-to-market strategies, but did provide high level discussions on the new company. One of the key elements that deserves and needs immediate attention is the channel and other routes to market. The merger affects many elements not only of the companies themselves but their customers and partners as well. This document reviews Neuralytix opinion and analysis on what will become Dell Technologies.
Introduction
EMC World 2016 was held May 2-5th, 2016 in Las Vegas, NV. The overall event was packed both in content and in attendance, with many product announcements. The real focus was on the merger between Dell and EMC.
The combined businesses will be under the umbrella of a new company named Dell Technologies. Neuralytix believes success can be achieved, but a great deal of this rides on the executives at the helm. Current CEO Joe Tucci has expressed his intention to stay involved in the new company so there is good reason to be optimistic (albeit, that he has no official position at Dell Technologies at this point).
EMC used this opportunity to host its separate, but complementary, annual EMC Global Partner Summit. Partners were able to attend the main sessions at EMC World, meet with EMC executives and customers, and attend a partner only concert (by invitation only) and breakouts, without conflicting with the main tent key notes.
Neuralytix believes the new “Dell EMC” has a winning combination – a “soup-to-nuts” product set and wide market acceptance. The routes to market are largely complementary but at different levels of maturity.
Partners were keen to learn how the post-merger combination would affect future products, channels, and partnerships. It was announced that the merged entities would be represented by two divisions.
One part of the business, which will be based in Austin, will serve the consumer business, which will continue to be named Dell; the other, the enterprise part of the business, will called Dell EMC and will be headquartered in Hopkinton, MA.
A Look at EMC
EMC has more years of experience in working with, and across, a broader spectrum of the channel and has a longer history with all the segments of the channel, including but not limited to, distribution, GSIs, CSPs, tiered partners and ISVs on a multinational level.
EMC offerings are enterprise class products, which typically have a longer sales cycle due, in part, to larger price tags and the mission-critical nature of their use in datacenters. Pre-sales activities are a key component in these types of sales to identifying customers’ IT needs based on an analysis of their current IT environment. This is one of the reasons the channel is of prime importance to the success and growth trajectory of the future Dell EMC portfolio. They are additional feet on the street, equipped to take on many of the pre-sales (and sales) activities on behalf of the suppliers the partner works in alignment with.
Breadth and choices are good, but the new company, Dell EMC, will have its work cut out. Matching the technology with the appropriate partner requires significant work and effort. Neuralytix expects this area to get focused as soon as possible to keep the channel engaged and sales momentum going.
A Look at Dell
Dell, in contrast, does not have as much experience in the enterprise or working with the Channel on as broad a geographic scale as EMC.
In the US, for example, distribution is relatively new for Dell, having relied on a 100% direct distribution model until about ten years ago. However, Dell does have employees with many years of experience successfully working in the channel: some of them gained via its acquisition of companies, such as EqualLogic, which was 100% indirect before the acquisition.
Dell’s customer base was originally the consumer and SMB, expanding to the enterprise space only later. Its maturity level and experience in this space is relatively new and not as extensive as that of EMC.
Although the learning curve can be steep, Dell was already well on its way toward servicing indirect channels for larger enterprises before the merger. Dell has struggled in the channel but is trying to improve as it learns more about the channel and how it operates. From a channel point of view (POV) this is synergistic. Dell will get better, more quickly because of the EMC channel groups.
Now with the merger Dell will have access to existing mature channels and the experience EMC has gained over the years. Dell has been trying to grow and mature its indirect channels for large enterprises but that was still a work in progress. Now, with EMC they can accelerate that progress.
A Look at the new Dell EMC
Many partners have a lot riding on this merger. They need to see the amount of time and money that they have invested in their relationships with Dell and EMC produce a return. The combined company has already stated that there will be one channel program.
The program is anticipated to go-live as of February 2017. As with the rest of the merger, it should be interesting to see how the relationship of the newly combined companies unfolds and whose channel approach predominates.
Neuralytix believes this could be very beneficial to all partners. The two companies already share some partners. Those associated with EMC or Dell can be synergistic. The opportunity to align the two is one of many areas that needs immediate focus. Execution will be key internally, and communication will be imperative externally. Setting, as well as meeting and exceeding, expectations will instill and maintain trust between the newly-formed combination and the channel partners.
Immediate product synergies have already begun: the announcement of EMC Unity, a storage system with an unusually low entry price of under $10,000, and focused on channel distribution is a prime example. Another example is the reseller agreement between Dell and EMC VCE to resell VxRail, EMC VCE’s hyperconverged infrastructure (HCI) appliance. This agreement has already netted significant gains to both companies.
Recommendations
There is a lot of work the new channel organization for the new companies under the new Dell EMC needs to do in order to realize the channel synergies that can result from this merger.
Partners should focus their attention on the program’s goals (value vs. volume, rewards, incentives for selling together, etc.). Neuralytix recommends that Dell EMC be inclusive of all types of channels and routes to market, including but not limited to, resellers, distributors, ISVs, GSI, cloud providers, telco, and mobile, etc.
Neuralytix believes that one of the first efforts of the newly-combined business should be an assessment and review of the combined channel segment, product, and customers. Add revenue numbers to create a heat map in order to identify gaps. Match legacy EMC partners with legacy Dell partners in order to sell the complete solution, and financially reward partners for selling across the portfolio (similar to the way in which an older HP handled its partner program Portfolio Tool). These initiatives could provide a viable revenue stream as the combined company goes through the transition.
Key to the success of this program will be program alignment, with consistency on a multi-national level. Very few partners are multi-national such as Dimension Data, Presidio or Logicalis, but many of their customers are multi-national. Partners are most successful working with suppliers that provide consistency across geographies. This consistency allows partners to profitably serve these customers as they know what to expect.
Once established, Dell EMC should consistently and frequently engage with their partners in order to set and understand expectations on both sides and to foster the development of channel partners. Cash is king, so pay close attention to not only the channel commissions, but the payment timings as well especially on subscription-based business. These considerations will go far in keeping partners engaged and focused on selling your products, not your competitors.
Conclusion
While Neuralytix believes that Dell and EMC have two very different corporate cultures, this two-division approach appears to keep each other at arm’s length, which raises the question, “How will synergies be achieved?”
Neuralytix believes the combined channels will be more comprehensive in scope and accelerate Dell’s motion to large enterprise sales. It will mean more partners and breadth in the product portfolios that partners can sell. When the channel programs are brought together into a simplified single relationship then true synergies can be achieved. This will be and should done in concert with the overall product portfolio, rather than multiple overlapping sales motions (a very powerful winning combination.) The result could become nirvana – a great way to finish the largest IT acquisition successfully.
Related Research
EMC World 2016 – Day 1 Review (Neuralytix, May 2016)
EMC World 2016 – Day 2 Review (Neuralytix, May 2016)
EMC World 2016 – Day 3 Review (Neuralytix, May 2016)
EMC MyService360 – A Simplified Approach to Customer Support & Service (Neuralytix, May 2016)