As the clamor surrounding the Dell acquisition of EMC and VMware softens to a dull roar, the real market impact of the combined company could take years to reveal.
Dell needs to work out what products and technologies it wants to eliminate or more heavily promote, to maximize the newly acquired economies of scale and what existing and new business partnerships among the three companies to maintain, analysts said.
"This is not something that will take six months to straighten out," said Chris Harney, leader of the Virtualization Technology Users Group (VTUG) speaking at a recent group meeting. "Over the short term I suspect there will be lots of confusion, but over the longer term I think [the deal] will be good for everyone."
Harney and some other VTUG developers believe the smooth melding of the operations and technologies of the Dell-EMC-VMware trio could be a drawn out process. It could take even longer if Dell continues to not clearly articulate what its longer term vision is, particularly for VMware.
"Dell has hardly done a stellar job in communicating its plans about all this," said one systems programmer with a large insurance company based in Hartford, Conn. with significant investments in both Dell and VMware platforms. "We really don't know any more than we did a few weeks ago about which VMware products Dell thinks are important, especially some of the open source projects."
One negative example caused by the lack of articulation is what the company plans to do with vCloud Air and Virtustream, a new cloud services business jointly owned by EMC and VMware. The new business is designed to serve as a focal point for a range of different cloud services offered by the EMC Federation.
"Some of the drop in VMware's stock price has to do with Virtustream and what that means for vCloud Air," said another IT professional at the VTUG meetinge. "If I don't know what they plan to do with [vCloud Air], it's hard to know if I should invest any more. And if the stock drops another 30% over things like this, will that put the deal in jeopardy?"
VMware's stock price was at $91.14 a share on August 3rd, and fell as low as $55.21 on October 21st.
Virtustream should work well with both companies' products, since its technology is built on the core technologies of both EMC and VMware,, according to one analyst who believes Virtustream should become the dominant technology.
"If all the underlying technology is the same as in vCloud Air, but if Virtustream's secret sauce better addresses mission critical workloads then why not," said Geoff Woollacott, software and business intelligence principal analyst with Technology Business Research, Inc. in Hampton, N.H. "Think of vCloud Air as a Jeep Wrangler and Virtustream as the aftermarket rock-climbing warrior for enterprises."
"It will be hard for Dell to tell VMware what to do when it comes to portfolio rationalization owning just 28% of the company," Woollacott said. "If anything gets shed between the two it could be from the Dell side if they embrace the open standard VMware apps."
Another technology segment where Dell has failed to offer much clarity is mobility. The company has its own Dell Enterprise Mobility Management (EMM), and will also be the proud owner of AirWatch by VMware, generally considered the top player in the EMM space. Dell insists it will treat both VMware and AirWatch as their own separate companies, but it is not clear what Dell plans to do with its own EMM business after the deal closes.
While there has been laser like focus on EMC integrating with Dell in order to boost its storage business, it may have been the subcomponents of EMC that drew Dell to the negotiation table, not EMC itself, said Mehran Basiratmand, CTO of Florida Atlantic University- Boca Raton, Fla.
"The value proposition for EMC was always the VMware component," he said. "It wasn't really storage as much. Dell already has a storage strategy. Between VMware, RSA and AirWatch, it's all those other pieces from EMC where the biggest growth areas are."
The market for storage is growing, but as companies move to the cloud, there is less of a need for on-premises storage, Basiratmand said. As that shift takes place, storage is becoming a service and is being commoditized.
Ed Scannell is senior executive editor for TechTarget's Data Center and Virtualization media group. He can be reached at [email protected]