Anyone who has been reading our blog posts or following CTG on social media channels knows by now that Nov. 1 will mark the end of one era and the beginning of a new one for HP. While the news will usher in a new era in technology, it has not been the most impactful news of this month – at least not in the eyes of the end user.
Last week, Dell announced its purchase of EMC, after reaching a $67 billion agreement. In this most expensive technology purchase in history, two giants in the IT world are coming together at a time when our industry as a whole is in the midst of a major shift. As with any big news in my industry, I spent much time after hearing the news going over the pros and cons of the deal, with hopes of better understanding how it would affect my goals of making Convergent Technologies Group and HP the platinum standard in manufacturer/reseller relationships.
When I meet with clients who use Dell products within their infrastructure, I always ask two questions: What do you like about buying Dell? And what do you dislike about it? The answers – although often varying in length – are almost always the same. Clients like the fact that Dell has a direct purchasing model because they believe that they are getting better discounts because of that agreement. Their dislikes always center on support, whether it be for warranty issues or implementation of new solutions.
Along with the Dell-EMC announcement came another announcement that I believe is equally important. Dell and CDW announced a partnership that will allow CDW to begin selling Dell products, virtually eliminating the direct model that so many customers are so fond of. Dell is not well-known to have a strong reseller focus, and this shift will have major impacts on clients who aren’t fond of change. Perhaps the reason behind the deal is that HP’s numbers with CDW were down 6 percent over the past year, a result, in my opinion, of HP’s increased focus on bringing deals to partners such as CTG that bring value throughout the entire sales process.
You might be asking yourself, “How does the merger affect either of these things? Shouldn’t two goliaths in the IT world coming together be a good thing for EMC and Dell clients alike?” Not from our market analysis.
The deal between Dell and EMC is one that has major financial ramifications. At $67 billion, the deal could prove very costly in the short term. Dell will be responsible for paying upward of $2.5 billion dollars annually in interest alone, which will cause a major disruption when it comes to support and R&D, both areas in which Dell has struggled as of late. You must also take into account that these are two very large companies coming together, with very different sales models. The integration of products and sales/service teams will be time consuming and cause major interruptions for the combining businesses for some time. In short, I believe that it will take these companies quite a bit of time to get it right, leaving the door open for companies such as HP to show the value that their products and partnerships can bring to the table, particularly for clients that have flown the Dell flag for quite some time.
Dell has always been a strong company with a loyal following. The move to purchase EMC has allowed them to expand its Enterprise storage portfolio with an EMC product that has been one of the top three Tier 1 solutions for many years. However, the EMC solution has become stagnant of late, as can be noticed by HP’s 3Par offering earning top ratings for the past two years. This deal will likely to cause loyal EMC customers to take a look at their architecture, which could likely lead to an increase in conversations around 3Par. I look forward to the challenges that this merger will create in the long term and am excited for HP Enterprise to take the lead across all major Data Center infrastructure portfolios.
Brandon Samuel is assistant manager of Convergent Technologies Group.
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