When EMC acquired VMware in 2007 waves were made in the technology world, primarily in the server sector. VMware, after all, was by far the best in show when it came to cloud and virtualisation software and services. It was a no brainer for EMC, who is a prominent player in the server build space. The acquisition made EMC a power player in the cloud and virtual space overnight. But in August of 2016 another such momentous occasion took place. EMC bolstered by its VMware arm came face to face with one of the tech world’s biggest giants; Dell.
Dell has had a storied rise in both business and popularity ever since it was conceived by its owner and founder, Michael Dell. After a 3-year hiatus from the company, Dell (the man) returned as the head of Dell in 2007 and the company has been on an upward trajectory ever since. Dell (the company) has basically revolutionised the way consumers and businesses looked at their computer hardware. Giving their customers the ability to customise their machines in the most hassle free way possible. This, along with strategic partnerships, advanced marketing techniques and overhauling distribution practices, catapulted the company into the hardware giant it is today. That’s why the $67 billion (USD) merger of Dell and EMC (the largest in history) is so significant.
More than just the mind-boggling dollar figure, the merger turned the hardware giant in Dell into a cloud and virtualisation powerhouse overnight, in a move reminiscent of EMC’s initial acquisition of VMware just under a decade ago. The banner of EMC2 fell on September 27, 2016 and has forever been replaced by the trademark Dell’s logo, but what does this merger mean for the future of VMware, and more importantly what role will it play in Dell’s current environment?
According to both entities, the future is brighter for both VMware and Dell, that is after the initial hysteria and uncertainty. Stock prices of both companies fluctuated significantly once the merger was announced. Employees, managers and shareholders were unsure of what was to come next. However, as the hours and days passed, official news and plans were revealed regarding the direction of both companies, and the market seemed to react positively. Stock prices climbed back up and, if the trend holds, will surpass the pre-merger price in the coming months ahead.
For VMware, flying under the banner of Dell gives them much needed stability and reach. Keep in mind, that VMware is a relatively young company when compared to the likes of EMC, Dell and Microsoft. It has undergone and, in some case still is undergoing, growing pains. With Dell’s guidance and backing, VMware can focus on growth and development without having to worry too much about mitigating the risk of both. Dell’s enormous rolodex of clients (which is continuously growing thanks to Dell’s business development efforts) has been opened to VMware which exponentially increases their reach. Remember that VMware is already in a class all its own when it comes to cloud and virtualisation services and this merger basically makes them almost untouchable. Almost. VMware CEO, Pat Gelsinger, was quick to admit that the only other competition out there is Microsoft with their Azure Stack fronted by Hyper-V.
But herein lies the rub. Critics of the merger view Dell’s inextricable history with Microsoft as a potential for VMware’s downfall. Almost since it started shipping out PC’s Dell has loaded them with Microsoft software. For decades this has been standard operating procedure with each Dell box, laptop and server being powered or touched in some way by Microsoft. Where then will Dell’s allegiance lie? With its own product in VMware or with the company that it has partnered with for so long in Microsoft?
When it comes to server virtualisation it is almost an open and shut case with VMware dominating the market. However, the emergence of the cloud space created a wrinkle in what was VMware’s absolute reign. Microsoft’s cloud solution Azure is, for lack of a better term, blowing VMware’s solution, vCloud Air, out of the water. To add fuel and confusion to the fire, Microsoft’s own CEO, Satya Nadella, posted a video stating that he acknowledges the merger but is looking forward to the continuous partnership that Dell and Microsoft has forged over the decades. He also adds that Microsoft looks forward to expanding its cloud business with Dell. In school yard parlance, they be fighting words.
So who does Dell ultimately side with. With the merger, Dell now has a vested interest in the success of VMware. However, in Microsoft resides a partnership spanning decades in which both companies have benefitted greatly. VMware management has already stated that the merger will see a greater integration of VMware technology into Dell machines, but this will put Dell directly at odds with their decades long bedfellow in Microsoft. The ball it seems is in Dell’s court, whether they like it or not. Who will they back and who will they shun? Turning their backs on Microsoft’s cloud solution may sour their relationship with software giant, but then again there are no “take-backs” when $67 billion worth of assets has already changed hands.
Pundits may argue that Dell may have got a bit more than they bargained for when they inked the EMC merger. However, one thing is for certain, Dell got a bargain. Oracle’s chairman Larry Ellison showed a bit of envy when discussing the merger, mentioning that were not Oracle already in the midst of developing their own cloud solution that they would have tried to outbid Dell to acquire EMC and VMware. Dell and Ellison both believe that the acquisition was both logically and fiscally sound, and that the investment is very much worth it. Dell is no longer the hardware giant of old. With the undeniable might and power that it now possesses with the acquisition of VMware it has been transformed into a titan, something that is not often seen in any industry.