The Dell-EMC Merger—a Channel Business Agility Lesson?

Regardless of the “who” in this story, most channel professionals want to know why, and what this will mean for their businesses, partnerships and customers.

We’ve just hit the half way point in October and it’s already been one of the most newsworthy months of all times, at least in the history of the IT industry. Mergers and acquisitions seem to be escalating this year on both the provider and vendor side of the business, with the latter taking center stage over the past two weeks. While many of us were still digesting the impact of the Intronis/Barracuda deal on partners and the channel, news of an even larger potential industry disruptor was hitting the wires.  

Dell’s announcement earlier this week that it will purchase EMC for $67 billion caught many industry experts by surprise. It wasn’t the sale itself or the size of the deal that caught everyone off guard, but the suitor. Several top analysts had been promoting an HP/EMC merger when, out of the blue it seemed, Dell stepped in to make the interception (see the CompTIA blog post from earlier this week).  

Regardless of the “who” in this story, most channel professionals want to know why, and what this will mean for their businesses, partnerships and customers. Quite frankly, this deal makes perfect sense for two companies with such large legacy IT business units. Each has undergone a transition over the past few years, moving away from a heavy dependence on hardware and software sales to take advantage of new opportunities (and the associated revenue) with third-platform technologies.   

Dell is basically following the same path thousands of its channel partners already have. It needs to transform to survive and, if all goes as planned, to prosper. EMC’s enterprise expertise should meld nicely with Dell’s mid-market and SMB strengths, expanding the combined company’s market opportunities and presence. “Dell’s partner base will now be able to offer enterprise level solutions, service and support to their SMB customers,” said Nancy Hammervik, senior vice president of industry relations at CompTIA. “Of course, its competitors will look to sweeten their alternative options and take advantage of the time it takes to transition. This means partners need to be savvy in protecting their own interests and the interests of their customers.” 

As with any M&A deal, don’t expect a perfect fit. Some product lines, service offerings, divisions and even channel programs may change or disappear completely during the transition. That’s what creates the efficiencies and reduces the company’s overhead costs that make the investment worthwhile in the long term. Hopefully, few (if any) of either company’s employees get displaced during their organizational realignment.       

Channel Impact

The “why” seems simple enough, but the big concern is how the acquisition of EMC will affect solution providers. Again, think third-platform. Cloud, mobile, analytics (big data) and social expertise is in high demand and will continue to grow. By leveraging the strengths of EMC with Dell, the new company should be better positioned for the future.   

“This deal will open up new opportunities for channel partners across markets and within strategic areas of next generation IT including digital transformation, software-defined data center converged infrastructure, hybrid cloud, mobile and security,” said Frank Vitagliano, vice president of North American channels at Dell. The transaction approval process may take several months to complete, so the resulting benefits could take months, if not years more to come to fruition.

Vitagliano’s comments are completely consistent with what CompTIA and industry experts have been saying for the past several years: the future is all about solutions, more than the sum of hardware/software parts. In order to survive and thrive, channel organizations need to be more agile, and vendor consolidation can actually help providers accomplish that goal. “As the Dell portfolio of solutions grows, the opportunities will open up for partners, allowing them to expand their offering to their own customers – and to reach new clients,” adds Hammervik. “Customers buying direct from the organizations will now need the services of a partner to recommend, build and integrate total solutions.”

Shifting the Providers’ Perspective on Vendor M&A

This type of news used to put a lump in the throat of VARs and MSPs. Those concerns often revolved around the loss of key relationships or around partner program changes, and while those possibilities still cause anxiety, the new opportunities these deals can bring often outweigh the negative. Will Dell be able to pull that off?

“There is certainly a lot of troubled history with large acquisitions in our industry, so this deal will likely be under a microscope for a variety of reasons,” said MJ Shoer, president and virtual chief technology officer for Jenaly Technology Group and chairman of the board of directors at CompTIA. “Dell still has a hurdle to climb over with regard to trust in the channel, but they have made significant progress in this area over the last several years and I expect this acquisition may accelerate their efforts to earn our trust once and for all. Time will tell.”

 

 

 

 

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