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Dell/EMC: An Information Management Behemoth?

The combination of Dell and EMC has the potential to create an information management powerhouse.

The $67 billion deal by which Dell Inc. acquired EMC Corp. this week is one of the biggest ever.

Most attention has focused, rightly, on the hardware side of the deal. Dell, after all, is a computing behemoth, with nearly $60 billion in fiscal year (FY) 2014 revenues; EMC, one of the biggest names in storage, is no slouch itself, ringing up almost $25 billion in FY 2014.

Dell also has an ambitious information management strategy, however. Its products include the “Toad” line of business intelligence offerings (Toad Data Point and Toad Intelligence Central), along with a slew of platform-specific Toad database management offerings.

Other products in Dell's information management portfolio include Boomi, its integration-platform-as-a-service (iPaaS) technology; Statistica, a rival to statistical analysis software from IBM Corp. (SPSS) and SAS Institute Inc.; and SharePlex, its data replication technology.

EMC has been busy, too.  Back in 2010, the company famously acquired the former Greenplum Software, which -- along with the former Netezza -- helped popularize the concept of the massively parallel processing (MPP) database appliance. Almost three years ago, EMC -- in tandem with VMWare Inc., in which it owns an 80-percent controlling stake -- spun off Greenplum and some of its other assets to form Pivotal Software, a big data-oriented start-up. In early 2013, Pivotal announced Hawq, a port of the Greenplum MPP database to Hadoop. Later that year, Pivotal complemented Hawq with two other technology offerings: Pivotal Data Dispatch (a data discovery facility for Hadoop) and GemFire XD (an in-memory database technology that had originally been acquired by VMWare).

That's just the beginning. According to EMC, Pivotal's CloudFoundry, Pivotal Data Labs, and Pivotal Big Data Suite services are each generating approximately $100 million in annual revenue.

The combination of Dell and EMC, then, has the potential to create an information management behemoth -- if the enormous task of integrating, reconciling, and “de-levering” (MBA-speak for firing people, killing products, and reducing debt) the two companies doesn't sink the whole deal.

Collectively, EMC and VMWare -- which Dell is also getting, even though VMWare will continue to operate as an independent, publicly traded company -- own a controlling stake in Pivotal, along with General Electric Inc., which has a 10 percent stake. In Pivotal, Dell is inheriting Greenplum, Hawq, Data Dispatch, Gemfire XD, and a host of other big data-management amenities.

It's also inheriting creditable Hadoop expertise. To wit: Pivotal used to offer a proprietary distribution of Hadoop, the centerpiece of which was Hawq. In September, Pivotal announced that it planned to donate the proprietary bits of its Hadoop distribution to the Apache Foundation. This means Hawq is now available as open source software (OSS) under the Apache license.

In Greenplum, Dell inherits an MPP database on par with Actian Inc.'s Matrix, Hewlett-Packard Co.'s (HP) Vertica, IBM Corp.'s Pure Data for Analytics, and Teradata's Aster. This is not nothing, but there's still some confusion about how much of a something it is. In its September announcement, for example, Pivotal said it planned to open-source its Hawq ANSI-SQL-on-Hadoop technology. Does this include the Greenplum database kernel or just the Hawq bits that permit something like Greenplum to run in the context of Hadoop?

Reply Hazy, Try Again

Dell's gambit clearly registered with its competitors. In a memo to employees, Hewlett-Packard Co. (HP) CEO Meg Whitman, claimed that Dell -- which took on an additional $50 billion in debt to finance its acquisition of EMC -- will be burdened with $2.5 billion in annual interest payments. This money, Whitman argued, will be “allocate[d] away from R&D and other business[-]critical activities.”

She also predicted “chaos in the channel” as Dell and EMC attempt to “bring together two different programs and approaches.” Whitman urged HP employees to “seize the moment” and positioned Dell's $67 billion gambit as a (paradoxical) validation of her own decision to break HP up into two smaller companies: Hewlett-Packard Enterprise (HPE) and seminal parent Hewlett-Packard Co.

Information management watchers aren't so sure. Mark Madsen, a research analyst with IT strategy consultancy Third Nature, notes that the addition of EMC helps to recast Dell -- long stereotyped or pigeonholed as “just” a PC maker -- as a credible enterprise computing powerhouse.

“One thing Dell gets with EMC is the perception that it's an enterprise company. Ask most people and they still think of Dell as a PC company, despite the fact that [Dell] supplies many large vendors with the hardware that is built into their products. With the acquisition of Quest and EMC, [Dell] looks more like an enterprise company than they used to. That can only help their brand perception,” he says.

Madsen sees HP's Whitman's memo as short on substantive critiques and long on competitive FUD-mongering. “Dell and EMC have minimal overlap in products. 'Chaos in the channel' is doubtful when it's just an expansion of the portfolio. [Whitman is] right that it will take a long time to merge the channel operations, but I don't see that being the biggest problem,” he observes, noting that the shift away from on-premises enterprise storage in favor of cloud-based storage services has been a huge problem for EMC, Hitachi Data Systems (HDS), and other storage specialists. (Cloud storage doesn't exist in the ether -- or, rather, in the ionosphere. It's powered by physical storage kit, but the market has shifted away from the storage area networks (SAN) and other large arrays that generate huge profits for vendors such as EMC and HDS.) “I also think the ever-shrinking storage unit costs combined with lack of non-organic growth in that market, [along with the] high margins plus [the] high engineering costs on storage -- all [of this] played a role,” Madsen says.

If SANs and other large arrays aren't used in cloud contexts, they've never been used in high-performance data warehousing. (This includes, notionally, the Greenplum business that EMC acquired. In MPP models, storage is almost always local to the physical server node.) The same is true of Hadoop, Madsen notes: “You'd be nuts to use EMC arrays for that sort of thing.”

A prominent industry analyst who didn’t wish to be identified offered TDWI a more guarded response. “[It's] way too soon to tell,” this person said. “I’m deeply skeptical of big deals like this. They rarely end well.”


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