To say the $67B Dell and EMC merger is big and complex is an understatement. Dell will be borrowing the majority of the cash needed to complete the deal.
A component of the deal requires Dell to issue VMware tracking stock to current EMC shareholders. As a result, Dell will have a 40% ownership stake in VMware while maintaining voting control of the company. Customers and the market are wondering about the long-term impacts of Dell controlling VMware.
I reached out to VMware to understand how customers could benefit from the new relationship with Dell. A VMware spokesperson responded with: “It’s important to note that VMware will continue executing on its mission of providing customers value through software-defined computing, networking and storage solutions, together with its cloud, mobile and desktop offerings. This doesn’t change.”
Stu Miniman, Principal Research Contribute with Wikibon, commented, “Overall, the deal does not have any immediate impact on VMware.” I agree – but that’s the short-term impact. There are three major areas that I predict may impact the VMware ecosystem.
VMware has consistently tried to diversify beyond the hypervisor. Competitors such as Nutanix and Scale Computing have begun to deliver on the promise of open source solutions such as KVM. Both Nutanix and Scale deliver solutions that manage VM running on KVM. Customers have figured out how to virtualize applications atop of KVM to be more than a good enough experience. Similarly as noted by ZDNet’s Larry Dignan, Microsoft’s Hyper-V offers additional choice. VMware has continued to dominate due to enterprise-friendly features such as DRS and HA.
There’s no overlap directly between VMware and Dell on the hypervisor, though it’s difficult to ignore Dell’s relationships with VMware competitors; the most visible relationship is the one with Nutanix. Dell sells a branded Nutanix hyper-converged infrastructure (HCI) solution. VMware sells EVO:RAIL that competes directly with Nutanix. Today, Dell sells both EVO:RAIL and Nutanix HCI solution; it would make sense for Dell to focus its efforts on selling EVO:RAIL over Nutanix or outright let the Nutanix agreement expire.
I’ve always thought that VMware holds back on adding features to its storage products. VMware has the potential to be disruptive with x86 server SAN. The disruption would come at the cost of its parent EMC or its soon-to-be-parent Dell. One need looks no further than Nutanix to see this market’s potential. From a maturity perspective, I compare the Nutanix solution to EMC’s and Dell midrange storage offerings. Talking to a Nutanix Solutions Architect, he claims never to have lost a deal to EMC’s high-end VMAX array. The point is that I don’t expect VMware to rock the boat for either of Dell and EMC’s core storage businesses.
Dell has been very active in the white box switch market. In the past, Dell has teamed up with software-defined networking solution providers such as VMware and Cumulus. One of the early marketing messages around VMware’s NSX solution has been the ability to use commoditized network products such as the products Dell produces. NSX provides the network intelligence and services in networks built on commodity hardware.
I’ve always wondered what VMware’s Network GM Martin Casado could create if VMware purchased a network hardware provider. The new relationship with Dell may prove the closest the industry sees to a VMware-branded network device. I’m looking for the Dell product roadmap future partnerships with providers such as Arista Networks.
I expect VMware competitors to capitalize on the uncertainty that comes from any large merger. I agree with Miniman’s assessment that the EMC and Dell merger doesn’t directly impact VMware. I believe it is an opportunity to examine your technology regarding VMware technologies.
It’s plausible that Dell may outright buy the remaining portion at VMware at some point. Dell has stated that it intends to increase its stake in VMware in the coming years. If this happens, there will be major changes to VMware products and the virtualization industry at large.
What do you think?
Will Dell’s control of VMware result in tangible changes to VMware and the market? Join the discussion.
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