The Aussie channel verdict on Dell-EMC merger

Dell’s US$67 billion acquisition of EMC may not have come as a surprise to the channel, but resellers are still unclear on where they fit in the IT powerhouse’s channel plans.

CRN spoke to Australian resellers about how the merger will affect their partnerships with Dell, EMC and VMware.

Thomas Duryea chief executive Andrew Thomas said the merger would be excellent for his company as it brings together the Melbourne-headquartered company's two biggest vendor partners under one roof.

“We’re very fortunate to be saddled with these two giants,” said Thomas. “The opportunity to remove the tension that exists between our two largest vendor partners is tremendous. When we look at this, we assume they will be combining the best parts of both organisations, which can only lead to opportunity.

“The question is how do they pick the products and position their combined product portfolios? They’ll probably position the portfolio more towards the enterprise market in Australia.”

While Thomas argued the future looked bright for Dell and EMC partners, he questioned whether VMware would be part of the Dell ecosystem after the merger.

“My personal view on VMware is that Michael Dell will buy back shares, remould the company, then spin it off to pay down debt,” said Thomas.

“We suspect Dell is carrying an enormous amount of debt, and there’s a lot of cash needed to make this transaction happen. So in the near term, [Dell] will have to look to reduce costs. There’ll be cost-cutting synergies between the two companies, and a higher margin across the EMC portfolio, but [Dell’s] got to find an uplift to back that debt.

“This is speculation, but maybe that comes from privatising companies.”

Rick Brown, managing director of SureBridge IT, said he sees opportunities for the new computing powerhouse to focus on the midrange market. The Brisbane-based reseller is a Dell partner.

“We’ll continue having a strong relationship with Dell, but this opens the gates to work with EMC more,” said Brown. “It would be ridiculous if they didn’t grow the relationship in the midrange space.”

“Having a single vendor selling storage and servers makes it easier for resellers to negotiate on price and functionality. It’s making the landscape easier for resellers, bringing them together under one roof rather than having to shop around.

Brown is wary of the two companies going direct to enterprise customers.

“The main thing is going to be how Dell interacts with resellers like ourselves and continues to grow that partnership, or if they’re going to go more direct in the enterprise space,” said Brown.

“If Dell approaches with package deals, we’ll seriously consider it. But there’s every possibility they could turn around and go direct.

“It may be a problem for resellers who have put their heart and soul into EMC and HP, but they should be able to manage that. It’ll be more interesting to see how Cisco and HP react.”

Chris Mearns, chief executive of Murdoch Webster Technology Group, also expressed concerns for the future of VMware. The Melbourne-based company is also a Dell reseller.

“Interesting is a word that comes to mind. Complex is another,” said Mearns.

“VMware would still need to be treated as a separate company. To go into a closed shop for converged virtualisation solutions would be a mistake.

“There’s two massive companies with a lot of cross-over. Dell has spent a lot of time buying up companies, but they’ve also worked really hard on focusing on their channel.

“The mergers isn’t likely to complete until next year, so we’ll play it by ear. The markets been quite active over the past 12 months and if it provides even more growth, that’d be great," added Mearns.

Canberra’s Infront recently won APJ partner of the year from both EMC and VMware. Founder Allan King welcomed the merger as a potential opportunity to benefit from integrated solutions.

“Infront has partnered with EMC, VMware and Dell for more than 10 years,” said King.

“We expect these partnerships to flourish under the merger as many of the commercial conflicts we have seen in the past should be removed. However, until we fully understand the new structure and GTM models, including partner programs, we can only guess as to the impact on our current business.”