Instant Insight

October 22, 2001


Heeding the CLARiiON Call:

EMC/Dell Ink Multi-Billion Dollar Enterprise Storage Agreement


By Charles King

EMC and Dell have announced a five year, multi-billion dollar strategic alliance agreement to accelerate the development of both companiesí storage system businesses. Under the agreement, EMC and Dell will co-brand EMCís CLARiiON line of enterprise storage systems, and the alliance will make Dell the leading reseller of CLARiiON products. The CLARiiON product line will become Dellís standard offering for storage area networks (SAN) and high-end network-attached storage (NAS) installations. For storage-related services, Dell will augment its Premiere Enterprises Services group with tools, methodologies and practices from EMC, and EMCís global services organization will support and train Dell personnel. The companies have also agreed to work together when opportunities in Dellís enterprise customer base require the features and functions of EMCís high-end Symmetrix enterprise storage systems, and the companies will explore and collaborate on the joint development of future open, networked storage systems. Additionally, EMC and Dell will look for opportunities to leverage Dellís procurement and manufacturing capabilities for the production of EMCís CLARiiON products.



Both companies will continue to sell their existing storage products directly and through existing partners. Dell plans to begin offering EMC products including the FC4500, FC4700 and IP4700 in November.



On its face, this agreement makes good sense for both EMC and Dell. For EMC, the partnership offers quick enhancement of the companyís channel strategy, since Dellís position at the top of the PC vendor heap makes it an enviable Microsoft/Windows-based buddy. Given Dellís strength in business desktop sales, it should also offer EMC a host of new sales opportunities in the Global 2000 arena for its CLARiiON product line. But the benefits do not flow solely to EMC. For Dell, partnering with a key player in high-end storage should broaden its own end-to-end product offerings, and could open doors to new large enterprise customers. On a more tangible level, reselling EMCís CLARiiON hardware and software and having access to the companyís Symmetrix product line should enhance Dellís standing among existing enterprise customers, and save the company significant R&D costs from having to develop additional storage products of its own.

But the deal also has wider repercussions beyond the two principals. For business customers devoted to Dellís well-regarded desktop products, the agreement provides access to a host of co-branded products from one of the industryís premiere storage vendors, as well as the potential for co-developed SAN and NAS products in the future. Additionally, having a single point of entry for both server and storage products should potentially streamline service and support from both companies. So everyone concerned should be a happy camper of the best sort, right? Well, not exactly. The folks at Network Appliance, who signed a similar product distribution deal with Dell in 1998 are likely feeling left out in the cold right about now, to the point of being a bit frosty. The deal could also cause concern among some of EMCís and Dellís traditional competitors. Compaq, especially, which has been pinched by Dellís growing presence on the corporate desktop and felt some pressure from the success of EMCís CLARiiON products, may find this deal falling a little too close to home for its liking.

Looking at a longer time frame, we think the EMC/Dell deal could portend greater ramifications for both companies and their sectors. While this agreement may appear limited at first glance, it touches so many essential points across both organizations that we believe it could portend interest by the principals in a deeper relationship further on down the road. Call this alliance a pair of training wheels for the future, if you like. If the partnership opens the kinds of doors to EMCís Global 1000 customers that Dell assuredly hopes it will, and if EMC can realize the real savings it wishes from leveraging Dellís widely-respected procurement and supply chain management organization, we will not be surprised if these two well-matched partners decided to exchange todayís friendship rings for something more permanent.

All in all, while a devil or two may yet be found in the details, we believe that the EMC/Dell alliance has the potential of delivering everything such an agreement should: tangible short-term benefits and wide-ranging, long-term opportunities to the principals, reasons to smile for customers and confusion to the opposition. While time and circumstance will almost certainly offer EMC and Dell myriad challenges to overcome, this agreement also suggests that the two companies are entering into it with the essential good will that portends any and every successful marriage.

The Sageza Group, Inc.

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Copyright © 2001 The Sageza Group, Inc.
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