When Michael Dell tweeted about the EMC acquisition, he made a clear statement of strategy:
What's missing from that tweet? Any mention of telcos, carriers, service providers and other comms companies.
Of course, you can't say much in a tweet, but industry sources say there's more to Dell's lapse than brevity. Dell Technologies (Nasdaq: DELL) will be required to drive revenue to meet the hefty debt it accumulates to achieve the acquisition, and that will mean investing more in the lucrative enterprise business, to the detriment of comms.
In other words, comms companies may be treated like extra adults at a holiday dinner, stuck at the kids' table, separated from the grown-ups in another room.
Dell on Monday announced plans to buy EMC in a $67 billion transaction backed by Dell owners Michael Dell, MSD Partners and Silver Lake, creating the largest privately controlled integrated technology company with a focus on the global cloud market, the Internet of Things and the virtualization of global IT. VMware will continue as an independently owned company with majority Dell ownership; it's now independent but controlled by EMC, which owns about 80% of stock. (See Dell Buys EMC for $67B in Biggest Tech Deal Ever.)
Industry insiders say that Dell, as controlling owner of VMware, will inevitably drive the company's strategic direction. And that will have ramifications for VMware, which is pursuing SDN and NFV strategies and gaining traction in the service provider market, even though it's primarily an enterprise company.
"There will be less focus from VMware on the SP market and even more on the enterprise market," Codero Hosting CEO Emil Sayegh tells Light Reading.
"Dell is going to double down on moving more and more into the enterprise, in light of Dell having a firm footprint there," Kumar Srikantan, president and CEO of Pluribus Networks , which partners with Dell on SDN, says. As Dell invests more in the enterprise, its service provider commitment will remain constant. The service provider market is currently a "marginal business" for Dell, he says. "I don't think it delivers any value at all."
VMware says it remains committed to the service provider market. "VMware's mission, strategy, ecosystem and leadership will remain unchanged," spokesman Michael Thacker tells Light Reading. "This includes our focus on offerings for service providers,"
It's a "stretch" to interpret Michael Dell's tweet, which "doesn't mention every audience [VMware] and Dell can and will serve," as a "change in strategy," Thacker says. "For example, the tweet doesn't talk to the SMB audience either, but we do believe that Dell's focus on SMB will benefit VMware post-merger."
For its part, Dell sent links to a few public statements in response to a request for comment from Light Reading. Those documents made no mention of service providers other than cloud providers, while singling out small business, the mid-market and large enterprises as target markets.
That said, VMware and Dell both have made inroads into the service provider market recently.
VMware, in particular, says it's making a service provider push. In an earnings call in July, CEO Pat Gelsinger said it sees NFV as an opportunity to win hearts in the telco and service provider market, which it has "never participated in before." (See VMware Looks to NFV to Crack SP Market.)
VMware NFV customers include Vodafone, Ooredoo Kuwait and IIJ Japan. Telefónica Digital uses VMware servers for 95% of the infrastructure for its Tu Go service, while C Spire standardized on VMware for a recent, new data center.
VMware and EMC joined the OPNFV project in May, and introduced new NFV software and partnerships this week. (See Telefónica Takes NFV Tu Go, VMware Lands NFV Deal at Internet Initiative Japan, Ooredoo Kuwait Taps VMware for NFV, EMC, VMware Join OPNFV Project and VMware Debuts New NFV Platform, Services.)
Next page: One size fits all?