What Will Dell Do Now?

For a company that prides itself on listening to its customers and delivering more than just what meets requirements, EMC received the message loud and clear from Dell about what the company is looking for in an enterprise class storage product: like a 3Par InServ. Can EMC deliver an enterprise storage array for Dell? Will Dell select a new acquisition target? Now that HP has won the bidding war, what will Dell do now?

There is no doubt that EMC is watching Dell and trying to determine if they will continue to have a strong and viable storage distribution partnership with the company. EMC's CLARiiON and Symmetrix lines--as they are today--seem not to fit in the Dell vision of their upper mid-range or enterprise class storage offerings. Mainly, the price/feature function combination with EMC can't be right for Dell or they wouldn't have gone after 3Par in the first place. While EMC has grown enormously over the years, they still understand listening to the customer and supplying what the customer wants.  

Granted, there are probably more than few ruffled feathers at EMC over Dell's storage actions of late (acquiring iSCSI provider EqualLogic, and now the bidding for 3Par). However, as the latest dust settles, getting back to the basics of business will be natural for EMC and Dell, and it's in EMC's best interest to work with Dell and try to provide the kind of advancements and price flexibility that their customers require. Will Dell now try to acquire another storage company? Perhaps, and we will look at that in a moment.  

HP now has the opportunity to reposition its storage line up. Perhaps it's time to phase out the EVA and finally work toward eliminating the costly and aging XP (Hitachi Universal Storage Platform, or USP) architecture. The Hitachi architecture appears stalled, new advancements aren't coming to market in rapid fire succession any longer, and enterprise customers are growing weary of the complexity of the product and the expensive professional services that come along with it. Reportedly, the latest IDC Quarterly Disk Storage Systems Tracker indicates Hitachi Data Systems' (HDS) storage market share results are below 10 percent for the fifth consecutive quarter, keeping them in the "other" category below HP and Dell. HDS is the global direct sales arm of Hitachi, Ltd. These results may be further indication of the sluggishness of sales of the USP. It's worth noting that IDC does not count HDS sales that are OEM sales through either SUN or HP.

With a potential elimination of the XP as a possibility, can 3Par InServ architecture scale for the HP enterprise customer? Can InServ provide the high availability features functions like that of the XP? In my opinion, the simple answer is yes. The more complex answer revolves around the question of how much money HP is willing to inject into R&D for InServ. Given the purchase price for 3Par, it's my opinion that HP will be willing to invest heavily to enable the InServ architecture as its new flagship line, scaling from the mid-range storage requirement with the F-Class all the way through to the very high-end and high-availability requirements with the T-Class, with new classes of InServ offerings to come.Looking more closely at the prospect of Dell continuing its acquisition strategy for a storage company, a few good candidates come to mind. However, some companies may be more likely candidates that others. Compellent, for example, could be a likely candidate, given the company's continued growth and success in the enterprise space. Compellent has been doing well in Hyper-V and VMware environments, and this tends to fit with Dell's vision of expansion into the enterprise space with its focus on Virtual Infrastructure Solutions.  

Pillar Data Systems has been discussed in the press as a potential target, however, I believe it is doubtful Dell will move forward with Pillar given Pillar's limited enterprise engagements and other investor entanglements. DataDirect Networks could be in Dell's crosshairs, given the their success in ultra high-speed storage for media application environments; however, there may be more enterprise robustness needed in their storage arrays to make it a prime Dell acquisition target.  

Isilon, another storage company that has been discussed as a potential Dell acquisition target, has built its continuing enterprise success somewhat quietly over the years. Isilon understands network storage very well and may be well-positioned given their focus on 1GbE and 10GbE connectivity. On September first, Isilon announced their VMware-ready status, which means they have passed evaluation testing managed by VMware, and they are now listed in the VMware Partner Product Catalog and on the VMware Hardware Compatibility List.

What is now clear is that HP will acquire and integrate the 3Par InServ line and Dell appears to be set on being able to deliver a more robust enterprise class storage product to round out its overall enterprise strategy. For Dell, there is no make vs. buy decision. Dell will buy an enterprise class storage solution. The remaining question is which enterprise storage vendor will Dell buy from, or will they flat-out make another bid to buy a storage company?

What do think Dell will do?