Dell-EMC Fall Into Classic Disruptive Technology Trap: Pushing Further Up Market
The Dell-EMC amalgam makes a lot of sense through the close-focus lens of short-term synergies, protecting established enterprise customers and horizontally filling out a legacy product portfolio, however strategically it looks to be more an act of reactive weakness, if not desperation. While the combined entity will be a powerhouse of traditional enterprise IT products, it does nothing to address the growing disruptive threat from public cloud services like AWS. Indeed, the deal is a typical example of established market leaders focusing on narrower and narrower slices of high-end customers as a disruptive technology erodes its entry-level and mainstream base.
The deal happens against a backdrop of a server market slowing down, where most of the growth is happening among second-tier vendors and ODMs, and sales declines for large, enterprise storage arrays even as overall storage capacity continues to skyrocket. Both of these can be traced to the increasing popularity of cloud services. Considered in this light, the Dell-EMC deal looks like a classic reaction to disruptive technology.
As I detail in the full column, the Dell-EMC combination smacks of two enervated companies combining to capture a greater share of a stagnating market and a classic case of horizontal integration. While I agree with the early consensus that this combination will be fruitful for both companies (ex-VMware) in the short-term, it doesn’t address the long-term threat to incumbent IT vendors from cloud services. Read on to understand why.
Originally published at www.forbes.com on October 15, 2015.