Dell's service and pricing prowess has combined with EMC's reputation in storage to take both companies into new and profitable parts of the enterprise.
A year into their OEM and manufacturing partnership, Dell Computer Corp.s service and pricing prowess has combined with EMC Corp.s reputation in storage to take both companies into new and profitable parts of the enterprise. But as the pact matures, the partners path could become more competitive, making future deals more complicated.
To be sure, the agreement has resulted in good fortune for both sides. Since it began reselling EMCs Clariion series in November 2001, Dell has seen overall storage grow 73 percent to $250 million last quarter, according to Russ Holt, vice president, enterprise systems, at the Round Rock, Texas, company. While he wouldnt say exactly how much of that was derived from EMC sales, Holt said Clariion models, mostly connected in storage area network configurations, were "the primary impetus" for the jump. Dell sold an extra 60 cents in software and services for every dollar of Dell-EMC storage gear sold, officials said.
Dells push of the EMC-based storage systems had a marked effect on customers, many of whom said that price had prevented them from considering EMC in the past.
"It opened a new door. The NAS [network-attached storage] has simplified things so much for us," said Carl Moser, chief technology officer at Excel Mortgage Network Inc., in Iowa City, Iowa. Like many smaller companies, Excel needed just 320GBwell below EMCs typical target audience. Moser chose Dells PowerVault 715N, a NAS hybrid of EMCs Clariion behind Dells version of the Microsoft Corp. Windows 2000-based Server Appliance Kit.
For its part, EMC, of Hopkinton, Mass., now sees one-third of its Clariion sales handled through Dell, according to CEO Joe Tucci in a conference call last month.
But the nature of the deal will change early next year when Dell begins manufacturing the low-end Clariion CX200 model. Dell-built Clariions could push the partners into a pricing conflict, observers note. Officials remain unfazed for now.
"Both companies are allowed to set price. ... Theres a market out there for consolidation thats still driving the bulk of the growth," Dells Holt said.
"EMC has [less than] double-digit market share in the midrange space. Theres much room for growth," said EMCs Dave Donatelli, executive vice president for storage platforms.
Still, worries that Dell may undercut EMC on price as it moves from re-branding to actually building some low-end EMC gear have industry observers concerned about the deal. Furthermore, observers familiar with the partnership said Dell will eventually start building higher-end Clariion models and could start reselling EMCs Celerra NAS product within six months, giving Dell a big jump in scalability, security and management over its Windows-based offering.
While declining to comment specifically on future plans for the pair, Holt did add that he is unconcerned with EMCs own challenges, such as its withering stock price and intense competition from IBM and Hitachi Ltd. "Thats not anything that I would worry about," Holt said. "Our portfolio is very complete right now, [but] were continuing to monitor new technologies such as iSCSI or Serial ATA," he said.