The resale deal between EMC Corp. and Dell Computer Corp. announced last week, which is aimed at low-end and midmarket businesses, is indicative of future arrangements EMC will make to cut costs and expand into more niches.
The five-year, multibillion-dollar pact gives EMC a new outlet for its low-end Clariion systems, which company President and CEO Joe Tucci said the storage company needs to do a better job of marketing.
"We will be the undisputed leader, clearly unseating Compaq [Computer Corp.] in this case," Tucci said. "[But] Id be a fool to sit here and say we could eliminate channel conflict entirely."
Industry analysts and users are optimistic but cautious about the long-term effects of the deal. When rumors of the deal surfaced last month, Steve Duplessie, an analyst at The Enterprise Storage Group Inc., in Milford, Mass., called the move "just stinking brilliant." But last week, analyst Shelby Seyrafi, of A.G. Edwards & Sons Inc., in St. Louis, suggested that EMCs "multibillion" claim is false.
"We believe that Dell should add to EMCs revenue roughly [$105 million] in 2002 and [$170 million] in 2003," Seyrafi wrote in a report last week.
Jeff Richel, director of IT at Graham Packaging Co., in Harrisburg, Pa., has more reason to worry. For the past six years, Richels companys terabyte of data has been stored on three Dell PowerVault servers and two SANs (storage area networks). But when the company shopped recently for a new SAN system, officials checked EMC as well because of support problems with Dell.
"Almost right off the bat, they told us theyd be more expensive, and then they bugged the heck out of us," Richel said of EMCs sales staff.
That experience is prompting Richel to lean back toward Dell despite his concerns with support. Now, he said, getting the EMC product from Dell is the lesser of two evils because he can still get EMC equipment but deal with Dell sales staff. However, EMCs announcement that Dell will handle Clariion service "makes us nervous," Richel said.
EMC has bigger plans. The partnership is only the start of more such deals, said Greg Ambulos, vice president of global channels for EMC, last week. The Hopkinton, Mass., company plans to expand its relationships with various consultancies, service providers, independent software developers and vertical-market-focused companies, Ambulos said. EMC may target multiple companies in those spaces to address regional needs.
The Dell deal will help EMC in server-based sales, an area where the company lags, and in learning better ways to control inventory, supply chains and manufacturing costs—areas in which Dell is well-known. The deal gives Dell, of Round Rock, Texas, a new, credible revenue stream to help it fight rivals Compaq and Hewlett-Packard Co. Dell will use Clariion systems for its network-attached storage and SAN product lines, officials said.