If Dell pulls the pieces together correctly in its $67 billion acquisition of EMC, the combined company will be a very formidable cloud services provider in the federal market, says Washington Technology's Nick Wakeman.
When Michael Dell took his computer company, Dell Inc., private in 2013, it was with the promise of remaking the company.
Since then, the company has made many acquisitions of technology companies in the cloud, security and storage space. It has added systems management and dashboard technologies as well.
But until this weekend, most of the deals have been relatively small. In fact, until it announced its $67 billion acquisition of EMC, Dell's biggest purchase was of Perot Systems in 2009, which at $3.9 billion pales when compared to the EMC acquisition.
With this deal, Michael Dell is putting an emphatic exclamation point on the evolution he started for his company in 2013. With billions of dollars backing him, he's making good on the promise that Dell's future is in the enterprise and not the desktop.
Let's assume that the Dell-EMC acquisition clears all the regulatory hurdles – and there is no reason to think it won't – what does it say about the market, and how is Dell trying to position itself?
The obvious answer to me is that Dell isn't trying to create an IT services company. As many have reported, this deal puts an emphasis on the enterprise, and that means the cloud, security, virtualization and enterprise IT management.
All of these are areas Dell has focused on via its acquisitions in recent years, and this greatly accelerates that process and leapfrogs the company into leadership positions in areas such as virtualization thanks to EMC's 80 percent stake in VMware.
On the security front, EMC brings RSA into Dell's stable. So, suddenly, they'll be a major player there.
In some ways, Dell is mimicking moves by IBM and Hewlett-Packard, but taking a different path toward a similar goal of creating a company that can be a soup to nuts technology provider, with an emphasis on innovative technology, software and related professional services.
Take virtualization for example. Dell ships lots of servers every day, and it already has a partnership with VMware. So, in a way, this deal is about vertical integration of server technology. The same can be said of the storage capabilities and security capabilities that will now all fall under the same corporate umbrella.
Integrating that umbrella will be the biggest challenge, but I expect Dell to be more successful with the EMC integration than it was with Perot. Perot is pure services, and while it performs well, it has always seemed like this other thing for the company.
Compensation, incentives and culture are very different between services companies and product companies. Also, Perot is a relatively small slice of Dell, and didn't carry the weight to push changes that might favor a services organization more.
EMC won't have that problem, and the market has changed greatly since 2009.
The emphasis now, of course, is on solutions and managed services and the cloud. And EMC can only help Dell in these areas, particularly in the government space.
If Dell pulls the pieces together correctly, it will be a very formidable cloud services provider in the federal market.
For the foreseeable future, the federal market will rely on a wide mixture of cloud services from private and some public to a lot of hybrid solutions. With EMC, Dell should be able to challenge anyone in the market for providing this mix of solutions and the tools to manage a heterogeneous IT environment across the enterprise.
A deal of this size will take months to close. The companies estimate a closing between May 2016 and October 2016.
It's also a great time to make such a move as one of Dell's biggest competitors – HP – is going through its own transition as it splits into two companies, driven in many ways to take advantage of the same trends Dell sees.
It'll be interesting to watch what kind of pressure this puts on HP and others who want to stake a claim to the heart of the enterprise, which to me means the data center and the management of the IT infrastructure.
That's where everything starts, and that's where the real value in the market is.
With EMC, Dell is putting itself right in the middle of the action.
This article originally appeared in Washington Technology
NEXT STORY: Greg Ambrose to depart VA