In my last column I wrote that Dell buying EMC is a great idea (for Dell) and left it to this column to more fully explain why that is so. It takes two columns because there is so much going on here in terms of both business models and technologies. As the title suggests it comes down to Michael Dell against the world and in this case I predict Dell will win, Cisco, HP and IBM will lose, Apple will be relatively unaffected and I don’t really know what it will mean for Microsoft but I think the advantage still lies with Dell.
One thing that is key is every one of these companies except Dell is publicly traded and answerable to Wall Street while Dell is for now answerable only to the gods of Texas bidnesswho must at this point be giddy with greed. So all of these companies except Dell have essentially the same playbook — cutting costs, laying-off workers and outsourcing like crazy all to pay for the dividends and stock buybacks Wall Street defines these days as prudent corporate behavior. In contrast to this defensive game Dell can use its free cash flow to transform the company and dominate the market — what 20 years ago we would have thought of as the right way to build a company. How quaint.
In order to become dominant Dell has to build or buy companies in these areas — network, storage, compute, virtualization, security, and integration consulting. Notice that last item because it means Dell will also challenge integrators like CSC, SAIC, HP-EDS, IBM, etc. Why buy integration from anyone other than the equipment provider? If Dell has compute, storage, network, and virtualization why look at HP or IBM for any of those parts?
Buying EMC is just the beginning of this battle for Dell.