Dell, EMC team up for mid-market storage opportunity

Dell Computer Corp. and EMC Corp. on Monday announced a five-year strategic alliance designed to help both companies increase their market share in the midrange storage market.

EMC claims to own 10 per cent of that market in both Canada and the United States, and Dell pegs its share at around seven per cent in both countries. Analysts acknowledged the mid-range space is the fastest-growing segment of a storage market Austin, Texas-based Dell and EMC expect to reach US$100 billion by 2005.

“The amount of information needed to remain competitive is exploding,” said EMC president and CEO Joe Tucci. “Remember the goal: us to be the undisputed leader in this space and we will do that.”

The agreement will see the companies co-brand EMC’s Clariion enterprise storage systems line, with Dell becoming the primary reseller of Clariion systems. The deal comes not long after Sun Microsystems Inc. and Hitachi Data Systems Corp. entered into a co-branding agreement to compete with EMC in the higher-end storage market.

Dell and Hopkinton, Mass.-based EMC will also pool resources to service Dell enterprise customers that require the EMC’s higher-end Symmetrix Unix-based systems.

“The thing we don’t want to do is have our teams selling against each other,” said Dell president and COO Kevin Rollins.

“The mid-range is important to us, and the high end will still be robust,” Tucci added. “And working together on a common software platform will be a win, win, win.”

Analysts don’t seem to share that sense of unbridled enthusiasm. Jennifer Ewen, a market analyst with Evans Research Corporation, said EMC will have to lower the prices on its mid-market offerings if it is going to be competitive in the space.

“The competition’s offerings are certainly comparable for what you get for a lower price,” she said. “EMC is going to have to offer an extremely compelling reason not to go with IBM and Hitachi.”

“(EMC is) going to have to lower their cost points to move into that marketplace,” added Frank Dzubeck, president of Communications Network Architects Inc.

But Robert Stroud, divisional partner manager for EMC Canada said EMC comes out quite favourably in terms of total cost of ownership.

“EMC’s products and services are very competitively priced in a capacity-for-capacity (comparison),” he said, adding that EMC has more than 50 per cent high-end storage market share in both the U.S. and Canada.

Stroud declined to offer a price list for the Clariion, which didn’t surprise Dzubeck.

“Pricing is relative,” he said. “In today’s day and age, every price is negotiated.”

Dell representatives in both Canada and the U.S. said tapping into the Dell supply chain will allow for a reduction in the prices on Clariion products. EMC also expects to extend its sales reach in the Windows NT and Windows 2000 storage markets in teaming up with Dell.

But Dell appears to have more to gain from the agreement. For starters, Dell can now offer storage products that support Unix operating systems. As well, Ewen said an increased presence in storage for Dell can help augment pain from the sluggish PC market.

“They’re looking to build their enterprise business,” she said. “Being able to compliment their product line with storage, I see more in it for them than for EMC.”

Dzubeck also suggested EMC may be hard-pressed to recoup cost savings resulting from Dell’s supply chain efficiencies. He said any savings will be countered by lowered costs and any cut Dell takes.

“Can it actually lower their costs without lowering their margins?” he asked.

Dell and EMC representatives in both Canada and the United States repeatedly referred to Monday’s announced agreement as nothing short of a tremendous opportunity. But Ewen said partnership and consolidation are currently hard to avoid.

“You’re seeing a trend towards consolidation and storage is no exception,” she said.

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