On Monday Dell and EMC will kick off their third annual user conference since merging. The conference is happening amid a swirl of questions about Dell EMC storage technology and business directions of the world's largest storage vendor.
Dell Technologies World will take place on the same Las Vegas site that hosted EMC World through 2016 and Dell EMC World in 2017. The new name is a reminder of the gradual absorption of the EMC Federation brands into Dell Technologies.
On the product front, Dell EMC storage is expected to beef up its most successful emerging storage platforms -- all-flash arrays and hyper-converged infrastructure -- as well as legacy Dell platforms. Other expected themes include Dell EMC's long-range storage roadmap for non-volatile memory express flash (NVMe), plans for revitalizing sales of the vendor's midrange storage arrays and a viable hybrid cloud strategy.
Will Dell and VMware merge, or not? Is EMC an IPO target?
One thing to listen for is whether Dell chairman and CEO Michael Dell addresses ongoing reports of a potential reverse merger with publicly traded VMware during his Monday keynote. Dell owns an 81% stake in VMware after buying EMC. Allowing VMware to acquire Dell Technologies would shift merger-related debt to VMware's books and make Dell a public company again. Such a move requires approval from VMware shareholders.
Dell has been considering ways to reduce its debt burden of about $40 billion, coming mostly from its $60 billion-plus EMC acquisition. It recently spun off its Pivotal Software subsidiary (acquired in the EMC deal) through an initial public offering. Other options reportedly under discussion include taking Dell EMC public, or do nothing and keep the existing corporate structure intact.
As a paper restructuring, a merger involving VMware makes a lot of sense, said Greg Schulz, chief advisory analyst at Server StorageIO, a consulting firm in Stillwater, Minn.
"Candidly, I'd be surprised if they announce it at the show, but I wouldn't rule it out," Schulz said. "There are some people who look at this as Dell unraveling the deal with EMC, as if to say 'I told you so.' Either way, though, Michael Dell has to address the VMware rumors. The less he says about it, the more Dell EMC is going to get grilled about it."
How will Dell tie storage refreshes to emerging hybrid cloud workflows?
Aside from expected product news, Dell EMC needs to articulate how its data storage helps customers adapt in a hybrid cloud era, said Scott Sinclair, a storage analyst at Enterprise Strategy Group in Austin, Texas.
The message takes on added significance given the revenue growth posted by rival NetApp since inaugurating its hybrid cloud Data Fabric strategy three years ago.
"Organizations are trying to wrap their head around what it means to compete in a digital economy," Sinclair said. "I'm looking for Dell to lay out its vision for the data center of the future and how they plan to help customers get there. They need the new product launches and features, but for a company of Dell's breadth, the strategic message at the end of the show should be a sum greater than the components of each individual product release."
Dell EMC storage revenue has declined for several quarters, indicative of an industry-wide pattern. Dell executives partly blame a slump on sales execution in midrange storage. That prompted changes to its compensation structure and a realignment of the Dell Infrastructure Solutions Group (ISG), which encompasses networking, servers and storage.
Dell EMC storage accounted for $4.2 billion in revenue last quarter, a drop of 11% year over year. A good chunk of that revenue stemmed from consumption-based purchases and recurring maintenance contracts on existing storage gear.
Reshuffling ISG is an acknowledgement by Dell EMC that legacy networked storage is slowly giving way to flash and hyper-converged infrastructure. Longtime Dell executive Jeff Clarke heads the realigned ISG, having taken over following the retirement of EMC veteran David Goulden last year. Clarke also runs the Dell client solutions group as vice chairman of products and operations.
"What we're seeing is the aftermath of the EMC acquisition," said Eric Burgener, a research vice president for the storage practice at analyst firm IDC, based in Framingham, Mass. "They were very open at the time that it was going to take several years for them to streamline the organization. There are certain products that they're getting rid of and they have to choose between some [others]. I think we'll probably see that going for at least another year."
Camberley Bates, a managing director and analyst at Evaluator Group, based in Boulder, Colo., said she wants to hear a clear strategy to stabilize post-merger turnover in Dell EMC storage sales team.
"We understand EMC has lost quite a few salespeople," she said. "EMC had the best storage sales force for a very long time, but changes in customer relationships and shifts within the larger Dell company have caused some EMC customers to pause as they make decisions" on product refreshes.
"Can they be a storage growth company? Yes, if they have a clear roadmap discussion on investments they're making in the product. Second, they need to retool the sales force, which I believe they are doing, such that there is an expert focus on storage. We have seen several firms combine server and storage sales, without success," Bates added.
A storage portfolio top-heavy with midrange offerings may also be weighing on sales. Prior to the merger, EMC had the market-leading VNX and Unity platforms, while Dell sold the SC Series (formerly Compellent) and PS Series (formerly EqualLogic) SAN arrays. Dell EMC plans to phase out the PS Series, but it added all-flash options to its SC Series last year. All-flash XtremIO arrays also sell into the midrange market.
Ultimately, Schulz said, Dell EMC will have to consolidate to one or two midrange storage platforms that can provide a webscale architecture.
"Customers at the very high end will continue to buy Dell EMC high-end VMAX," he said. "There won't be many new customers in that area, but it's in the midrange where they are most vulnerable. Ultimately, Dell EMC will have to consolidate to one or two midrange storage platforms" to address emerging cloud and webscale workloads.
Will Dell EMC formalize its strategy on NVMe?
This seems like the year for Dell EMC's data storage to make a splash on its NVMe storage, with analysts predicting NVMe over Fabrics host-to-target connectivity to boost deployments by 2019.
Dell EMC was an early entrant in NVMe storage with its DSSD D5 Rack-Scale Flash Appliance, which it designed with a proprietary mesh fabric. It was also the first to scrap an NVMe flash product, taking DSSD D5 out of circulation in May 2017 after meager sales performance.
Company product executives have said the plan is to integrate DSSD as a fast flash tier in existing platforms, making it a candidate for insertion in VMAX, XtremIO or server-side flash with Dell PowerEdge. Dell EMC has yet to indicate how it will use DSSD technologies, if at all.
EMC was an early contender in all-flash arrays, but that market has since plateaued, IDC's Burgener said.
"Even as late as last year, the Dell EMC VMAX all-flash was the fastest-growing revenue stream in their external array portfolio. It overtook the XtremIO. But a lot of that growth is starting to level off, because they're not leveraging their installed base [for] replacements," he said.