Dell is buying EMC for $67 billion, the largest tech acquisition of all time. The merger is based on fear of the obvious future facing both companies. Rather than remain two companies that go from power to poverty with the ever-increasing cloud competition chipping at their legacies, they can merge to battle the tide as one.
It's a strategically optimistic approach, although not necessarily a winning one. As my InfoWorld colleague Serdar Yegulalp eloquently explains in "4 no-bull takeaways from the Dell EMC/VMware buyout," these companies are "endangered species." Can this move help them collectively find their mojo again? Not likely, but they need to try.
Dell and EMC come together to ward off the future
With more and more enterprises considering a move to the cloud, Dell and EMC have to reinvent themselves to find a new seat at the table. Microsoft faced a similar challenge, and it seemed to hold off too long in getting into the cloud game. But it now appears Microsoft made the right move by building platforms like Azure and Office 365 that put it in a stronger position in a cloudier world.
You might argue that EMC's VMware has its own public cloud solution, but it's hardly a force to be reckoned with. VMware's recent focus has been to improve its cloud image by focusing heavily on hybrid tools, not the public cloud that IT is increasingly turning to.
Dell and EMC were already having difficulty adapting fast enough to keep pace with the world around them, but a merger of the two will make it harder. Mergers take time, and they essentially put companies on hold while they figure out their new order.
Meanwhile we see smaller, nimbler, and more agile companies coming up with solutions for on-premises hardware (like Gridstore or Scale Computing) and showing genuine innovation in the process, which a behemoth blend of two existing giants cannot pull off.
It's not always a bad thing for one company to acquire another. It can help with the reinvention of that company. For example, Microsoft bought Skype in 2011 (for $9 billion) and has used Skype to battle competitors. Although it may not beat Apple's FaceTime for consumer use (thanks to the prevalence of the iPad and iPhone and FaceTime's solid quality), it's doing fine as Office 365's internal business video communications tool.
Another example is Microsoft's acquisition of Nokia, which put Microsoft into the devices game and, after several years of tumult, led to new Lumia smartphones, a new Surface tablet, and its very first laptop, the Surface Book. The Nokia acquisition started Microsoft down the path of its devices reinvention.
Unfortunately, I think my colleague Yegulalp hits the nail on the head with his statement that the "union of legacy tech outfits has historically resulted in combinations of mass and weight, and it rarely produces agility or fresh thinking."
That's unfortunately too true. But I believe we'll see more of these kind of mergers going forward.
Microsoft will emerge as the cloud's king of the hill
Though you might think there are plenty of competitive possibilities for IT customers going forward, I see a single, monopolistic future. I believe (I'm sure your comments will rip me apart for saying this) that Microsoft Azure and Office 365 will be the one cloud city that all companies will eventually join.
Sure, there will still be stragglers that try to remain villages and towns outside the city limits with their on-premises hardware, as well as alternative cloud cities like Google and Amazon Web Services. The other cloud vendors will retain their historical charm; it'll be like visiting an ancient European city where people say, "Wow, they were ahead of their time in the 1600s."
But Microsoft is proving itself to be the king of cloud. Office 365 is simply a transfer of its de facto Exchange and Office monopolies from on-premises to the cloud. I guarantee that will be the result. As others start to see it, they will scramble to hold onto their piece of revenue, in some cases merging to do so. But that's a holding pattern, not a winning strategy.
For another scenario to play out, three events must occur:
- An innovation springs up from nowhere to offer a new cloud option that trumps the existing one. That's not going to happen.
- Large companies like Apple refocus all their energy on the enterprise to push Microsoft out of the game. That's not going to happen.
- Companies merge to create something truly awesome, game-changing, and disruptive to the move folks are already making. That's not going to happen.
What we'll see are mergers, acquisitions, monopolies, and a future where Microsoft is king of the cloud and everyone else scrambles to reinvent themselves for seats at the table. Sounds good to me!