Dinosaur love hug: Dell's $64bn death pledge to EMC

EMC/Dell deal A trouble shared is a trouble doubled. Thus spake Frank Spencer, sales director of DataCenter, and thus goes the marriage of two legacy enterprise tech vendors.

In a $67bn megadeal, EMC and Dell will combine; it's like HP-Compaq all over again, like two dinosaurs mating just before extinction hits.

The markets involved are, of course, different, but the attempt to restore fading relevance by doubling down on yesterday’s technology is very familiar. Cloud may be driving EMC and Dell together, but it’s also guaranteeing that the merger won’t work.

A decade of dwindling

EMC has spent 2015 announcing missed revenue targets every single quarter. Dell, for its part, escaped the scrutiny of Wall Street (after round after round of missed earnings) by going private. But neither side has been winning. Not for a long time.

Nor are they alone. As The Economist highlights, once upon a time IBM was incredibly dominant, to a degree even Apple hasn’t matched.

That was then. This is now.

For years IBM has struggled to hit earnings targets as its software business continues to take a beating. Ditto Oracle, which has missed (far) more earnings estimates than it has hit. In fact, ever since Oracle missed big in March 2013, the writing has been on the wall for every legacy vendor.

Why? There are many reasons, but perhaps most poignantly, open source and cloud have conspired to render the old world of million-dollar-deals-over-golf an endangered species.

But the biggest problem is cloud.

A cloudy future

Or, rather, the absence of Dell and EMC in any meaningful way from the future of cloud. To spot that future, one doesn’t need to spend $67bn. Instead, just a few dollars (or pennies) paid to Amazon Web Services will do.

ZDNet’s Larry Dignan asks: “EMC and Dell will be able to sell all the cloud building blocks an enterprise wants to buy. But it's not clear whether enterprises will want to build their infrastructure.”

Actually, it’s very clear. They don’t.

Amazon Web Services is already doing more than $1bn in storage revenue, eating into EMC, and is on a $7bn run rate “growing at 80 per cent with operating margins comparable to EMC’s,” as Wikibon analyst Dave Vellante calls out.

And while legacy vendors used to be able to pooh-pooh enterprise interest in running their businesses in the cloud. “The argument ‘this will only matter to people who have some of their data in the cloud’ is becoming less useful every day,” as Gartner analyst Merv Adrian notes.

At last week’s Amazon Web Services re:Invent conference, it was hard not to feel that AWS was writing a eulogy for tech vendors just like Dell and EMC. Service after service was announced to help enterprises disengage from decades of dependence on the Oracles and EMCs of the world, and instead move to the more flexible cloud.

But, really, this is good for you!

Meanwhile, Dell wrote a letter to its customers, touting its EMC tie-up as a harbinger of innovation to come:

We are bringing together Dell's strength in small-business and the mid-market with EMC's strength in large enterprises. Together, we can serve you better and fuel innovation across our end-to-end portfolio of solutions and across customer segments to generate significant cash flows... We will be positioned to meet our obligations and continue to invest for the long term success of your organization.

The biggest problem with this hopeful analysis is that it simply isn’t true.

We’ve seen innovation largely stagnate within the legacy enterprise vendors, with the most promising new infrastructure being spawned by Amazon, Facebook (DataStax), or by startups like Docker, Cloudera, Hortonworks, and MongoDB. Most of Dell’s and EMC’s customers are already dabbling in these different vendors, and that dabbling is increasingly turning to dedicating significant resources to them.

But no one is a bigger threat than AWS, with Microsoft’s Azure business coming in second.

But for the legacy vendors, they’re ready to be pushed into a retirement home, as Cade Metz of Wired, formerly of The Reg, writes: “Oh, sure, they’ll shuffle along for some time. They’ll sell some stuff. They’ll make some money. They’ll command some headlines. They may even do some new things. But as tech giants, they’re dead.”

It’s too bad.

Some, like Datamation's James Maguire, posit that these big dinosaurs have enough cash to buy a future, but it’s not a simple matter to acquire the future. Not when the future is most clearly being articulated by two companies that aren’t for sale: Amazon and Microsoft. ®

Matt Asay is veep of mobile at Adobe and a Register contributor.

For full coverage of Dell's EMC buy, click here