When Dell Technologies completed the acquisition of EMC in 2016, it got a choice asset: VMware. Specifically, it acquired 80% of VMware, making the software company a near-standalone company in the Dell Technologies family of companies. Dell Technologies has just announced the expected split of this 80% stake, making VMware a fully independent company. It’s a good decision for investors, but is it also good for clients?
While VMware has freely associated itself with Dell’s competitors, the Dell-VMware couple has benefited from closer synergies, as companies have suggested in their “better together” message. However, many of these benefits never materialized. Because the relationship is flexible (i.e. Dell does not fully own VMware), it cannot dictate much.
VMware will be able to spread its wings further
Although VMware operates independently, partners who also compete with Dell have been somewhat reluctant to come together. These partners will soon be able to partner more closely with VMware, so customers’ options will expand.
Freeing up VMware in this way allows it to pursue a more aggressive market strategy, forging closer partnerships with other vendors, especially in cases where customers want more flexibility, such as unified point management. endpoint (UEM), a market in which VMware’s Workspace ONE product is a leader. The separation from Dell will allow VMware to expand its presence in the device management arena to meet the needs of increasingly heterogeneous end-user computing environments, including with other Windows OEMs. It will also give the company space to address the challenges that open source virtualization, containerization, and Kubernetes have created.
VMware has built a huge business by embracing cloud providers rather than fighting them. This delicate balance opens up more opportunities for customers, but presents potentially significant risks for VMware. Cloud providers are partners of VMware, but they will cannibalize part of VMware’s footprint with their native offerings.
Of course, the future of VMware largely depends on its next CEO. CFO Zane Rowe is in the interim as the company seeks a permanent executive after Pat Gelsinger leaves to head Intel. The next CEO will have some additional freedom, but also some notable challenges. Cloud providers and open source software are gaining ground. Sustaining the growth of VMware will be difficult, but certainly doable. Customers benefit from the financial strength of suppliers, provided that this growth does not come at the expense of the customer experience.
Dell customers will benefit, but software needs to be better targeted
In his letter to customers, Michael Dell assured everyone that the close partnership will remain unchanged. However, Dell’s main software assets are with VMware, and software is critical to its future. Dell needs to redouble its software research and development efforts, especially to take advantage of infrastructure automation as part of the infrastructure as code and composable hardware movement. It must also launch an assault on peripheral computing. Here, an ongoing relationship with a separate VMware will work, but Dell also needs to add its own software intellectual property.
An important benefit to Dell customers will be the improvement in Dell’s debt situation. The company assumed a massive debt of around $ 50 billion when it acquired EMC. Dell has repaid billions of dollars organically each year, but the VMware split will allow it to get an immediate injection of cash of up to $ 9.7 billion to repay its debt.
Finally, Dell is aggressively expanding its Apex program to deliver its products as a service. This is a huge backbone for the company, and it needs to focus its energy on this transformation. This transformation mobilizes everyone at Dell. The new business model requires a lot of software under the cover. VMware will always provide some of it, but Dell needs to integrate its own. Expect – and demand – more of this organic software from Dell.
Not much change for customers in the next two years
Michael Dell is right that customers will see little real impact, at least over the next couple of years. The impact beyond depends on many factors and it is difficult to predict. Software DNA is essential for success in its mission to deliver long-term customer value. This software intellectual property must be built into Dell’s hardware products to facilitate automation and security as built-in natural capabilities.
This strategic shift is an important event for investors, but less so for the rest of us. Billionaires rejoice while customers can largely ignore the hype. Keep the pressure on Dell and VMware to provide you with what you need – just like you have in the past.
Forrester sees edge computing as the next “gold rush” in the tech world. Dell and VMware each play a key role in this future, but in different forms. Dell is expected to be a key player in the field of embedded hardware, often integrated into industrial products from ABB, Johnson Controls and Siemens. VMware software can bridge the gap between your cloud, on-premises data center, and edge systems to simplify how your own software will transform your business. Note that we use the conditional – they will only do this if the community points them in the right direction.
Source : ZDNet.com