Dell's $67 billion takeover of EMC is all about the New IP. In acquiring EMC, Dell is hoping to address a market that is moving away from fixed hardware toward software-defined networking and virtualization, both in the telco and enterprise IT space.
As the Internet of Things booms and sensors are being built into everything from dog collars to light bulbs, the traditional markets are being disrupted just as much as the networks. Said Joe Tucci, chairman and CEO of EMC Corp. (NYSE: EMC), on a conference call this morning, "If you look at this industry that we grew up in, it is going through a tremendous transformation, where the old style of IT is being pretty quickly disrupted," he said. "There are more opportunities now than in the history of man. There is massive telemetry with sensors being built into everything imaginable, generating massive amounts of data." (See Dell Buys EMC for $67B in Biggest Tech Deal Ever.)
More specifically, the deal is also about building a complete software-defined data center solution for telcos who have yet to build their own cloud infrastructure, according to Caroline Chappell, principal analyst, cloud and NFV, Heavy Reading.
"There you have it -- a complete software-defined data center solution, hardware and all," says Chappell in a Light Reading article today. "From a service provider (not enterprise) perspective, this is good for Dell, which has struggled to articulate a strong telco cloud story on the grounds that it is only a box company in a market where telcos in particular want help building/integrating end-to-end cloud architectures -- and that's where the value is, not in the hardware."
The acquisition brings together two leaders in New IP digital transformation and combines their capabilities in software-defined data center, hybrid cloud, converged infrastructure, mobile and security. VMware Inc. (NYSE: VMW) will remain an independent, publicly traded company, according to Dell Technologies (Nasdaq: DELL) press release on the deal.
In the network functions virtualization (NFV) fray, Dell will have to compete with the likes of already established Alcatel-Lucent/Nokia, Cisco Systems Inc. (Nasdaq: CSCO), Ericsson AB (Nasdaq: ERIC) and Huawei Technologies Co. Ltd. . And while one of the often-talked-of benefits of New IP architecture has been avoiding that dreaded "vendor lock-in," Dell's move to build a complete solution runs against the grain of the idea of building out a multivendor New IP ecosystem model that we've heard so much about.
While the deal won't likely close until 2016, and includes language that lets EMC look around for better offers, it's still a sign of what we can expect to see as the reality digital transformation: more mergers and more consolidation as the industry adapts to a New IP future.
— Elizabeth Miller Coyne, Editor, The New IP