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Merger lessons from the Dell-EMC partnership

Merger lessons from the Dell-EMC partnership 

At yesterday’s Dell EMC Forum in Toronto, top executives of what is now Dell EMC didn’t just announce the new focus of their organization, they also shared some insights on how the multi-billion dollar deal went down and what convinced their bosses to pursue it in the first place. Their accounts would make a good primer that could be titled: What to look for in a good merger

15 years in the making

“This was not a mere idea or a defensive move,” Howard Elias, president of Dell EMC Services and IT, explained when he spoke of the merger. “Dell and EMC actually made their first strategic partnership back in 2001.”

The merger which closed on September 7 this year can actually be traced to the two companies’ early deal 15 years ago which would allow Dell to sell to its customers the storage products made by EMC.

That agreement was extended in 2008 with the creation of a multi-year alliance stretching through 2013 which saw Dell and EMC add the EMC Celera NX4 storage system to the portfolio of Dell /EMC networked systems. This allowed both companies to deliver fully integrated data centre products to customers.

In 2009, Dell CEO, Michael Dell approached EMC chairman and president, Joe Tucci with the idea of a merger. Teams from both companies were set out to determine the pros and cons of such a deal, said Elias.

“But both companies determined that it was not the right time,” said Elias. North America was still in the grip of a recession at that time.

Early 2013, there were reports that Dell was in discussions with two private-equity firms seeking to acquire the Round Rock, TX., technology company. By February of that year, Dell had closed a $24.4 billion deal with Silver Lake Partners. The next month, activist investor Carl Icahn had also acquired a significant stake in Dell.

In October of 2014, Dell rival Hewlett-Packard announced that it was splitting its enterprise hardware unit from its computer and printer business. There were also questions of whether Dell was on a better financial footing, one year after going private.

By 2015, Dell had launched an aggressive campaign to redefine itself as an IT services company. Meanwhile, EMC continues to reject ideas of breaking up the company. It acquires cloud computing company Virtustream. EMC goes on to defend its federation model.

By October of 2015, reports were circulating that Dell and EMC were talking about a merger.

In May this year, Tucci said at the EMC World 2016 Conference in Las Vegas: “Obviously things are going to change. But this is not the end of something good but the beginning of something great.”

Dell and Tucci then announced Dell EMC, which will encompass the brands, companies, and capabilities reflected across the current Dell and EMC portfolios which now includes VMware, Pivotal, Secureworks, RSA, and Virtustream.

No overlapping

Kevin Peesker, president, Dell EMC Canada Commercial Division, emphasizes that the alliance between Dell and EMC makes such good sense not because the two companies serve the same customer but rather because the products and technologies the two companies offer are complementary rather than similar.

Dell manufactured servers and computers while EMC specialized in storage and virtualization.

“EMC is focused on large government, large enterprise, large healthcare and in Canada, Dell looks at the opposite…commercial businesses and SMB,” said Peesker. “There’s no overlap but lots of opportunities to offer our products to each other’s customers.”

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Dell EMC decided not to touch Dell’s PC business and let it operate as usual because “designing and the lifecycle of a PC is different from that of a data centre,” Elias pointed out.

Culture trumps strategy

Shared culture and values played a key role in getting the two companies working together, according to Elias.

“Culture trumps strategy in many ways,” he said. “We worked with each other to discover each other’s culture and values and determine which ones we were most comfortable with.”

Dell and EMC asked some 75,000 employees to rank 22 corporate cultural attributes they valued the most in their respective companies.

“It was amazing,” said Elias. “They came up with the same top five items across the board.”

These were:

  • Focus on the customer relationship
  • A passion for winning
  • Innovating on solutions that matter most to the customer
  • Being results-oriented
  • Integrity

Dell and EMC top brass was very confident the merger was going to work out because “the culture was shared and complimentary,” said Elias.

Building a go-to-market template

Before closing the deal, Dell and EMC also needed come up with a comprehensive plan of how the new company and its partners would serve customers.

Peesker and Mike Sharun, president, Dell EMC Canada Enterprise Division, traveled across the country to consult with employees of Dell and EMC on how to come up with a strategy.

Dell EMC had rejected the idea of splitting up the sales teams of bought companies. Instead, Dell EMC has one giant salesforce. Its members are now being cross-trained on Dell and EMC product lines.

“We needed to make sure the team was aligned in how we engaged the customer,” said Sharun.

This was all prior to the regulatory approval of the deal and law prohibited employees from both companies to share customer data with each other.

The teams had to anonymize customer name and account data when they had their discussions, said Sharun.

In the end, the teams found out that they aligned in nine out of 10 areas which both companies were serving. This and other data helped create a template for a go-to-market engagement strategy wherein current customers of one company can now be approached with products from the other company.

“We’re working on certain deals and opportunities where they’ve been primarily an EMC customer and now they’re interested in many different products from a Dell perspective,” said Peesker.

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