Will Dell Networking Wither Away?

chopping-block-Dell-EMC

The behemoth merger of Dell and EMC is nearing conclusion. The first week of August is the target date for the final wrap up of all the financial and legal parts of the acquisition. After that is done, the long task of analyzing product lines and finding a way to reduce complexity and product sprawl begins. We’ve already seen the spin out of Quest and Sonicwall into a separate entity to raise cash for the final stretch of the acquisition. No doubt other storage and compute products are going to face a go/no go decision in the future. But one product line which is in real danger of disappearing is networking.

Whither Whitebox?

The first indicator of the problems with Dell and networking comes from whitebox switching. Dell released OS 10 earlier this year as a way to capitalize on the growing market of free operating systems running on commodity hardware. Right now, OS 10 can run on Dell equipment. In the future, they are hoping to spread it out to whitebox devices. That assumes that soon you’ll see Dell branded OSes running on switches purchased from non-Dell sources booting with ONIE.

Once OS 10 pushes forward, what does that mean for Dell’s hardware business? Dell would naturally want to keep selling devices to customers. Whitebox switches would undercut their ability to offer cheap ports to customers in data center deployments. Rather than give up that opportunity, Dell is positioning themselves to run some form of Dell software on top of that hardware for management purposes, which has always been a strong point for Dell. Losing the hardware means little to Dell if they have to lose profit margin to keep it there in the first place.

The second indicator of networking issues comes from comments from Michael Dell at EMCworld this year. Check out this short video featuring him with outgoing EMC CEO Joe Tucci:

Some of the telling comments in here involve Michael Dell’s praise for the NSX business model and how it is being adopted by a large number of other vendors in the industry. Also telling is their reaffirmation that Cisco is an important partnership in VCE and won’t be going away any time soon. While these two things don’t seem to be related on the surface, they both point to a truth Dell is trying hard to accept.

In the future, with overlay network virtualization models gaining traction in the data center, the underlying hardware will matter little. In almost every case, the hardware choice will come down to one of two options:

  1. Which switch is the cheapest?
  2. Which switch is on the Approved List?

That’s it. That’s the whole decision tree. No one will care what sticker is on the box. They will only care that it didn’t cost a fortune and that they won’t get fired for buying it. That’s bad for companies that aren’t making white boxes or named Cisco. Other network vendors are going to try and add value in some way, but the overlay sitting on top of those bells and whistles will make it next to impossible to differentiate in anything but software. Whether that’s superior management capabilities, open plug-in model, or some other thing we haven’t thought of will make no difference in the end. Software will still be king and the hardware will be an inexpensive pawn or a costly piece that has been pre-approved.

Whither Wireless?

The other big inflection point that makes me worry about the Dell networking story is the lack of movement in the wireless space. Dell has historically been a company to partner first and acquire second. But with HPE’s acquisition of Aruba Networks last year, the dominos in the wireless space are still waiting to fall. Brocade raced out to buy Ruckus. Meru offered itself on a platter to anyone that would buy them. Now Aerohive stands as the last independent wireless vendor without a dance partner. Yes, they’ve announced that they are partnering with Dell, but have you been to the Dell Wireless Networking page? Can you guess what the Dell W-series is? Here’s a hint: it rhymes with “Peruba”.

Every time Dell leads with a W-series deployment, they are effectively paying their biggest competitor. They are opening the door to allowing HPE/Aruba to come in and not only start talking about wireless but servers, storage, and other networking as well. Dell would do well at this point to start deemphasizing the W-series and start highlighting the “new generation” of Aerohive APs and how they are going to the be the focus moving forward.

The real solution would be for Dell to buy a wireless company and take all the wireless expertise they are selling in-house. That would show they are serious about both the campus network of the future and the data center network needed to support their other server and storage infrastructure. Sadly, with Dell being leveraged due to the privatization of his company just two years ago and mounting debt for this mega merger, Dell is looking to make cash with spin offs instead of spending it on yet another company to ingest and subsume. Which means a real non-partner wireless solution is still many years away.


Tom’s Take

Dell’s networking strategy is in maintenance mode. Make switches to support faster speeds for now, probably with Tomahawk support soon, and hope that this whole networking thing goes software sooner rather than later. Otherwise, the need to shore up the campus wireless areas along with the coming decision about showing support fully behind NSX and partnerships is going to be a bitter pill to swallow. Perhaps Dell Networking will exist as an option for companies wanting a 100% Dell solution? Or maybe they are waiting for a new offering from Dell/EMC in the data center to drive profits to research and development to keep pace with Cisco and Arista? One can only hope that their networking flower doesn’t wither on the vine.

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The Butcher’s Bill

chopping-block-Dell-EMC

Watching a real butcher work is akin to watching a surgeon. They are experts with their tools, which are cleavers and knives instead of scalpels and stitches. They know how to carve the best cut of meat from a formless lump. And they do it with the expert eye of a professional trained in their trade.

Butcher is a term that is often loaded with all manner of negative connotations. It makes readers think of indiscriminate slaughter and haphazard destruction. But the real truth is that a butcher requires time and training to cut as they do. There is nothing that a butcher does that isn’t calculated and careful.

Quick Cuts

Why all the discussion about butchers? Because you’re going to see a lot more comparisons in the future when people talk about the pending Dell/EMC acquisition. The real indiscriminate cutting has already started. EMC hid an undisclosed number of layoffs in a Dec. 31 press release. VMware is going to take a 5% hit in jobs, including the entire Workstation and Fusion teams.

It’s no secret that the deal is in trouble right now. Investors are cringing at some of the provisions. The Virtustream spin out was rescinded after backlash. The tracking stock created to creatively dodge some tax issues is now so low that it needs a ladder to tickle a snake’s belly. Every news day brings another challenge to the deal that is more likely to sink it than to save it.

In order to meet this rising tide of disillusionment, Dell and EMC are pulling out all the stops. Expect to see more ham-handed decisions in the future, like cashiering entire teams and divisions in order to get under some magical number that investors like and will be willing to support in order to make this mega merger happen. Given Michael Dell’s comments about investors during his run to make Dell a private company, I’m sure he probably has a very sour taste in his mouth thanks to all this.

Butchers work to make the best possible product from the raw materials given. There are no second chances. No do-overs. You have to get it right the first time. That very reason is why all this scrambling looks more like the throes of a desperate gambit instead of a sound merger strategy.

Prime Cuts

All companies that merge have duplicate jobs. It’s a fact of business. Much of the job overlap comes in the administrative side of the house. Legal, accounts, and management teams all have significant overlap no matter where you go. And while those teams are important for keeping the lights on and getting the bills paid, the positions represent redundancy that almost never gets trimmed away. Staff positions keep the machine moving. That means they stay.

Assuming that no one inside of either organization wants to cut staff positions, how can we approach something resembling more sane carving that accomplishes the same goals without leading to the hemorrhaging that will come from large-scale indiscriminate layoffs?

  1. Kill off needless products. While I’m sure this is an on-going process, there are some pretty easy targets for this one. Haven’t sold that SKU in two years? Gone. Wind down support and give a discounted upgrade to something you do support. Kill off SKUs that exists solely to win awards.
  2. Reduce products by collapsing product lines. You don’t need two entry-level products for iSCSI storage. Or five different enterprise-class arrays. Kill off the things that overlap or directly compete against each other. Who survives? The one that sells better. The one that has better tech. The one that costs less to support. If you’re going to pinch pennies in other places, you had better start doing it here too.
  3. Management reductions need to happen too. For all the talk of reducing engineering teams and creating synergy, it’s surprising how often managers escape the layoffs. They’re almost like professors with tenure. Well, it’s time for them to prove their worth too. If their department is gone, so are they. If they are an ineffective manager, pay them a severance and let them earn their role somewhere else all over again. And that goes double for the 500 CTOs that seem to have sprung up inside large organizations lately.

You’d think these things were obvious and easy to figure out. Yet these are the kinds of decisions that get overlooked during every merger.


Tom’s Take

Layoffs hurt lots of people. It’s never fun when your teammates and friends get sacked. But you can be smart about who goes and how best to make the new company survive and even thrive. Chopping away at the company with a machete is like a horror movie. People are going to scream and cry and you’ll be lucky to live through the end. Instead of taking that approach, be smart. Make the best cuts you can from what you’ve got. Find ways to package the parts no one might want with other parts that people find attractive. Do what you can to use as much as you can. Think like a professional butcher. Don’t act like an amateur one.