I’m at Dell EMC World this week and I’m struck by two things. One is that Dell Technologies is acting like one company just weeks after the merger has settled and that that is unprecedented for a merger this size. Actually, it’s unusual for a merger of any size.
I had a chance to chat with Michael Dell first thing in the morning and the guy actually looks younger than the last time I saw him which, to me, indicates the process wasn’t anywhere nearly as stressful as any other merger I’ve followed. A good chunk of this is due to not being public, having strong people on both sides of the merger, and tossing out the big merger rulebook while keeping the attorneys on both sides in check.
The benefits appear to be massive. Out of nine of the most recent large enterprise competitive bids against HPE, Dell EMC won nine, and the buzz here is that HPE not only wasn’t close, it is increasingly uncompetitive. In one story, I was told the CEO was a personal friend of Meg Whitman who, after HPE lost the bid to Dell Technologies, personally got involved and forced a second shoot-out. Dell Technologies won so overwhelmingly, the CEO was overridden and, in my experience, that almost never happens.
Two Very Distinct Strategies/Models
We have in play two competing strategies. HPE’s strategy isn’t unique and represents a growing trend of managing to keep hedge funds happy, managing to keep customers happy, and growing the company toward ever larger solutions. Sadly, with public companies, CEO compensation is increasingly driven by the investment side, not the customer side. While HPE is one of the most aggressive companies, it is far from alone. But it is paying massive strategic benefits for customers and employees.
Dell Technologies’ strategy is the same strategy that effectively created most of the large dominant companies that exist today. The HPE strategy is a relatively recent change and you can see the difference in execution. Dell is massively bigger because customers are demanding complete solutions and the concept of one vendor they can hold accountable (One Throat to Choke). Financial types are demanding excessively high repetitive quarterly returns, which can only be created by downsizing the firm and dramatically reducing costs.
There is a substantial amount of uncertainty in the market at the moment, ranging from technology changes forcing more and more companies to consider alternative technologies, to the massive increase in cyber threats that few seem capable of mitigating, to the environmental changes ranging from the break-up of the EU to folks talking about revolution in the U.S. It really feels like the customers here want a vendor they can depend on to execute at a time when they are increasingly concerned about disruptions happening on a global scale.
In short, the ideal is a new company at massive scale that appears to be able to execute. And that doesn’t just mean bringing out a product, but being able to actually create ever more comprehensive solutions that meet the expectations that were set. This is in sharp contrast to firms that are increasingly known for making excuses for missed expectations that resulted from unplanned, or secret, cost-cutting efforts or divestitures.
As a result, customers are talking about Dell Technologies as if it is a safe harbor during a massive storm, as a firm they feel safe depending upon the more worried they get about the changes around them.
Wrapping Up: It’s the Model, Stupid
I’m fascinated that we are basically seeing a fight, not so much between two companies, but two very different concepts. One that tries to make happy a new class of power players who are in the game to make money quickly and could care less about ensuring a firm is around for generations, and another that holds customer loyalty as the primary goal, and treats employees more like family than interchangeable cogs in the machine. It isn’t rocket science, and the customers really do seem to get which model they trust.
Since it appears clear to me that the hedge fund approach is a company killer, I expect this is a problem that will be self-correcting. I just wonder how many companies will have to die before the market corrects. Regardless, none of the CIOs here seem to be willing to chance being on the wrong side of that outcome and this appears to be working amazingly well for Dell Technologies.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+.