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a16z Podcast | Dell + EMC -- Why the Python Just Ate the Cow
30 segments available
We just witnessed the largest acquisition in tech history, and before Dell made it happen, it would have been hard to imagine. Not so much that the two companies would come together, but that the much smaller Dell would be buying its larger peer EMC. If he imagined anyone doing the acquisition it would have been EMC, says a16z’s Peter Levine, but the realities of being a public company and the pressure of activist shareholders are what made this an “upside down acquisition.” “Dell was able to do this deal because they were a private company and had no activists,” Levine says. “EMC could only do this deal because they had activists.” Levine is joined on this segment of the a16z podcast by Actifio Founder and CEO Ash Ashutosh, and Cumulus Networks Co-founder and CEO JR Rivers in a conversation examining the Dell/EMC deal. What were the technological forces that brought these two companies together, and what does that say about the future of enterprise technology and the people who buy it? Finally, what role did the public and private markets play in this deal, and what will Michael Dell need to do to pull it off?
Segments Timeline
Unpacking the Dell-EMC Acquisition
In this segment, the hosts introduce the monumental acquisition of EMC by Dell, discussing the surprising dynamics of a smaller private company acquiring a larger public one. They set the stage for exploring the technological and market forces that made this deal possible, particularly focusing on the implications for customers and the enterprise technology landscape.
"welcome to the a 16z podcast I'm Michael Copeland we just witnessed the largest tech deal in history when Dell bought EMC but how does a much smaller private company Dell by a much larger public compa..."
The Shift in Enterprise IT
Ash Ashutosh discusses the circular shift in enterprise IT and IoT, emphasizing how businesses are increasingly focusing on digital transformation. He explains how traditional IT architectures have become burdensome, leading to a consolidation trend driven by the need for agility and efficiency in technology.
"in a 16 ZJ neural partner Peter Levine co-founder and CEO of cumulus J are rivers and founder and CEO of actifi oh gosh Ashutosh the Dell EMC merger on this segment of the a 16 Z podcast welcome gentl..."
Dell's Strategic Shift
The conversation shifts to Dell's strategic transition from a PC manufacturer to an enterprise IT vendor. The hosts analyze how Dell's acquisition of EMC aligns with its goal to enhance its offerings in the enterprise space, particularly in servers and storage solutions, marking a significant evolution in its business model.
"why don't we start with you well I think there has been a circular shift of enterprise IT and IOT in general as businesses start to become more about digital more about information fast becomes a new ..."
Private vs. Public Market Dynamics
The discussion delves into the advantages Dell gained by going private, allowing it to maneuver without the scrutiny of public markets. The hosts highlight how this strategic positioning enabled Dell to pursue the acquisition of EMC, a move that would be nearly impossible for a public company of its size.
"happened 30 years ago with a whole new different architecture and I think it's a as a result of this big shift that's happening now and we're happening for the next five or ten years yeah you're noddi..."
The Need for Consolidation
The segment explores the necessity for Dell to consolidate its business by acquiring EMC. The hosts discuss how this merger addresses the gaps in Dell's offerings, particularly in storage solutions, and positions the company to compete more effectively in the evolving enterprise landscape.
"need I mean clearly you know Michael Dell didn't go off and spend all this money on EMC to make a mistake that was not his goal that might end up being a mistake but that wasn't the goal he had it's s..."
The Dance of Technology and Sales
JR Rivers elaborates on the historical relationship between Dell and EMC, noting their long-standing interactions in the market. He emphasizes the importance of having a strong enterprise sales force and how EMC's capabilities can enhance Dell's market position in the competitive landscape.
"from a PC endpoint vendor to an enterprise vendor if you think about their core competency was developing servers for enterprises right and now the other missing part of the whole you know sort of ser..."
Shifting Data Center Architectures
The conversation shifts to the future of data center architectures, with a focus on how they are evolving to resemble models used by tech giants like Facebook and Google. The hosts discuss the implications of this shift for traditional hardware vendors and the need for companies like Dell to adapt to these new paradigms.
"actually most people don't know this but there are EMC branded servers you can buy they have VCE that they acquired you know wholly owned from Cisco so they have you know exercises than that just prio..."
The Role of Software in Future Deployments
The hosts discuss the increasing importance of software in data center deployments as hardware becomes commoditized. They explore how the Dell-EMC merger positions the companies to leverage software solutions in a market that is rapidly evolving towards hyper-scale deployments.
"even dancing at the right party where does this business shift and how are you seeing it shift in the enterprise landscape yeah well I think it's it's certainly a great question as you know data cente..."
CIOs and the Demand for Freedom
The segment highlights the contrasting demands of CIOs at enterprise events, where they seek freedom from traditional operations while grappling with the need for transformation. The hosts discuss how this reflects the broader market trends and the challenges faced by companies like Dell in meeting these evolving needs.
"ago what we see now is the blueprint is coming from the likes of Facebook Google and Amazon and in those environments incumbent Hardware in particular and in the case of you know whether it's cisco EM..."
The Future of IT Infrastructure
The discussion focuses on the future of IT infrastructure, emphasizing the need for commoditization and efficiency. The hosts argue that as enterprises move towards private cloud solutions, the focus will shift to outcomes rather than traditional hardware, challenging companies to adapt their strategies.
"decision I think you're right as to where the pucks going what I would argue is you know well you might have a Google or an Amazon that wants to kind of build their own a lot of people write the next ..."
The Changing Landscape of Hardware Vendors
The hosts reflect on the diminishing presence of hardware vendors at major industry events, indicating a shift in focus towards software and platforms. They discuss the implications of this trend for traditional hardware companies and the need for them to innovate in a rapidly changing market.
"and and that exact same week there was an event in Orlando gardener event where 8500 CIOs from the world wearing the suits and but controlling the budgets were wringing their hands wondering okay what..."
Driving Efficiency vs. Innovation
In the closing segment, the hosts debate whether the future of enterprise technology will prioritize efficiency or innovation. They highlight the importance of understanding market dynamics and the need for companies like Dell to navigate these challenges as they integrate EMC into their operations.
"I think the evidence of and if we took the same example a year ago or two years ago some of these infrastructure vendors were predominant because that's what the CIO folks you know spend all out of th..."
The Buyers Market in Enterprise Cloud
CIOs are currently in a favorable position as they can negotiate better deals for infrastructure due to a surplus of resources available from major providers like Amazon and Microsoft. This segment discusses the implications of this buyers market, where CIOs have time to strategize their cloud approaches while being cautious of future price increases from providers.
"the put together a cloud infrastructure the question is is the puck going towards driving efficiency or is it going towards driving innovation as far as that market is concerned I think you know you e..."
Redefining the Data Center Architecture
The discussion shifts to the evolving architecture of data centers, which are increasingly resembling public cloud infrastructures. The segment argues that while data centers may be hybrid, their architecture is modern and designed for efficiency, utilizing commoditized hardware and sophisticated software to meet the demands of new applications and analytics.
"know latest and greatest and everything else like that at some point in time those two groups both they both said we're gonna converge someday right yep but that day is not today yeah we believe enter..."
Dell's Strategy in a Commoditized Market
Dell's acquisition of EMC is framed as a strategic move to position itself as a major player in a commoditized hardware market. The segment explores how Dell aims to transform its business model to compete effectively against larger organizations by offering comprehensive solutions rather than niche products.
"is a buyers market I can sit here and have all these guys give me free infrastructure for the next 2-3 years meanwhile as JR was pointing out I've got two years to figure out what my cloud strategy is..."
The Win-Win Scenario of the Dell-EMC Merger
The merger between Dell and EMC is presented as a beneficial outcome for both companies and their customers. This segment discusses how the acquisition allows Dell to expand its market presence while providing EMC with the resources needed to innovate and compete effectively in the tech landscape.
"there still is this trend right now if you think about sort of the the I would say the near immediate transformation of the data center even though things even though data centers may be hybrid the ar..."
Activist Shareholders and Strategic Decisions
The impact of activist shareholders on EMC's strategic decisions is examined. The segment highlights how short-term pressures from activists can hinder long-term innovation and growth, contrasting with Dell's ability to make bold moves as a private company without such pressures.
"very sophisticated software that links together all of these underlying hardware components yeah I think we all agree there and that's that's kind of where I was getting at if you look at a company th..."
The Upside Down Acquisition
The conversation reflects on the surprising nature of Dell, a smaller company, acquiring EMC, a larger entity. This segment discusses the reversal of expectations in the tech industry and how the dynamics of public and private companies influence acquisition strategies.
"right right from from all of you it sounds to me like this is not this was a pretty good idea I mean or at least it was and I want to get to the sort of public-private market dynamics but this this is..."
EMC's Missed Opportunities and Future Outlook
The discussion considers the potential missed opportunities for EMC had it pursued a different acquisition strategy. The segment emphasizes the importance of understanding market dynamics and the role of activist shareholders in shaping corporate decisions, ultimately affecting the company's growth trajectory.
"different EMC is a huge technology company and arguably they could have been the ones out buying companies and you could imagine them putting together a class of companies around them that would have ..."
The Impact of Activism on Innovation
The conversation shifts to the historical significance of EMC's acquisition of VMware, illustrating how activist pressures could have hindered such a pivotal move if it occurred in the current environment. This segment emphasizes the risks associated with innovation in tech and how activist shareholders can stifle potential growth opportunities for companies.
"shareholder that's the activist position the fundamental issue however is the time horizon by what's in the best interests of the shareholder activists are very short term focus ie sell the company di..."
Dell's Advantage as a Private Company
This segment discusses how Dell's status as a private company without activist shareholders enabled it to pursue the acquisition of EMC. The speakers express concern about the broader implications for large tech companies, noting that limited strategic options could stifle innovation and growth in the industry.
"one but costs activists were involved with current EMC if if EMC were now it was fifteen years ago an EMC were faced with buying vmware and they had activist pressure on their board they would not be ..."
Market Dynamics and Shareholder Pressure
The discussion highlights the volatile nature of public markets and how shareholder pressure can lead to a focus on short-term gains rather than long-term strategic planning. The speakers explore the challenges faced by companies like EMC in maintaining stability and growth amidst activist demands.
"I can't invest in it in innovation through R&D investment and I can't do M&A what does that leave for me I mean the the public markets are ones that are based they work really well when you're growing..."
Customer Vulnerability Post-Acquisition
In this segment, the speakers address the concerns of customers relying on EMC and Dell for their technology needs. The acquisition creates a sense of vulnerability among customers, who are uncertain about the future of the products and services they depend on, highlighting the risks associated with major corporate mergers.
"they're managing it themselves correct so I think one of the things we've noticed Michael here as we talk to some of the larger enterprises our customers perspective there is a very interesting dynami..."
The Changing Landscape of Enterprise Relationships
The conversation shifts to the evolving relationship between enterprises and their suppliers in light of recent acquisitions. The speakers discuss how customers are adapting their strategies to ensure they can rely on current offerings while navigating the uncertainties of future product availability.
"product portfolio yesterday we had one of the one of our large customers come into the office a very loyal EMC customer they've been to EMC for an ABC when they came to us for another day and a half w..."
Incremental Innovation in Enterprises
This segment emphasizes the need for enterprises to adopt a more incremental approach to innovation, focusing on current capabilities while preparing for future changes. The rise of platforms, APIs, and open standards is discussed as critical components of enterprise strategy in a rapidly changing tech landscape.
"perceived to be vulnerable well that was my next question I mean maybe who is vulnerable there's still some large public tech companies out there what there aren't are large private folks that may or ..."
Mergers and the Risk of Failure
The speakers delve into the complexities and risks associated with mergers, particularly the Dell-EMC acquisition. They discuss how misalignment in sales strategies and market approaches can lead to failure, emphasizing the importance of effective integration post-merger to avoid pitfalls.
"think what did you call it the wall street the wall street blueprint which I think I love that the phrase in that world they would they would kind of add to it a little bit ago so this is you know it'..."
Sales Strategy Challenges Post-Merger
In this final segment, the discussion focuses on the challenges faced by sales organizations after a merger. The differing sales strategies of Dell and EMC are analyzed, highlighting potential conflicts and the difficulties in aligning sales teams to effectively market combined offerings.
"making the right move and EMC had no choice but murders have a long history of not working you know what could go wrong in this particular merger so it's often said that big mergers are like the colli..."
Opportunities in Engineering Systems
Despite the challenges, the speakers identify potential opportunities arising from the merger. They discuss how EMC's expertise in selling highly engineered systems can be enhanced by incorporating Dell's commodity components. This integration could lead to cost-effective solutions that address real customer problems, creating a broader market presence for the combined entity.
"sign here my see cuz I agree with you but one of the things that I that I know maybe I'm a little bit enamoured but I think the opportunity here happens to be really good in that you're right about th..."
Cultural Integration Challenges
The discussion highlights the cultural differences between Dell and EMC, which could impact the success of the merger. The speakers stress the importance of aligning engineering and sales teams and navigating the complexities of merging distinct organizational cultures. They reference historical examples of tech mergers that struggled with cultural integration, underscoring the need for careful execution.
"of success I mean I'm sure I'm sure they have thought about this and imagining what I mean you know there's a lot of well-laid plan that when executor and I'm not arguing with you yeah that's great th..."
The Future of Public vs. Private Companies
In the final segment, the speakers reflect on the implications of the Dell-EMC merger for other tech companies, particularly those in the public sphere. They discuss how the merger's success or failure could influence perceptions of private company advantages in executing large-scale acquisitions. The conversation touches on the role of activist shareholders and the tension between short-term results and long-term innovation.
"entropy is that the word is there a danger that Dell squeezes too hard on the on the EMC you know jewels that they just bought EMC spun off was six billion dollars of profit last year and returned lik..."