• FEATURED INFOGRAPHIC

    FEATURED INFOGRAPHIC

    2024 Top 10 SMB Business Issues, IT Priorities, IT Challenges
    GET IT NOW
  • SIMPLIFY. EXPAND. GROW.

    SIMPLIFY. EXPAND. GROW.

    SMB. CORE MIDMARKET. UPPER MIDMARKET. ECOSYSTEM
    LEARN MORE
  • 2024 TOP 10 PREDICTIONS

    2024 TOP 10 PREDICTIONS

    SMB & Midmarket Predictions
    READ
  • 2024 TOP 10 PREDICTIONS

    2024 TOP 10 PREDICTIONS

    Channel Partner Predictions
    READ
  • CHANNEL PARTNER INFOGRAPHIC

    CHANNEL PARTNER INFOGRAPHIC

    2023 Top 10 Partner Business Challenges, Priorities
    GET IT NOW
  • CHANNEL PARTNERS RESEARCH

    CHANNEL PARTNERS RESEARCH

    Channel Partner Trends
    LATEST RESEARCH
  • IT SECURITY TRENDS

    IT SECURITY TRENDS

    SMB & Midmarket Security Adoption Trends
    LATEST RESEARCH
  • CLOUD ADOPTION TRENDS

    CLOUD ADOPTION TRENDS

    SMB & Midmarket Cloud Adoption
    LATEST RESEARCH
  • FUTURE OF PARTNER ECOSYSTEM

    FUTURE OF PARTNER ECOSYSTEM

    Networked, Engaged, Extended, Hybrid
    DOWNLOAD NOW
  • BUYERS JOURNEY

    BUYERS JOURNEY

    Influence map & care-abouts
    LEARN MORE
  • DIGITAL TRANSFORMATION

    DIGITAL TRANSFORMATION

    Connected Business
    LEARN MORE
  • MANAGED SERVICES RESEARCH

    MANAGED SERVICES RESEARCH

    SMB & Midmarket Managed Services Adoption
    LEARN MORE
  • ARTIFICIAL INTELLIGENCE

    ARTIFICIAL INTELLIGENCE

    SMB & Midmarket Analytics & Artificial Intelligence Adoption
    LEARN MORE
  • WHITE PAPER

    WHITE PAPER

    SMB Path to Digitalization
    DOWNLOAD
  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14

Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

Dell-EMC deal – sense and sensibility or solid reasoning

On October 12 Dell took an enormous step along its new chosen path of reorienting away from a provider of low-cost PC and server hardware to a role as a more sophisticated supplier to businesses that view technology as a strategic asset rather than as a tactical necessity. Dell announced a “definitive agreement” to acquire EMC (including EMC’s ownership positions in VMware, RSA Security, Pivotal Software, Virtustream and other industry firms and joint ventures) for $67 billion – the largest-ever acquisition in the information technology industry. The deal was announced to analysts and media in a conference call that featured Dell Founder and CEO Michael Dell, EMC President/CEO/Chairman Joe Tucci and Silver Lake Partners Managing Partner and Managing Director Egon Durban, and included VMware CEO Pat Gelsinger, Dell CFO Thomas Sweet, and David Goulden, who acts as CEO for EMC’s Information Infrastructure business.

Two second Take

The acquisition greatly enhances Dell’s position in higher-margin, higher growth markets: storage is expanding faster than servers or PCs, and EMC is focused on the higher-margin software used for device management as opposed to the creation of physical devices themselves.

Revenue Synergies – the $67 billion question

While the call eschewed any commentary on staff redundancies between the two organizations, it focused its messaging on “revenue synergies that are three times larger than cost synergies,” a justification for the deal that comes primarily from new growth opportunities rather than from squeezing out costs through headcount reductions.

It can be assumed that most of this growth potential comes from expanded market rather than product positioning. In his remarks, Michael Dell noted that Dell/EMC (including VMware) have already established “leadership positions in storage, servers, virtualization and PCs,” and have strength in IT’s “most important growth vectors,” including software-defined data centers, hybrid cloud, converged infrastructure, mobility and security – and are “positioned as a leader in an amazing 22 Gartner Magic Quadrants.”

If Dell and EMC are already leaders in all of these large and/or expanding areas, then the question is where will further growth come from? It appears that the combined entity is banking on the benefits associated with increased customer account presence. In particular, Michael Dell noted that “as the data market moves to a compute-centric, converged model, Dell’s server franchise is a natural fit with EMC’s strength.” The theory appears to be that by combining EMC’s prowess at selling to enterprise accounts and Dell’s broader compute portfolio the company can increase share of wallet within major accounts; there is also some opportunity for using EMC to drive increased storage presence within Dell’s “growing commercial infrastructure franchise” in the SMB base, but this is likely to be a secondary consideration.

Security, Converged Infrastructure, Mobility, Big Data

Dell has been investing heavily in building a comprehensive security portfolio, assembling advanced threat identification services firm SecureWorks (acquired by Dell in 2011), firewall/unified threat management from vendor SonicWALL (acquired in 2012), backup software specialist AppAssure (2012) and identity monitoring and management software vendor Quest (also acquired in 2012), plus related capabilities sourced from thin client vendor Wyse (purchased by Dell in 2012) and from work done by Dell’s own engineering team. With the latest acquisition Dell adds encryption pioneer RSA Security (which became a division of EMC after being acquired in 2006) and enterprise mobility management supplier AirWatch (acquired by VMware in 2014), thus diversifying the portfolio even more. Dell has been positioning end-to-end security as a differentiating feature of its infrastructure portfolio for some time and with the acquisition Dell’s security story becomes even stronger, and even more distinct from the approaches of competitors like Lenovo, HP and Oracle.

Although it is tempting to look at a Dell/EMC/VMware combination as a means of consolidating a converged infrastructure offering capable of competing with the Cisco-led Vblock (Cisco, EMC, VMware) and FlexPod (Cisco, NetApp, VMware) offerings, it appears that Dell’s vision is broader and more strategic.

The acquisition also gives Dell a foothold into the big data deployment market opportunity where the enterprise spending is still hardware driven rather than software and analytics uptake.

And with AirWatch in the mix, Dell finally gets a mobility story in place beyond just the mobile devices.

Move to cloud

Michael Dell believes that “the combined company is very well positioned to address the move to the cloud,” both by providing infrastructure to public cloud providers and private cloud operators and through VMware’s ability to enable hybrid cloud. But in his remarks, he went further, observing that “I think what you’re seeing with the Software Defined Data Center is an ability to take the benefits of the public cloud and bring them into an on-premise data center.” He considers the complexities associated with connecting compute, network and storage as a major demand driver for public cloud, and virtualization and converged infrastructure as a means of delivering greater simplicity in on-premise environments, allowing firms to focus on optimizing for “the application user, quality of service and security.”

But Michael Dell is not satisfied by simply focusing on leveling the terrain between cloud and on-premise infrastructure, his vision is to supply infrastructure across different environments (public clouds, SaaS, hyperclouds, private clouds), providing common, connected and secure platforms to customers of all sizes, wherever their IT workloads reside.

Financial challenges

A lot has been said and written about financial challenges but due to the enormity of the deal size it is worth another read, from our point-of-view. The cost of debt may have an impact on the overall cost of operating the newly-expanded Dell entity. Dell was thought to have about $12 billion in debt prior to this deal; clearly, this figure will increase substantially after the acquisition. Michael Dell did state that observers could expect “a significant deleveraging” resulting from cost savings, increased revenue and cash flow management improvements that come with being a private company, but $67 billion represents a very high hurdle for these activities. Obtaining the funds themselves is not an issue but it seems likely that the costs associated with debt service may affect product prices and margins, and it is difficult to boost either in many of Dell’s core hardware markets. It might well be that asset sales become important to enhancing corporate profitability by reducing the cost base of the company.

Should debt reduction become a priority, the newly-expanded Dell would have a few options, starting with VMware. Although there was no mention of selling VMware as part of this deal – indeed, VMware CEO Pat Gelsinger was described as having a “very bright future” in the new organization – EMC’s 80 percent stake in VMware is worth more than $26 billion at current valuations. It will be very tempting to convert this equity into reduced debt to help the competitiveness of future hardware products, though this would be at the cost of an ownership position that (as per the terms of the Dell deal) accounts for 40 percent of EMC’s overall value. There are other avenues Dell could pursue – for example, it could combine its in-house security assets with RSA, and perhaps AirWatch, to create a stand-alone security business that could be monetized via issuance of public market shares – but a VMware sale is clearly the most direct means of raising capital to reduce debt.

Go-to-market challenges

An often-overlooked ingredient in a merger is the extent to which go-to-market staff and strategies can be melded in a single organization. This will likely be a significant issue for the expanded company. Dell and EMC customer-facing staffs have very different skills and compensation levels and may not be neatly amalgamated into a single sales force. The channel strategies of the two firms are different as well. Because EMC has focused primarily on large deals within large accounts and Dell has been more SMB (and consumer) focused, it may be that the sales staff and channel strategies can be aligned by sector but that will not erase the GTM discrepancies.

EMC sales staff work large, high margin deals, and are among the best compensated reps in the industry; Dell certainly cannot afford to reduce EMC-classic rep compensation (which would trigger a mass exodus to competitive startups) or to pay EMC rates to Dell-classic sales staff (which would consume more than 100 percent of current margins). From a channel and alliance perspective, EMC is a strategic partner to its enterprise-level services and software partners; Dell is primarily a tactical resource for SMB-focused VARs and integrators. These approaches target different partners with different programs and are delivered in different ways. Again, it is possible to align strategies by market sector, but many partners are likely to try to “shop” across programs to “Frankenstein” together blends of services and compensation structures that optimize the supplier benefits that they derive from the new Dell, and some – notably, Cisco, which is an EMC ally via Vblock – will find a Dell partnership untenable.

Final Take

While there are reasons to admire Dell’s strategy, it is very rare to find successful examples of a merger yielding a combined market presence that eclipses the individual positions of the firms involved. However, these are still early days, and the hard decisions will not be made until mid-2016, but there are still many operational issues to be ironed out between now and then. Even though Dell is not a public company, it will need to explain its expectations of “revenue synergies” to customers, analysts and the press, and Silver Lake will likely need to do the same for its current and potential investors.

There are reasons to both admire and to question the Dell/EMC deal. The answer to the $67 billion question will be found in the opportunities for “revenue synergies” that extend well beyond today’s converged infrastructure SKUs, and into the cloud and the core operating models of customers ranging from EMC’s traditional public sector and large enterprise accounts to Dell’s SMB buyers. If Dell can extend its reach across the full spectrum of IT/business infrastructure, it may build a position as the behemoth HP believed it would become, before it was bifurcated into two distinct business units. If it does not, it may more closely resemble Oracle, trying to assemble a coherent vision from a series of mismatched pieces.

The real winner though is Silver Lake. It has positioned itself as a central force within the technology industry, an unusual position for a private equity firm, and may signal that excellence in financing is joining excellence in inventing technology and excellence in technology marketing as paths to the industry’s pinnacle.

  0 Comments

Midmarket technology & business buyers: two peas, two pods

Business decision makers (BDMs) are an intrinsic force in most midmarket organizations and are the primary decision makers in some high-growth technology areas, including collaboration, social media and analytics – meaning that increasingly, BDMs are ‘the boss of IT’. These BDMs view IT as a component of business processes, rather than as a stand-alone silo. Techaisle SMB & Midmarket Decision Authority data shows that twice as many BDMs as ITDMs (IT decision makers) in midmarket businesses say that it is critical for IT to understand how technology contributes to overall organizational success. These BDMs have specific objectives for technology usage, clear perspectives on adoption drivers and impediments, and tend to be influenced by information sources that are different from the inputs used by ITDMs.

This pressure from business managers leaves IT leaders scrambling to stretch limited budgets to meet seemingly limitless requirements, striving to deliver predictable, secure systems that respond to the increasingly varied needs of their business users and competitive environments. The growing divide between IT authority and responsibility, exacerbated by the fact that business perspectives on IT are shaped by information channels that are not part of the IT professional dialogue, has created an environment where businesses are struggling to develop the cohesion needed to promote or embrace new IT capabilities to achieve business objectives within existing IT and business process structures..

In a unique survey, Techaisle posed the same question, “expectation of associating business success factors to IT solutions” to both BDMs and ITDMs and probed to identify what each expected from the other. Techaisle data shows that BDMs tend to have higher expectations of IT; while business decision makers and technology decision makers are reasonably well aligned in some areas, there is a wide expectation gap in others, which may explain (at least to some extent) the continued proliferation of non-sanctioned, “shadow” IT.

techaisle-midmarket-linking-it-with-business-success-resized

The figure above provides a simplified view of differences between BDMs and ITDMs across several different factors. Although there is a tacit agreement that both business and IT management should understand business related success imperatives and should be able to associate IT solutions to achieving those objectives, closer examination of the data shows some important differences between the two groups:

  • 53 percent of upper midmarket BDMs say that it is very critical for business success that ITDMs are able to identify and associate IT solutions with business efficiency, productivity & profitability. On the on the flip side, only 30% of IT executives in these upper midmarket businesses say that business executives should be able to associate IT solutions with business efficiency, productivity and profitability. Responsibility for delivery clearly rests with IT, and BDMs have very high expectations from ITDMs.
  • Data also clearly shows that BDMs again have high expectations for support in using technology to build customer connections. Over 40 percent of BDMs believe that it is critical that IT has a grasp of solutions that enable beneficial customer & supplier interactions. In contrast, only 1/4th of ITDMs say that BDMs should have a grasp of such solutions.
  • Employee productivity is an important aspect of business and in most cases businesses are expecting IT to understand and deploy core technology solutions to make employees more productive.
  • Business process automation is an area where there is better alignment between IT and business. However, automation is a dominant need within the 100-499 employee size segment; nearly 40 percent of BDMs in the segment say that it is critical that IT can identify requirements for automation and associate IT solutions with these needs.
  • Cross-organizational integration is recognized as being important by both BDMs and ITDMs in mid-size businesses: over 50 percent of both groups agree that it is critical for both business and IT to associate technology solutions with business demands. This is an area where both BDMs and ITDMs are fully aligned.

The trend towards increased BDM involvement in IT decisions is likely to accelerate further. BDMs are already active in shaping demand in core IT markets, and they are the dominant force in high-growth areas like collaboration, social media and business intelligence/analytics. ITDM and BDM divergence will continue and although there is cross-pollination they may as well continue to operate from different pods. Although it may be tempting to try to bring the various parties together, IT suppliers cannot successfully act as intra-corporate matchmakers: they have to come to grasp with the reality of selling to two different constituencies which have different expectations.

  0 Comments

Addressing SMB and Midmarket buyers cloud & mobility journey

In the course of Techaisle’s SMB & Midmarket IT Decision Making Authority: IT vs LoB, BDMs (business decision maker) and ITDMs (technology decision maker) were asked to identify the “greatest benefits” and “key attributes” of both cloud and mobility solutions.

There is an interesting pattern apparent in the survey research findings. When adopting mobility solutions small business BDMs are focused on addressing near-term pain points: attracting new customers, improving accuracy, addressing work/life balance. The ITDMs appear to be taking a longer view, focused on applying automation to bring structure to business processes – improving the quality of interaction through application of mobility solutions, improving the quantity of those interactions, increasing process efficiency.

Midmarket BDMs are looking to mobility to help increase business process efficiency and customer interaction quality. Midmarket ITDMs, on the other hand are focused on increasing the quantity of customer interactions, which would logically impact other core areas (such as business user productivity and process efficiency) as well.

When discussing the mobility solution attributes that BDMs and ITDMs consider important to delivering on mobility benefits BDM and ITDM buyers have similar and common perceptions across all business sizes. “The ability for the mobile solution to be integrated seamlessly with existing corporate systems” – ensuring consistency across devices – is ranked as the most important mobility solution attribute by small business BDMs, and the second-most important attribute by midmarket BDMs. The ability to create and sustain secure connections for remote workers and the ability to deliver seamlessly across the “three screens” of PCs, tablets and smartphones are also priorities for BDMs in both small and midmarket businesses. ITDMs also have some key common areas of focus: the ability to integrate multiple media types into outbound communications and the ability to read or write data from/to corporate systems are the two top-ranked attributes in both employee size categories.

It is clear that each IT and business professional’s perspective on the mobility journey is shaped by their context – by their business objectives, and by the requirements imposed by the size of their organization. In the figure below we have taken the results from the Techaisle survey and plotted them in three dimensions.

techaisle-itdm-bdm-smb-mobility-attributes-resized

A look at the findings from parallel questions on cloud also reveals differences between ITDMs and BDMs, but similarities between small and midmarket firms. Looking at cloud benefits, BDMs, especially in small businesses, view cloud as a means of introducing capabilities that would have been cost or time prohibitive, and of reducing business process costs. ITDMs, on the other hand, view cloud primarily as a means of reducing IT costs. ITDMs in both small and midmarket businesses recognize that cloud can enable their organizations to be more agile, which connects well with a theme expressed by BDMs.

When analyzing the key attributes leading to realization of the above cloud benefits, data shows some differences in emphasis between small and midmarket firms. The most important difference between BDMs and ITDMs is the BDMs’ emphasis on collaboration: BDMs in both small and midmarket businesses are more likely than their ITDM counterparts to view support for collaboration as a key cloud solution attribute. BDMs are also more likely than ITDMs to look to the cloud for detailed reporting and for support of features – disaster recovery, on-demand data access, and mobility support – that may be lacking in their current environments. ITDMs, on the other hand, are focused on technical attributes (scalability, integration, IT management capabilities) that are difficult and/or expensive to develop without third party support.

Understanding the requirements, preferences, success metrics and areas of focus of BDMs and ITDMs within both small and mid-sized businesses is critical to structuring an effective SMB sales and marketing strategy. The findings open the door to an important issue: the requirements in structuring and communicating messages to ITDMs and BDMs within small and midmarket businesses. To effectively engage with and manage the increasingly-diverse decision making unit, IT suppliers will need to structure messages that address the "care-abouts" of BDMs and ITDMs, and deploy those messages through the channels that are most effective at reaching each community.

  0 Comments

Indian IT Hardware Retail – Shifting Landscape

India is witnessing unprecedented growth driven by favorable demographics, a young working population, rising income levels, urbanization and growing brand orientation. India’s retail industry has emerged as one of the fastest growing industry and is projected to grow almost to US$1 trillion by 2020 from the present market size of US$600 billion in 2015 driven by income growth, urbanization and attitudinal shifts.

However, it must be said that Indian retail is still dominated by unorganized sector. Organized retail penetration is just 8%. The biggest challenge facing the Indian retail sector is the lack of efficient supply chain. Within retail, India's IT hardware market includes many product segments such as desktops, laptops, phablets, tablets, printers, and other peripherals.

Techaisle team has been tracking the channel market and specifically sales out of various IT products in India for a decade. At last count, Techaisle India channel census data shows that there are over 30,000 channel partners in India. Supporting this vast channel network are eight national distributors and 159 regional distributors. Techaisle research shows us that there are typically four types of retailers.

With a country so large with varying maturity of IT adoption and number of distributors and retailers/resellers it is but natural to see a very complex PC distribution flow. Techaisle team tracks the percent units that flow through various intermediate channels from the OEM to the end-customer.

techaisle-complex-pc-distribution-flow

It is common knowledge that India’s e-commerce market India is still in nascent phase, yet it is growing rapidly but IT hardware sales through e-commerce websites or through the company's own website are still in the single digit-range as percentage of total sales because most of laptops, desktops, and tablets sales are still sold through bricks and mortar shops. In order to expand in India, large technology companies have been increasing their focus on smaller towns and non-tier 1 cities. For example, by end of 2015, Dell plans to more than double the number of its stores (named Dell Exclusive) in India to 825. In 2014, Dell had already doubled its number of stores to 400 from 2013.

Organized retail started more than a decade ago and significant growth has been achieved. However, most of the retailers have struggled to achieve a desired level of profitability. Leading retailers are now putting profitability at the top of their agenda. Croma was the first multi-brand store to sell consumer electronics among other retail products. Today, major retail players include Reliance Retail (Reliance Digital – 151 stores), Pantaloon Retail Ltd (eZone – 92 stores and Electronic Bazaars), Videocon (Next Retail Ltd – 144 stores), Tata Sons (Croma – 101 stores), Sumaria Appliances and Vijay Sales (54 stores).

To learn and read more download our free White Paper.

Table of Contents

  • Indian IT retail landscape
  • Major IT retail hubs in India
  • Distributor and Retailer count
  • Increasing focus on OEM branded stores
  • Leveraging distribution and sales networks through strategic partnerships
  • Types of Retailers
  • Complex PC Distribution Flow
  • Pain points of smaller retailers
  • Explosion in E-commerce and M-commerce retail channel
  • Overcoming inefficient supply chain management
  • Overcoming logistics and warehousing challenges of Indian e-commerce
  • Organized retail sector competing with online retail
  • Brick-and-mortar retailers warming to E-commerce

techaisle-india-it-hardware-retail-pov

  0 Comments

By accepting you will be accessing a service provided by a third-party external to https://techaisle.com/

Search Blogs

Find Research

Blog Archive

Research You Can Rely On | Analysis You Can Act Upon

Techaisle - TA