Private Clouds a 'Big Priority' for Dell

By Rachael King 

LAS VEGAS -- Dell Inc. hopes its pending $60 billion acquisition of EMC Corp. will make the combined company a favored supplier in the rapidly growing market for cloud computing, where companies tap software programs via the internet.

Dell Chief Executive Michael Dell appeared Monday at the annual conference of EMC's VMware unit, underscoring the deal's importance for Dell's future. He is betting that companies will use Dell's equipment to build "private clouds," where their employees access software programs through the internet. "A big priority for us is making private clouds easy," Mr. Dell told the VMworld conference Monday.

The strategy faces challenges, because prices for computing hardware are tumbling, and many potential customers are turning to outside providers such as Amazon.com Inc.'s Web Services unit or Google Inc., which mostly sources its own data center equipment.

Cloud computing is changing the economics for technology suppliers, said David Vellante, chief analyst at research firm Wikibon. Prices have been declining for a decade. "Now it's accelerating and everybody is scrambling," he said.

Dell is expected to complete its acquisition of EMC in coming weeks, after it wins regulatory approval from China. The combined company will be the leading vendor by revenue in the world-wide $29 billion market supplying hardware to cloud-computing providers. In 2015, Dell and EMC combined garnered 18.2% of the highly fragmented market, according to market watcher International Data Corp. That market is characterized by low-margin hardware.

Beyond hardware, the combined company will need to knit together a diverse group of software offerings from Dell and EMC units including VMware, Pivotal and Virtustream. Pivotal offers services to help software developers create cloud applications; its customers include Ford Motor Co. and General Electric Co. With Virtustream, Dell will get services that help run traditional corporate software programs from vendors such as SAP SE on newer cloud infrastructures.

VMware's software allows a single computer to run multiple operating systems simultaneously. It is used by 99% of the Fortune 500, offering Dell additional inroads into the data centers run by large customers.

VMware also unveiled new software and services that make it easier for customers to run, manage and secure their applications across different clouds. The company also extended a partnership with IBM, through which more than 500 customers, including Marriott International Inc., use VMware software and services to manage their operations in IBM's cloud.

Such cross-vendor collaborations have proved difficult because of the diversity of technologies, said Wikibon's Mr. Vellante. Amazon Web Services offers a contained, integrated experience that works for software developers without needing to patch technologies together.

Write to Rachael King at [e-mail]

(END) Dow Jones Newswires

August 29, 2016 18:48 ET (22:48 GMT)

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