Editor’s note: The digital revolution necessitates business practice modernization for EMC, its partners and its customers, concludes a team of analysts from Technology Business Research which attended the recent EMC World event. As they point out in this third of four reports, EMC faces many changes as it gears up for a merger with Dell.

HAMTPON, N.H. – In his last address at EMC World as CEO, Joe Tucci opened his remarks by making comparisons between the industrial revolution — or the start of the manufacturing economy — and the digital revolution, or the start of the IP-based knowledge economy. Business, political and social practices will transform while disruption has clearly gained a chokehold on the industry.

EMC engineering has refreshed the product families at a breakneck pace that will not and cannot abate. The challenge now is modernizing the interactions between people and organizations. The twofold challenge EMC faces and clearly understands will revolve around developing prototype services for its customers and optimizing their ecosystem of channel partners to mitigate disintermediation risks as demand shifts to hybrid cloud.

Imperative 1: Infrastructure optimization consulting

Customers sit on differing capitalized assets and labor investments accumulated throughout the quickly diminishing client-server era. Technical debt, therefore, comes in numerous forms requiring different risk mitigation strategies to modernize the IT core of these enterprise organizations.

EMC cloud services provides a compelling value proposition to enable large enterprise to refinance this technical debt through incremental steps. In this fashion, EMC can demonstrate immediate returns to organizations that will face internal skills gaps and cultural resistance to the required changes. In these intermediate steps, EMC can also jump-start the IT organizational shifts required to more tightly align infrastructure investments to business value creation.

EMC will promote the tighter control associated with the “opinionated infrastructure” that Pivotal Cloud Foundry relies upon over the more loosely structured assets of competing standards. In doing so, EMC believes it can more quickly automate application deployments within the software-defined abstraction layers that it will propagate through selling software-only versions of core offerings regardless of whose underlying commodity infrastructure runs it.

EMC’s challenge will be scale. It can deliver these sound infrastructure consulting services to its marquee enterprise accounts with great success, but direct sales success at the top of the account stack will only help to avoid attrition within 40% of its revenue base, given 60% flows through channels.

Imperative 2: Accelerate partner ecosystem velocity to generate an accretive network effect

EMC has big challenges ahead on the partner front, with many being natural reactions to a large merger. Many of the short-term challenges revolve around the base of transaction-oriented resellers awaiting clarity from Dell and from EMC on the new rules of engagement and conflict resolution that cannot be articulated until after the transaction finalizes. Obvious concerns will be around local market conflict between Dell and EMC partners triggering price wars and margin erosions. During the transition process, EMC can expect provocative press reporting and some short-term fallout as the combined entity sorts through the go-to-market segment issues.

While downmarket partner programs will face turbulence, EMC has strong opportunity to forge tighter relationships higher up the partner stack with solution providers, cloud service providers and global system Integrators. The efforts started at the federation level around these initiatives certainly aim the market motions in the right directions.

Key benefits EMC can articulate include:

  • As Michael Dell intimated in his keynote remarks, Dell Technologies and HPE will be the last two infrastructure titans standing (with Cisco and Lenovo having at least some reason to take exception to the statement). From this vantage point, they can sell efficiencies to these global suppliers on the benefits of working with the Dell Technologies stacks and software-defined assets underpinning the API first infrastructure enabling automated services. EMC will be able to take the IP gained from the transformation consulting services with the core enterprise accounts and turn it into automated services that, in turn, save its partners time in their own services stacks.
  • Telecom disruption is “deja vu all over again” for technology vendors. Network virtualization has reached a tipping point and will tear through that segment far faster than it did the IT space. EMC can build out the infrastructure stacks telecoms require and develop the turnkey systems and business solutions Tier 2 and Tier 3 telecoms will need to pivot into delivering business services to their commercial base as a way to generate new profit pools as network abstraction evaporates their core ones.
  • Solution providers have struggled to seamlessly migrate workloads across multiple clouds and on-premises environments due to the lack of standards that EMC believes Cloud Foundry can overcome. EMC can deliver turnkey solutions, allowing solution providers to quickly build easily scalable infrastructures with automated interoperability features so the partner’s time and energy can be devoted to innovation and value creation rather than kludging together patchwork infrastructure connections that increase technical debt.

EMC will face headwinds from hyperscale public cloud players such as Amazon Web Services, Google and Azure, but Virtustream can and will provide it with sufficient room to battle these headwinds and make progress. Virtustream provides a critical value to the equation by enabling for Application Performance SLAs that distinguish it from others. In turn, Virtustream will deliver three types of IP: metered cycles, managed services and software only. Tier 2 and Tier 3 telecoms and cloud service providers (CSPs) can therefore leverage the Virtustream IP to differentiate against their peers, particularly if they are running the EMC physical stack like Virtustream does, while also generating the ecosystem network effect Dell Technologies will need to survive and thrive in the aftermath of the disruption triggered by the digital revolution.

EMC has the technology assets to pull this off, provided the Dell Technologies charter preserves its R&D and M&A investment levels, and provided EMC’s assumption of server development affords Dell Technologies more permission to play on the server side of the enterprise. The challenge will be to accelerate the well-understood need to transform the selling motions to the various partner entities to build the ecosystem required to avoid disintermediation.

(C) TBR