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EMC partners mull Dell's iSCSI strategy following EqualLogic buyout

As Dell buys EqualLogic for $1.4 billion, EMC partners and analysts are looking at a change in the competitive equation and wondering how Dell's iSCSI storage system strategy will affect them.

Dell Inc.'s announcement yesterday that it will acquire EqualLogic, an iSCSI storage area network (SAN) provider, for $1.4 billion in cash has EMC value-added resellers (VARs) wondering what the implications of the deal are for them.

They're also puzzled about Dell's iSCSI storage system strategy, now that the famously direct-only company seems to be establishing both a channel and a product line that poses a direct challenge to EMC, despite the two companies' original equipment manufacturer (OEM) agreement to sell products to the midmarket iSCSI storage customer.

Buying Nashua, N.H.-based EqualLogic gives Dell 3,200 new iSCSI storage systems customers in more than 30 countries and 480 active EqualLogic channel partners worldwide. Dell will also take over prime technology including the PS Series SAN products. Dell's iSCSI storage system strategy also includes incorporating EqualLogic's technology into future generations of its PowerVault storage line.

"Dell did more than shoot a cannon across EMC's bow -- they are directly attacking their business, and that means a counterattack by the channel," said Jamie Shepard, vice president of technology solutions at Marlborough, Mass.-based International Computerware Inc., an EMC reseller. "I'm sure EMC will be pouring whatever resources they can into getting partners like myself more focused on these Dell accounts to beat Dell/EqualLogic," Shepard said.

Shepard said Dell's iSCSI storage system strategy is to pump resources into existing Dell and EqualLogic accounts, proposing EqualLogic as a solution packaged with virtualization products.

The acquisition expands Dell's options, but EMC's recent moves to strengthen the channel include a line of midmarket NS20 and NS40 iSCSI-enabled products, which can still match anything that Dell will offer.

"Now that VMware has gone public, EMC is on an even playing field with other vendors like Dell. EMC partners can go after those accounts and position VMware and NS20, iSCSI, Fibre Channel, CIFS and NFS all together," Shepard said.

"It seems to me that Dell now competes with EMC," said John Webster, analyst at Nashua, N.H.-based Illuminata Inc. "EqualLogic competes with EMC's CLARiiON products, Dell now owns EqualLogic. Therefore Dell now competes with EMC."

"We are seeing EqualLogic's channel partners trying to sell in the same accounts where we are pushing EMC products," agreed Mike Strain, director of storage for Overland Park, Kan.-based EMC reseller Alexander Open Systems. "This deal is definitely going to have some effect on the EMC/Dell relationship; I just don't know to what extent," Strain added.

Sean Shea, virtualization specialist at Bedford, N.H.-based Expert Server Group, an EqualLogic reseller, said the acquisition is going to be tricky for two reasons.

"No. 1, EqualLogic resellers will want to make sure that their existing channel is maintained and that these products are not sold directly by Dell," Shea said. "No. 2, the EMC reps are going to be more skeptical about Dell because EqualLogic is now a Dell company, which has in the past been a fierce iSCSI competitor in the midmarket," he continued.

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Dell executives have said recently that they want to build a stronger indirect channel. Mike Arterbury, Dell's director of storage operations product group, said Dell's iSCSI storage system strategy won't include significant changes to EqualLogic's channel program in the near future.

"One purpose of the acquisition is to fully leverage EqualLogic's channel presence. They have a well-established channel presence and we intend to keep that moving forward while integrating products in the future," Arterbury said.

Arterbury said the deal won't affect Dell's relationship with EMC.

"We view this acquisition and integration of EqualLogic's products as complementary to our current PowerVault modular disk offerings and Dell/EMC offerings. The important thing is how this will benefit our customers with a broader portfolio of iSCSI and virtualization offerings that will simplify storage for customers," Arterbury said.

Sources have told that EMC has been holding meetings to discuss how to deal with Dell's latest shot. The official word from the company is that the deal will not substantially affect the EMC/Dell relationship.

"We view Dell's planned acquisition of EqualLogic as an expansion of Dell's PowerVault line, which Dell has always sold along with EMC's storage solutions," said EMC spokesman Rick Lacroix. "The acquisition moves Dell from an OEM model to one where they can offer their own technology for this part of the market," he added.

EqualLogic's products are iSCSI only, so they're more limited than EMC's NS20 and NS40, which support Fibre Channel and IP connectivity in addition to iSCSI. EMC's CLARiiON supports both Fibre Channel and iSCSI.

Dell is the fourth-largest storage vendor, according to IDC's second-quarter data on the storage market. Dell's growth in external storage sales -- more than 24% compared to a year ago -- was the fastest among the top five vendors during the period, IDC's report said.

EqualLogic's archrival, LeftHand Networks, said the agreement is a strong validation of the iSCSI SAN market, and helps LeftHand expand its channels.

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