Dell is Establishing itself as an Independent Storage System Contender

Implications: ·         Dell announced that it will acquire storage startup EqualLogic for $1.4 billion dollars. ·         EqualLogic makes scalable iSCSI storage for IP SAN storage networks ·         The purchase of EqualLogic by Dell points out the growing importance of iSCSI storage in today’s market ·         Dell’s acquisition of EqualLogic may have implications for the long term relationship of Dell and EMC

Analysis:  Dell announced that it is acquiring EqualLogic for $1.4 billion.  This is a large sum to pay and recognizes the growth potential for iSCSI storage systems.  iSCSI storage networking uses well known Ethernet networking to create storage area networks (SANs) for sharing stored content between host devices attached to that network. 

Traditionally SANS have been constructed with the more expensive Fibre Channel networking technology.  Although there are performance sacrifices in using iSCSI vs. Fibre Channel these have been reduced in the last few years by clever caching and overhead processing technologies.  The development of effective iSCSI storage networking combined with the use of lower cost ATA-based storage systems creates a very attractive storage networking opportunity, especially for static content.  

Static content (that is data that is mostly read rather than written) is growing in importance as network storage systems are used for backup applications, storage retention compliance and as repositories for commercial content.  These applications are greatly assisted by iSCSI storage networking and ATA-storage arrays.

Higher performance storage arrays and fibre channel networking are still widely used in high transaction and write environments such as on-line trading and sales as well as very high resolution professional media editing.  In fact the growth of high performance storage depends upon the existence of a lower cost, reasonable performance storage hierarchy that can service the high performance systems with content when it is needed.  

EqualLogic increases the options that Dell can offer its storage customers.   Since EqualLogic sells into markets served by channel partners rather than direct sales the acquisition could assist Dell in becoming more comfortable in these indirect markets as Dell’s direct sales cool.  Dell has also announced alliances with VMware and XenSource to allow virtualization technology to be incorporated into Dell hardware. 

Combined with iSCSI SAN these moves put Dell into contention to provide solutions to many companies that are looking to simplify their IT operations and provide more efficient uses of computer and storage hardware as well as reduce to costs of managing that hardware.  This is a wise move on Dell’s part.   Dell is also a major reseller of EMC storage products, including EMC iSCSI products. 

The purchase of EqualLogic by Dell will certainly strain the relationship with EMC and lead to direct competition between EMC resellers and Dell selling EqualLogic solutions.  Could it be that Dell is establishing it’s own technology base in storage networking?  If so then it will be a very interesting period in the next few years as Dell starts to compete directly with EMC and other former technology partners.