Is Dell right for the SME anymore?

Dell is a marketing machine with its sights on becoming a storage technology company, not just a storage reseller. For most of its life, Dell simply re-sold storage from other vendors, like EMC. It still does.

In the last few years, however, Dell has been on the march to acquire storage technology companies and integrate them for the benefit of Dell’s bottom line. It paid $960 million for Compellent this year; $1.4 billion for EqualLogic; an unknown amout for data compression and de-duplication company Ocarina Networks; and $12 million in pocket change for Exanet’s scale-out NAS file system.

“Dell is moving from being a company that sells storage to being a storage company,” says Carter George, executive director of storage strategy at Dell, during an interview withNetwork Computing in March.

So what is Dell up to?

That’s anyone’s guess, but it looks like the company will maintain a stove-type approach to storage while “unifying” SAN and NAS systems with a single management interface adapted from Compellent’s already fluid system.

Scale-out NAS versions of Compellent and EqualLogic likely will arrive in the first half of 2011, according to Dell. Its value to the SME, however, is undefined. The Exanet file system was geared for large throughput applications like rich media, not the daily grind of storage.

It is for this reason that HP purchased the more practical Ibrix file system the same year. Compellent currently has a clunky version of scale-out called Live Volume. It’s good marketing spin for a migration tool that automatically accomplishes fork-lift upgrades without taking the system down. Yipee.

It’s not even close to scale-out and perhaps Dell realized this technology won’t stand the test of time. Steve Duplessie, of Enterprise Strategy Group, surmised that Dell had to add a scale-out file system to EqualLogic eventually in order to match the scale-out developments by HP’s LeftHand and Ibrix and IBM’s SONAS and XIV, and those by EMC’s purchase of Isilon.

Dell’s track record as a marketer is above par; as an acquirer and integrator of technologies, not so good. After acquiring EL, Dell’s storage revenue declined by 14% while EMC’s and NetApp revenue increased by 14% and 86% respectively, according to the Motley Fool. Dell’s purchase of Perot Systems for $3.9 billion only grew its service business by 1 percent year over year.

What does all this mean for the SME?

1. Dell is moving upmarket, at the same time other companies are moving down. The Compellent technology won’t likely reach the SME price range, as it is designed to compete with EMC’s enterprise-class products and reduce its dependency on its reseller agreement with that company. Dell may need to alter the line’s business model in order to maintain current margins. That may likely translate into either fewer features with more add-ons or a higher price.

2. EqualLogic’s current offering seems to be relegated to the ash heap on Dell’s product roadmap. They’ll make a scale-out NAS version, but not a scale-out SAN and likely will push a migration path from EL to the Compellent line where many of the more sophisticated features and capabilities reside.

3. It doesn’t appear that there’s any plan to enlighten the EL brand with unified, scale-out features. Instead, the only way for companies to achieve unified storage in the near-term is by purchasing the EL NAS (if released in 2011) and SAN separately, and using management software layer to pull them together.

4. The other concern an SME should have is the lack of controller-less architecture in Dell’s roadmap. The company seems fairly committed to maintaining controller heads as a cornerstone to its entire storage line. Controller heads are costly, demand redundancy and aren’t easy to scale.

SMEs need to be advised that many changes are occurring at Dell and their technology will be changing rapidly in the very near future. Purchasing EqualLogic today may be an unwise investment given the stated functionality that soon will be added to the product line.

Bottom Line: Don’t be fooled by good marketing (unless it is mine).

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Peter Fuller has 16 years of go-to-market experience in several industries ranging from consumer marketing to security hardware and mobile technologies. Peter is also a contributor to three patent-pending technologies. Prior to Scale, he helped launch two industry associations, founded two companies, raised series A capital, and was involved with two successful acquisitions. He has aided in the market launch of nearly a dozen start-ups, backed several of Silicon Valley’s top VC firms and helped ESPN, Sony Entertainment, Quantum Corporation and others with their go-to-market and public relations strategies.