The Dell-VMware Saga Deserves The Oscars

Update: 2023 Broadcom acquires VMware for $61B, and employs dramatic changes.

As of yesterday, VMWare is an independent company. Again. VMware’s spin-off from Dell is now complete.

This has been a twisted plot worthy of the Oscars. It all started when a young and small fish VMWare has been acquired by the big fish EMC in 2004. Then came the whale Dell and acquired EMC in 2015 in the biggest tech takeover of all times. Yes, you heard it right: with all the flashing M&As you hear about in the news these days, Dell-EMC still holds the all-time record. And with that mega-merger, Dell also swallowed little VMware as part of EMC.

But this behemoth started cracking. So much so, that at some point the whale (Dell) even considered selling itself to the fish (VMware) in a reverse merger! And here, in the last episode, Dell spun off VMware into an independent company, though keeping strong partnership ties between them. It’s also important to remember that by now VMware is no longer a small fish, but a $64 billion’s worth whale according to current valuation.

There are financial considerations, debt and liquidity management at play in this story. For me, however, the interesting part is the signal on the IT market and the technology trends.

In principle there are 3 strategies that IT vendors in this domain can seek:

1. Multi-cloud model: If you can’t beat them, join them. Support Amazon, Microsoft, Google public clouds. If done via a good generic platform, it can help avoid vendor lock-in.
2. Hybrid model: mix the public cloud support with support for private cloud and bare-metal to offer public-private-hosted hybrid approach.
3. Private model: concentrate on strictly private cloud. The popular open-source project Kubernetes, originally developed by Google and now under the Cloud Native Computing Foundation, is a leading technology driving for this strategy. This approach is useful for the customers insisting to run things on their own premises.

VMware has grown its business out of virtualization for the data centers, or private cloud in today’s terms. It then naturally expanded into the hybrid model as companies started migrating some of their workloads to the public cloud.

However, to get ahead of the curve VMware has been pushing a multi-cloud strategy, teaming up with AWS and other partners, playing on its virtualization pure-play brand. Being under Dell introduced tension with some of these partners. Now with the Dell label shed, VMware can more freely tango with others.

Being independent, VMware can also go back to the extensive acquisition strategy that helped it grow and keep current, something that was slowed down under Dell.

This is not just the story of Dell and VMware. These transformations in IT impact the entire industry. Just look at the giants of the past, such as IBM that acquired Red Hat, or the changes HP has gone through. We all swim in these changing waters. The Big Tech players are just massive enough to make big waves.