Dell’s VMware Spin-off Will ‘Unleash’ Their Full Potential: Partners

Dell Technologies’ plan to spin off its 81-percent stake in VMware is an exciting move for the channel, according to several solution providers.

The planned spin-off of Dell Technologies’ majority stake in VMware is expected to help expand the two companies’ industry partnerships and open up new opportunities for the channel in the process, solution provider executives told CRN.

On Wednesday, data center technologies giant Dell unveiled its plan to spin off its 81-percent stake in VMware stock, a move that will leave Dell and VMware as standalone companies.

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The spin-off is an exciting move both for Dell and for virtualization leader VMware, said Paul Clifford, president of Davenport Group, a St. Paul, Minn.-based solution provider and longtime partner of both vendors.

“It’s finally happened,” Clifford told CRN. “People have been talking about this for years. The two are completely different companies. At the core, they are now trying to unleash VMware to be VMware and Dell Technologies to be Dell Technologies, and at the same time free up cash.”

Dell has held a majority share in VMware since its 2016 acquisition of EMC, which itself had owned VMware since 2004. VMware is incredibly valuable, and was the jewel of Dell’s $67 billion acquisition of EMC, Clifford said.

However, Dell is a manufacturer and provider of technology solutions, while VMware creates operational environments, he said.

“VMware is all software-based,” Clifford said. “A software company is different from an infrastructure company. On the street, they are completely different. Dell Technologies as a company is selling Dell Technologies issues and solutions. But VMware was supposed to be agnostic. VMware works across all industry players. It doesn’t matter if you are Dell or HPE [Hewlett Packard Enterprise].”

VMware’s success has always been around its independence, Clifford said.

“This continues to be VMware’s strength,” he said. “I’m sure both companies have learned a lot from each other. Both are powerful entities. I’m sure this is more a statement for both, and not just a move to generate cash.”

Notably, the spin-off will give VMware the opportunity to pursue new vendor partnerships, said Ed Palmer, chief operating officer at Winslow Technology Group, a Boston-based solution provider and longtime Dell solution provider.

“I could see VMware expanding its relationships with other vendors, which would help customers,” Palmer said.

Ultimately, the Dell-VMware spin-off needed to happen, said Matt Musial, solutions architect at Sidepath, an Irvine, Calif.-based solution provider and longtime Dell channel partner.

“If you look at VMware, pretty much everybody is running their software and architecture,” Musial told CRN. “VMware works with many companies. But if you are someone like HPE, you don’t want to feed your competitor by working too closely with VMware. This spin-off makes VMware independent of Dell.”

That autonomy works both ways, Musial said.

“Dell had a great partnership with [VMware competitor] Nutanix for hyper-converged infrastructure before it acquired VMware,” he said. “There’s lots of places Dell can go without worrying about its VMware relationship. There will be a lot of relationships between Dell and VMware that will continue. But Dell will be able to make its own partnerships with other companies as well.”

With the spin-off, both Dell and VMware will be returning to their vendor-agnostic roots.

Following the acquisition of VMware by EMC, CRN spoke with Diane Greene—then VMware’s president, CEO, and co-founder—who said that she had steered VMware to be vendor agnostic as the only way for it to continue its meteoric growth. “We realized that, if we suddenly had EMC selling our software, that’s going to be destructive to our partner channel,” Greene said at the time.

Now, Dell’s spin-off of VMware makes sense in part because VMware is a software company operating within an infrastructure company, said Michael Tanenhaus, CEO at Mavenspire, an Annapolis, Md.-based solution provider and longtime Dell channel partner.

“Software is eating the world,” he said. “Dell has historically struggled with software. For a company as big as Dell, it’s hard to focus on everything. At Dell, software takes a back seat to integration.”

Culturally, Dell and VMware remained different even after the more than four years since the two came together, Tanenhaus said.

“VMware already operates independently,” he said. “At VMware, people say, ‘We are VMware,’ while Dell people say they are Dell. Dell people still talk about integration with VMware. But they really have been independent for some time.”

In terms of the channel implications, Tanenhaus said he does not expect a lot of change because the two have remained essentially independent.

“Today, there are two channel programs, one for Dell and one for VMware,” he said. “We as partners talk to two channel people, with someone else inside working with us to integrate the two. Dell’s VMware spin-off probably won’t change anything on a day-to-day basis.”

Still, Palmer noted that recent years have seen the Dell and VMware channel programs becoming more closely aligned.

“I expect to see them continue to offer similar programs after the spin-off, with MDF (market development funds), certifications, training, and so on to continue,” he said. “We’ve been focused on our VMware services business, and have seen a big increase in the last 12 months across VDI (virtual desktop infrastructure), connectivity to the cloud, VxRail, and VSAN Ready Nodes. And I expect them to continue growing into the future.”

Sidepath has found both Dell and VMware to be good partners with each other and with the channel, Musial said.

“The ‘Better Together’ mantra has been strong,” he said. “But with the cloud today, they’ll have to solve problems in new ways. The Dell VMware spin-off will make both more agile.”

Clifford said he expects the spin-off will work out for the best.

“Michael Dell is so much smarter than I am,” he said. “I’ll trust him. If you look at what Michael Dell has done, I’m not sure there’s anyone out there who could have done better than he did.”

Furthermore, Clifford said, Michael Dell is in a position where, because he’s Michael Dell, he can look at all the important impacts of what he is doing.

“He’s looking at employees, customers, partners, investors, everybody,” he said. “He is putting together a deal that will benefit everyone. It’s not about the money. What would he do with more money? Buy another island? He’s in a position to do a lot of good in the world. And Dell and VMware are his vehicles to do so.”

Dell’s VMware spin-off has been expected at least since reports surfaced last June that such a move was under consideration.

From a financial perspective, Dell’s VMware spin-off makes perfect sense, Tanenhaus said.

“Every time Dell suggests a spin-off, people look at Dell and see it doing a decent job, and then the company’s share prices move up,” Tanenhaus told CRN. “Sometimes I think this pops up because it works to get people to look at Dell’s portfolio. So from a financial point of view, it’s good press.”