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Dell's (NASDAQ: DELL) aggressive move into the storage market this year has had some industry observers wondering just how much its long-running partnership with EMC (NYSE: EMC) would suffer as a result.
The two moved today to shore up those doubts by announcing an extension of their seven-year-old partnership through 2013 and expanding the agreement beyond Clariion midrange storage systems for the first time.
Dell's emergence has hurt EMC's sales EMC reported a 12 percent sequential decline in Dell's revenue contribution in the third quarter but the two companies say the partnership remains strategically important to both.
"It was never intended that EqualLogic would supplant our relationship with EMC," said Darren Thomas, Dell's vice president and general manager for Enterprise Storage.
Rich Napolitano, senior vice president of EMC's Storage Division, said the purpose of the extension was to "make it clear to our customers this is a lasting relationship."
Even with Dell's big push into the storage market, the company still provides EMC with just over 10 percent of its total revenues and nearly a third of midrange Clariion sales.
The companies had already extended their agreement through 2011, so the new deal appears at least in part to be aimed at putting to rest any doubts about the relationship.
"There is no question that there is tension between the two companies, as Dell has owned EqualLogic for about a year now and competes against EMC for channel partners in the mid-market," said Enterprise Strategy Group senior analyst Brian Babineau.
"However, both companies realize that the partnership is extremely valuable to them in terms of revenue opportunities which are hard to come by right now but more importantly, customers are getting great benefits from the relationship," he added. "The bottom line is Dell still needs a Fibre Channel-based storage offering as well as a multi-protocol storage system and EMC needs a server partner. Right now, it appears like it is a marriage of convenience, but the two companies are making it work for themselves and for customers, so why not keep it going?"
The deal also gives Dell access to EMC's fast-growing Celerra unified storage line, which has been growing at a 50 percent clip in the last year. Dell will rebrand and support EMC's new Celerra NX4, which starts at $20,300. The new offering will also give Dell a much-needed NAS presence.
Asked if EMC could take its successful unified storage systems even further down market, Napolitano said the company is "not prepared to address that at this time," but added that EMC "will go where the market opportunity is."
Napolitano and Thomas noted that the Dell-EMC relationship extends well beyond the 60,000 storage systems they've sold. Dell and EMC also have agreements for VMware (NYSE: VMW) virtualization technology, RSA security and even Iomega backup offerings. They're also working together on solid state storage (SSD), data warehousing and de-duplication (see Dell's Dedupe Plans Include EMC, Quantum).
"It's arguably the most successful partnership in the tech industry," said Napolitano.