Lower hardware prices and packaged solutions from a single vendor are just some of the benefits that may accrue from Dell’s $67 billion purchase of EMC.

Dell shocked the enterprise IT landscape in mid-October with the announcement that it is to acquire storage giant EMC in a staggering $67 billion deal.

The acquisition will be the largest such technology takeover in history, providing Dell with the businesses of the EMC Federation: EMC II, Pivotal, RSA, VCE, Virtustream and the 80% stake in virtualization leader VMware.

But what are the implications for buyers of enterprise storage products?

To answer this question it’s necessary first to understand what drove the deal and why Dell wants to spend such a vast sum of money on a storage competitor.

The main push for a deal came from EMC shareholder and active investor Elliott Management. Elliott made it clear last year that it believed EMC shares to be undervalued. As a result it pushed for EMC to be broken up, or for VMware to be spun off as a separate company, or for the company to be acquired by another technology giant.

In that context it was clear that EMC was “in play” when a standstill agreement between EMC and Elliot came to an end in September. It certainly seemed unlikely at that point that it would remain in its existing form beyond the very short term.

HP had long been rumored to be interested in acquiring EMC, but it’s not a huge surprise that it has turned out to be Dell – a similar company in many respects. Ironically HP has announced that it is to split itself into two parts – Hewlett Packard Enterprise (servers, storage and networking) and HP Inc. (PCs and printers) – while the EMC deal will increase the size and customer base of Dell considerably.

The motivation for Dell to buy EMC comes down to its aspiration to becoming a key player in the enterprise IT space, believes Glenn O’Donnell, a research director at Forrester. “What Dell needs is a large enterprise customer base, and EMC’s is enormous,” he says. Furthermore, “EMC’s technology completes Dell’s product portfolio so it can compete with HP.” (After November 1st, when HP splits, Dell will actually be competing with Hewlett Packard Enterprise in the enterprise IT space.)

Dell’s plan to enlarge itself is not without a huge element of risk. That’s because there is a real question mark about whether the benefits that Dell can get from the EMC acquisition are worth paying $67 billion for. The precedents are not good: a 2009 study by KPMG found that 83% of mergers were unsuccessful in producing any business benefit as regards shareholder value.

So what does all this mean for customers – both current and potential – of the new Dell?

The company sells traditional storage products such as its Compellent and PowerVault SANs, but the EMC acquisition brings a huge range of additional storage technologies – particularly storage software and flash based storage hardware.

That’s good news for enterprise buyers because this complete portfolio – Dell’s servers and networking combined with EMC’s considerable storage range – will be much more appealing, O’Donnell believes. “When you mix products you have to do an element of self-assembly, and that is not what you want. If vendors can package solutions for you, that adds a lot of simplicity, which is attractive,” he says.

But for storage buyers there’s a possibility that the acquisition by Dell, and all the reorganizations and restructuring that will follow, will cause corporate chaos for a year or two. This could result in a slowdown or ceasing of innovation in storage products as staff is moved, product lines changed, and new road maps drawn up.

“There is certainly a worry if you are buying one of the older storage product lines from EMC (or Dell) that they might decide to turn them into cash cows and squeeze more income out of them,” says Stu Miniman, principal research contributor at Wikibon. “But Dell must realize that if it doesn’t give customers new solutions they will go elsewhere,” he adds.

Miniman also believes that falling in to the arms of the privately-owned Dell will actually make it more straightforward for EMC to wean its customers off the legacy array products and on to its more cutting edge offerings.

“The challenge that EMC is going though is a product shift,” he says. “Moving away from VNX and VMAX storage systems and towards XtremeIO (all flash scale-out storage arrays) and Isilon (scale-out NAS storage systems) will be easier as a private company. EMC will be able to be more aggressive with that shift.”

The EMC acquisition could result in cost savings for EMC customers, according to Mark Peters, senior analyst at Enterprise Strategy Group. That’s because while EMC is used to healthy margins on its products, Dell – with its PC selling background – is used to dealing with lower ones.

“You are not going to see Dell doing ‘Buy one, get one free’ deals on VMAX, for example, but there is an opportunity for EMC hardware to be more competitively priced,” he says. Even a slight dent in margins for EMC could still be part of an overall improvement for Dell, so they could find some mid-point that benefits both businesses.”

A great deal has been made about the product overlap between Dell and EMC, but on closer inspection it doesn’t appear to be hat significant. Most of the overlap that does exist appears to be in the storage array space, where both Dell and EMC are active.

The possibility that favored product lines could be discontinued is therefore another worry for customers of both Dell and EMC, but Peters believes these fears are overdone. “There is overlap in the storage array areas, but the big questions are ‘how much?’ and ‘does it matter?’

He adds that if overlaps had to be eliminated then EMC hardware would probably win out over Dell’s, but eliminating overlaps is likely to upset some customers. “Why make then choose when you can just accept some overlap,” Peters asks.

Talking about overlap, there’s an obvious question that needs asking about what will happen to EMC’s VCE subsidiary. The project was originally a joint venture between EMC (with VMware involvement) and Cisco, although EMC now has a controlling stake. But its Vblock data center units rely on Cisco servers and networking hardware as well as EMC storage, and it seems unlikely that Dell will want VCE to include Cisco hardware when it could substitute it with its own Dell hardware.

“Dell will certainly want to push its own servers, but it won’t let VCE die – it’s far too important,” says Miniman. “EMC has a strong culture of looking after its customers, and anyway EMC and Cisco have a multi-year deal for VCE.”

This view is backed up in an open letter to VCE customers from EMC and Dell. In it, David Goulden and Chuck Robbins, CEOs of EMC II and Cisco respectively, say:

“VCE will be a very important part of the new combined company and EMC and Cisco are committed to working together to ensure that we continue to deliver the industry’s best Converged Infrastructure customer experience.

Vblock will remain exclusively based on Cisco UCS servers, Nexus networking and ACI technology. EMC remains committed to utilizing Cisco networking and the ACI architecture throughout the VCE offering portfolio.”

That’s all well and good, but it’s impossible not to imagine that in the longer term Cisco’s contribution will be phased out in favor of (probably lower cost) Dell hardware, and eventually Cisco’s involvement will disappear.

One final area for concern, this time for Dell customers, is the future of Dell’s partnership with Microsoft for virtualization solutions using Microsoft’ Hyper-V and System Center products. It’s a concern because with Dell owning (most of) VMware, it may no longer want to promote a rival server virtualization platform like Hyper-V, and Microsoft may not want to promote VMware thought a partnership with EMC.

But ESG’s Peters believes that the EMC acquisition is unlikely to herald the end of the Dell-Microsoft partnership. That’s because many enterprises use both Hyper-V and VMware for virtualization, so it would be unwise for either Dell or Microsoft to start playing hardball with each other.

It’s too early to say for sure what will happen when the deal is finalized and the dust settles, and it’s hard to predict whether it will turn out to be a wise investment on Dell’s part or not.

But if Dell can handle the post-acquisition management changes with a minimum of disruption, then storage buyers are likely to be the real winners in this whole affair.