Dell will OEM from Engenio an entry-level ATA-powered disk array fronted with SAS ports, according to people who are familiar with the matter and did not want to be named. Dell already buys storage components from LSI, and this deal will simply extend that long-standing relationship, one source said.

The development may make EMC nervous about the nature of its own relationship with Dell. For the last five years Dell has been selling re-badged EMC mid-range Clariion disk arrays.

The EMC-Dell arrangement has been very successful, providing EMC with a means to expand into the mid-range market. Dell accounted for 14% of EMC’s revenue in the first half of this year, and only this week Dell and EMC announced that they have extended their deal until the end of 2011.

But if Dell has indeed taken on Engenio as a second source, Dell may be attempting to improve its negotiating position with EMC. Engenio already supplies IBM Corp, Sun Microsystems Inc and SGI with a range of popular mid-range disk arrays. For Dell the same boxes would be a very viable alternative to the Clariion.

LSI honestly feels that they could unseat EMC from Dell in the next few years, said one source. Engenio itself was not prepared to make any comment, while Dell would only confirm its satisfaction with its EMC hybrid OEM-reselling deal.

Everything is going extremely well with EMC, and we’re very happy with the momentum, a spokesman said. When Dell announced the extension of its deal with EMC on Tuesday, its CEO Kevin Rollins described the relationship as a rare exception that truly delivers value.

An EMC spokesman said: Dell works with other companies, and EMC works with other companies, and the relationship between EMC and Dell has been very good.

In February, EMC launched a low-end brand called EMC-Insignia, and in the summer it struck an OEM deal with Intel Corp. Both moves could be interpreted as attempting to reduce EMC’s dependence on Dell, although EMC itself said that they were simply efforts to reach new markets and increase sales.

One catch for Engenio is that the box that it is expected to supply to Dell is running late. The product is over six months late from LSI, not a good start with the relationship, one source said.

Engenio last year said that it was developing a SAS-front-ended box that would rival EMC’s entry-level $5,000 Clariion AX-100, which has since been superseded by the AX-150. The LSI box was due to ship in 2005, but has still not emerged. This month Engenio declined to discuss any such project. But the company has already shipped a SAS RAID adaptor, followed by a JBOD SAS enclosure which is being OEM’d by SGI. You can see a steady progression, Engenio said.