I'll be presenting at two private events and one public webinar this week!

I’ve been quite busy lately recording webinars, writing articles, and setting up speaking events. This week, I’m in Boston and New York for private speaking engagements. I’ll also be recording a webinar with an exciting new storage/virtualization company, Nutanix, and I urge you to tune in to that one!

Nutanix is Truly Innovative

Watch Nutanix present at Tech Field Day 8

It’s rare to come across a truly innovative idea in enterprise IT, but that’s exactly what Nutanix is. They’ve taken the scale-out Google Filesystem and ran with it, applying it to the core issues of sever and desktop virtualization.

My webinar with Nutanix is little bit different from the typical “give them an excuse to go through their slide deck” event. We’ve organized it as a discussion between me, Tiffany To of Nutanix, and a customer of the company. Tiffany will have a set of slides as backup, but we won’t walk through them one by one.

I’m glad to be able to shake things up a little bit, since the old webinar formula is getting pretty stale. We were able to do this thanks to the third party involved in this production: Truth in IT. They have put together an excellent webinar platform and are eager to try new ideas.

If you would like to view the recording, it is now available. You can register to view this webinar at the TruthinIT website.

Speaking Engagements in the Northeast

I’m also speaking on a couple of interesting topics this week. Today, I’m giving an overview of enterprise storage industry trends to an investment banking firm. I often get this sort of request, and am happy to develop a customized presentation. In this case, the event was initiated by an attendee at my Storage for Virtual Environments seminar.

On Thursday, I’ll be speaking at a private event in New York City sponsored by Dell and Symantec. This time, the topic is the divergent paths of performance and capacity in enterprise storage. This is another topic I’ve spoken and written about in the past, but developed some new content just for this CIO audience. I will probably be delivering similar evening speeches and events next year.

Sadly, my Storage for Virtual Environments seminar in San Diego next week has just been canceled by the organizer. I was really looking forward to this, my final seminar of the year. But I’ll be in San Diego regardless, and look forward to meeting up with some of my friends who are planning to attend. If you are around next week, drop me a line.

Oracle ZFS Storage Appliance

I’ve also recorded a webinar with Oracle last week. We talk about my favorite Oracle product: The Sun ZFS Storage Appliance. This hasn’t been posted yet, but I’ll link to it here when it appears!

© sfoskett for Stephen Foskett, Pack Rat, 2011. | Two Online Events You Should Attend (And Two More That You Can’t)
This post was categorized as Enterprise storage, Everything, Personal, Virtual Storage. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

Now this is a respectable support matrix! (Saint Vitus' Cathedral, Prague)

As a computer hobbyist and tinker, I love making things work, but as an IT professional I just can’t countenance this kind of hacking. The sad truth is, regardless of whether or not something works, product support is usually more important. That’s why I’m singing the support matrix blues: I don’t care if you say it works, just tell me if it’s supported.

“Supported” and “Functional” Are Not Synonyms

I hear it all the time from IT product vendors: our product works great and we support it with Oracle, VMware, Microsoft Windows, and every other application. But what about the opposite? Does VMware support running in this configuration? Will it run in a virtual machine? And can I call all the involved vendors when things fail, or will they just point fingers?

The truth is, interoperability in modern IT environments is tricky enough without the added pressure of production, downtime, and hostile users. Although many of us are clever hackers by nature, we have to set this aside and be as conservative as possible when designing production systems. We just can’t afford to use components that aren’t supported.

The time has come to draw a line for vendors: Stop encouraging buyers to use configurations that aren’t supported by everyone involved, and stop confusing the terms, “supported” and “functional” when discussing your products. If it’s not on the hardware compatibility list (HCL), if not supported regardless of what you say.

The HCL Bill of Rights

Buyers deserve better than empty promises:

• A hardware compatibility list (HCL) or support matrix is a one-way list of approved functionality. In other words, it’s a way for Vendor A to affirm that Vendor B’s product works with their own. Presence on the list is usually initiated by Vendor B, however, who often bears the financial and functional burden of securing a spot.
• A good support matrix should list revisions as well as products, preferably down to point releases of drivers, firmware, and hardware. Often, special versions are produced just to attain certification with some popular vendor, and it’s up to the buyer to ensure that he is using these magical revisions.
• Hardware compatibility lists should be open to the public for browsing, querying, and deep investigation. Take a look at the VMware ESX HCL for a good example. Updated continually, it can be queried interactively or downloaded on demand as a PDF file. Nice!

Real-World Objections

Vendor support matrices are fallible, of course. Just because the list says it works doesn’t mean it does, and just because it’s not on the list doesn’t mean it doesn’t. But presence on the support matrix lets the end-user (also known as “the buyer”, “the customer”, and “the whole reason for the existence of product vendors in the first place”) get everyone on the phone when something breaks.

Why isn’t everything on the HCL? There are lots of good reasons:

• Some things just don’t work. Not every implementation of iSCSI, NFS, or SMB is equal, and some just don’t interoperate. Obviously, this is a very good reason for product to be absent from the HCL, and one should always assume that things don’t work rather than assuming that they do.
• Some things work reasonably well but fall apart in production or under load. These may or may not appear on the HCL, the listing means that buyers have some recourse when things fail in production. These can be difficult to locate in the lab or proof of concept testing, though both testing and listing are valid considerations when making a purchase.
• Some vendors lack the resources or motivation to get their products listed on all of the various compatibility lists and support matrices. This is fine: if you don’t want to go through the motion of getting on the supported list, I don’t have to buy your product for that application!
• New products often take a while to get on the supported list, and vendors commonly advise customers to buy and implement them anyway. “It will be included next month,” they will claim, “go ahead and buy it now.” This is absolutely irresponsible behavior, and no customer should buy a brand-new product that’s not listed on the empty promise of their sales rep.

“But it’s just a paper certification,” I heard the vendors cry. “It doesn’t matter if things work, all you have to do is fill in the paperwork and pay the money.” This may or may not be true, but it is absolutely an irrelevant argument. Do you really think that VMware, Microsoft, Oracle, or anyone else will decide to support your broken application just because you derive their paper certification requirements?

Stephen’s Stance

As an IT professional, I subscribe to a simple rule: I won’t recommend a solution that’s not listed in the support matrix or HCL. “I don’t care if it works, only that it supported,” is really a cynical overstatement of this position. Of course I care whether or not a solution works! But merely claiming that something works is not sufficient for me to recommend it. I need to be able to demonstrate that it’s a supported configuration. Show me the listing, and I’ll start recommending it.

© sfoskett for Stephen Foskett, Pack Rat, 2011. | I Don’t Care If You Claim It Works (The Support Matrix Blues)
This post was categorized as Enterprise storage, Terabyte home, Virtual Storage. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

Everyone has a target on their backs, but they all aim in different directions

One of the amusing aspects of being self-employed is watching all the giants battle it out. Every company is gunning for someone, but the amazing thing is that they rarely point their sights directly at each other: NetApp is gunning for EMC who’s more focused on HP who wants to knock off Oracle who’s fixated on IBM. It sounds very “high school romance” but this is deadly-serious business.

The Enterprise IT Ladder: Dell, HP, Oracle, and IBM

Dell -> HP

No question about it: Dell wants to beat HP. It was bad enough back when PCs were king, with Dell constantly undercutting HP on price and supply chain efficiency. Dell went to retail, elbowing HP aside on the shelves at Staples, and even introduced a line of printers. But the enterprise data center has taken things to a whole new level. Dell’s plays in blade servers and storage are drawn from the same playbook, only there’s more in-house IP and R&D involved this time. Dell arguably got the iSCSI prize in EqualLogic but couldn’t seal the deal for 3PAR, settling on Compellent instead. They’re working hard in the professional services market; Could networking be next?

HP -> Oracle

For the longest time, HP wanted to be IBM. Then Oracle stomped on their servers with Sun and started flaunting their software-heavy profit margins. Appointing Leo Apothiker as CEO sends an unambiguous signal: HP’s gunning for Oracle. The printers, PC’s, servers, storage and networking gear isn’t going anywhere (HP’s got fights picked in each area), but software and services are the only way to make shares of HPQ perk up. Watch for some startling acquisitions and more bizarre rear-guard antics from Ellison and company.

Oracle -> IBM

Although Oracle is clearly enjoying poking sharp sticks in HP’s direction, they’re focused forward. Larry Ellison has seen the future, and it looks an awful lot like IBM: Massive services revenue, a “we do it all” executive sales pitch, and “hate to love us” handcuffs on the C-level executives at the largest global corporations. It’s worked so far: ORCL shares have risen steadily since the end of the last recession.

IBM -> IBM

IBM has seemed aimless for a decade. Armonk has won every enterprise IT war it’s fought, leaving it nowhere to turn. Spinning out the printer and PC businesses sent a signal that IBM was a different kind of company, and Wall Street is singing the chorus. In many ways, the middle-aged IBM of the 1980′s is the enemy of the new, with the company dreaming of a return to the “Mad Men” Big Blue of yore. Although this is much exactly what HP and Oracle are aiming for as well, IBM is the aloof valedictorian who just needs to keep his grades up until graduation.

Tag Team: EMC and Cisco -> HP

Cisco is like a mini IBM: All of their historical rivals are dead and buried, forcing them to look outside their traditional market for growth. Cisco seems loathe to climb the HP/Oracle/IBM ladder, seeking instead to take enough of their market to maintain solid revenue growth and profitability. Their blade servers smacked HP, which responded with a challenge in the networking space. Realizing they needed help, Cisco looked around for an “enemy of my enemy” to mount a serious IT infrastructure challenge.

What happens when you combine the market leaders in enterprise IT verticals like SAN storage, encryption and authentication, server virtualization, backup, and records management? You get EMC Corporation, the biggest company most “regular people” have never heard of. Something about “information.” Wall Street seems to have a hard time making sense of this company, too.

EMC seems overly concerned about smaller competitors (NetApp, Symantec, cloud providers), but the combination of EMC and Cisco is formidable indeed. The two and their joint venture, known as VCE, have the sales muscle to go head-to-head with Dell, HP, and IBM in the enterprise data center, and their control of key components make them a hard team to ignore.

The Wolves: NetApp and Juniper

NetApp -> EMC

Back in the 1980′s, Honda decimated the American carmakers with just a few models; They sold millions of Accords and Civics while GM watch whole brands disappear. That’s NetApp in the enterprise storage space. They pull in top-tier revenue quarter after quarter with essentially a single product line, taking on dozens of storage devices from HP, HDS, IBM, and EMC. Especially EMC. Talk to NetApp insiders and you’ll hear those three letters frequently, with precious little attention paid to anyone else. Data Domain might have made them a broader play, but NTAP shares have risen steadily since losing that takeover battle with EMC. Now NetApp is stripped down and running hard to close the revenue gap, too.

Juniper -> Cisco

Cisco is vulnerable in their core networking markets, and Juniper is ready to take them on. Since their $4 Billion acquisition of NetScreen in 2004, Juniper has been cherry-picking up-and-coming technologies in every market Cisco dominates, from the WAN to wireless. Though JNPR shares have taken their lumps, this is every bit a “Dell” to Cisco’s “HP”. The various networking sub-markets include many agile competitors, but Juniper is like NetApp: Insiders have a single-minded focus on the market leader.

Stephen’s Stance

The enterprise IT game is getting serious. Emerging from their historical strongholds, Dell, HP, and Oracle are each undermining the other, and everyone is chipping away at IBM. They each realize that they must focus upward for real growth rather than fighting a rear-guard against smaller and newer competitors. The challenge for HP and Oracle will be to expand rapidly enough to keep Wall Street from noticing the erosion from below.

Meanwhile, Cisco and EMC have joined forces out of necessity to grown both revenue and share price, while their own bases are chipped away by Juniper and NetApp. The upstarts can flourish within the verticals of networking and storage, but the VCE team is seems tenuous and uncertain. The joint venture can challenge the full-line players on a customer-by-customer basis, but history shows that only an integrated vendor can rock the enterprise IT world.

Although the information economy is growing, it will not be enough for everyone to survive. These competitors are too cut-throat to allow a smaller challenger to live, and each faces a real threat himself. The largest have a strong base to draw on, while the wolves will always find something to eat. It is those in the middle that face the most serious threat.

© sfoskett for Stephen Foskett, Pack Rat, 2010. | Every Company Is Gunning For Someone Else
This post was categorized as Computer History, Enterprise storage, Everything, Gestalt IT, Virtual Storage. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

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© sfoskett for Stephen Foskett, Pack Rat, 2010. | Back From the Pile: Interesting Links, November 19, 2010
This post was categorized as Enterprise storage, Everything, Virtual Storage. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

Larry Ellison is on a tear at Oracle. Who will he buy next?

Oracle has its sights set very high. Although the company is best-known for its namesake database software, a steady string of acquisitions has transformed the company (and its colorful leader, Larry Ellison) into an industry powerhouse. Much speculation revolves around Oracle’s next move, and a surprising meme is developing, suggesting that the company is looking at making another massive purchase. Could HP or NetApp follow Sun into the hands of Oracle?

Basic Facts

Companies typically combine with each other in one of three ways:

1. A straight purchase, using cash to buy up all of the shares in a public or private company. The acquiring company is in command here, offering a price per share fixed well above the current market rate. Purchases can be friendly or hostile, and bidding wars can break out if a rival wants to challenge the buyer (or push the price up). Companies sometimes lack enough cash on hand and will finance a portion of the purchase from an investment bank or by using bonds.
2. A stock swap sees the buyer trade their own shares (or those of a new company to be created) for those of the purchased company. This is advantageous if the buyer lacks enough cash to make the deal happen and can even see odd small-for-large acquisitions. But stock-based acquisitions are risky, since the value for stockholders varies continually right up until the deal closes and a slide in price can tank the deal entirely.
3. A combination cash and stock deal, where shareholders get both cash and shares in the new company in exchange for their shares. This is less risky for shareholders than a stock swap, but less attractive than a straight purchase, since the final price can vary based on the value of the stock included in the deal.

Like any company, Oracle can use any of these mechanisms to acquire other companies. They paid about $7.4 billion to purchase Sun and paid $10.3 billion for PeopleSoft, among their many acquisitions. Since both were all-cash deals, one can presume that Oracle prefers this over a stock swap or merger.

Oracle currently has $23.6 billion in cash and short-term investments and quarterly gross profits of around $5 billion. ORCL stock is currently priced at $27.42 per share for a market capitalization of $137.79 billion. Oracle could easily spend up to $20 billion on an acquisition, and could potentially engineer a much-larger deal by borrowing tens of billions more or using their stock.

The purchase of Sun gave Oracle all the server hardware expertise it needs, but it is lacking in storage and networking, two of the highest-margin areas of datacenter hardware. It would not be at all surprising to see Oracle invest in these areas.

You would probably also like to read my other articles in this subject area:

• The Enterprise IT Acquisition Game
• Meet the Enterprise IT Superpowers
• Everyone Loves 3Par – Here’s Why!

The Case for HP

Larry Ellison has been clear that his target is to unseat IBM as the preeminent enterprise IT superpower. Although HP is on the rise, Oracle as a traditional software vendor seems more fixated on the full-line services/software/hardware market at IBM. Oracle scooped up ousted HP CEO Mark Hurd last month, and the two companies appear to have buried the hatchet over the resulting spat extremely quickly. They appeared friendly and supportive at Oracle Open World as well.

HP’s annual revenue of $110-120 billion dwarfs Oracle’s $26 billion number, but their annual gross profits ($26 billion and $21 billion for HP and Oracle, respectively) are comparable. This reflects the differing profit margin of hardware and software. For comparison, IBM’s gross annual revenue is just under $100 billion but their $43 billion annual revenue must have Ellison drooling with envy. Assuming no overlap, integration difficulties, or customer defections, a combined Oracle/HP would instantly be dominant in terms of both revenue and profit. But that’s not a likely outcome, at least initially.

An Oracle and HP combination would certainly create an earthquake in the IT market, but the massive overlap between the two raises difficult questions about the role of Sun’s hardware assets. HP competes or leads just about everywhere Oracle/Sun sells hardware. On the other hand, Oracle is making the most of Sun’s software assets (Java, Solaris, virtualization and cloud technology, and even ZFS). Perhaps the deal makes sense even if Sun’s servers and SPARC technology is jettisoned.

But could Oracle pull off a deal like this? HP’s market cap is over $90 billion and Oracle could never raise the $100 billion in cash they would need for a straight acquisition. The two companies would have to merge, and Ellison’s control of the combined company would thus be greatly diluted. He currently holds 1.2 billion ORCL shares, or just over 27% of the company. An HP deal would put Ellison at the helm of the biggest ship at sea, but he would have to share command with many others.

The Case for NetApp

Although Oracle just introduced some impressive Sun ZFS-based storage devices, the company isn’t even a blip on the enterprise storage radar. The entire external disk storage market is only worth $20 billion according to IDC, but is attractive for margins higher than other hardware areas as well as its strategic value as a part of the enterprise IT stack. Therefore, a storage acquisition makes a great deal of sense for Oracle.

Larry Ellison is a major investor in storage startup Pillar Data, and this little company has some impressive technology, but an acquisition there is not the slam dunk many claim. Building Pillar into a force into the enterprise storage market will take effort and time, and that acquisition would be imperceptible on either side of Oracle’s balance sheet.

“Moving the needle” for Oracle would take a much-larger purchase. NetApp is the perennial top-five enterprise storage company, bringing in nearly $4 billion in revenue and $2.5 billion in gross profit annually. They have a wide range of SAN, NAS, and backup technology as well as software, services, and solid sales presence. An Oracle/NetApp combination would have little Sun overlap and would place the company in a duel with IBM for the number-two spot in external storage sales.

NetApp’s current market cap of $17 billion makes the acquisition financially practical for Oracle as well. They could offer a 20% premium right off the bat and could prevail in the resulting bidding war with IBM without resorting to trading shares for the company. They would even have enough left over to consider buying Symantec or Juniper Networks in another year!

Stephen’s Stance

An Oracle acquisition of NetApp makes so much sense, I’m surprised it hasn’t happened already. Combine very little product overlap, a “doable” price, and a poke-in-the-eye for IBM and you have a winner for Larry Ellison. No other available company offers the solid enterprise storage portfolio and sales of NetApp, and few other companies could make the purchase. The recent NetApp/Oracle ZFS settlement makes it look like something could already be in the works. Unless Oracle really is content to stand pat with Sun’s ZFS storage systems, I expect a NetApp deal within a year.

A combination of Oracle and HP is much harder to swallow. Although it would deliver an un-matched smack to the head for IBM, I just can’t see how it comes together. Larry Ellison isn’t about to give up control of his company, and Oracle is nowhere near having the cash to make it happen. I call HP/Oracle a pipe dream.

Image credit: Oracle_Photos_Screenshots

© sfoskett for Stephen Foskett, Pack Rat, 2010. | Could Oracle’s Next Acquisition Be HP or NetApp?
This post was categorized as Enterprise storage, Gestalt IT, Virtual Storage. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

The players are lining up for the biggest acquisition game enterprise IT has witnessed in a while

Today is the (a?) day of reckoning in the 3Par saga, with Dell widely expected to make a counter-offer higher than HP’s bid. But this mega deal, like the Data Domain war before it, sends a strong signal to the enterprise IT world: It’s open season on data storage companies! But the rising superpowers are also likely looking at networking as an area of expansion. The game is afoot!

The Competitors

The simple fact is, enterprise IT prefers to buy from large, established names like HP and IBM rather than smaller and less-familiar companies with names like Ocarina, EqualLogic, or even 3Par. The acceleration of sales by enterprise providers is what makes these big acquisitions so successful and why others involving less-powerful players often fail to deliver the same results.

Full-line “superpowers” like IBM, HP and now Dell and the new Oracle can influence purchasing decisions across a broad spectrum of hardware and software. Many large organizations are tightly coupled to one of these vendors, and will give their products stronger consideration even when they are new or unfamiliar. HP is already flexing their muscle selling their broadened network lineup, and Dell found that it could do this in data storage.

Software vendors like Microsoft, Citrix, and Oracle adamantly maintained a neutral stance toward hardware, but Ellison and company seem serious about changing this. Oracle’s success in selling Sun hardware will likely dictate further software acquisitions for Dell and HP, though IBM already has strength there. Then there is Intel, the wild card who just got wilder with their acquisition of McAfee.

Companies with narrower focus like Cisco, EMC, NetApp, Juniper, and Brocade have the same power within their sphere of influence but cannot pull in wholly-distinct products. Cisco is in the midst of this fight with their technically-excellent UCS blade servers: Although they were certainly a strategic CIO-level vendor in the largest organizations, “blades from a networking company” isn’t the as easy a decision as “networking gear from a full-line company.”

The Game

Then one must consider the market in contention. The enterprise IT space is not expanding, especially in the United States. This is very close to a zero-sum game, with Oracle’s or Dell’s wins being HP’s or IBM’s losses and vice-versa. There is massive money in play, and flexibility enough for it to swing between the competitors, but growth is not unlimited.

Enterprise storage and data center and campus networking are two areas where smaller companies retain enviably-large slices of the pie, explaining the interest in these spaces among the superpowers. These verticals still have room for sales to grow without displacing a fierce full-line foe, and the superpowers have lately been weak here. Storage and networking are enticing opportunities, but each slice is similarly dominated by “vertical superpowers” and partners EMC and Cisco.

So this is the game: Four full-line enterprise superpowers battling each other for datacenter dominance and coveting the extra profits of a few verticals. HP clearly believes they can chip away at EMC and Cisco in storage and networking; Dell and IBM have so far focused mainly on storage; and Oracle hasn’t made a move in either direction, instead challenging the other three in the core server and software space.

Pawns or Knights?

So where does this leave the smaller players? Are they merely pawns in the game, waiting to be sacrificed, or are they knights who can wield power across the field? The largest (Cisco and EMC especially) appear to have ambitions of their own as well as the financial and technical strength to shake up the game. They are unlikely to be acquired by the superpowers. Brocade, too, has broad strength in storage and networking but maintains relationships across the board that make an acquisition difficult.

Strong vertical players like Juniper, NetApp, Riverbed, and Compellent are ripe for acquisition, as were Foundry, 3Com, Data Domain, and 3Par. IBM, Dell, and Oracle are all likely buyers of the networking players, though HP may consider filling in where 3Com was found lacking. All four will likely take a strong look at the remaining storage players as well, with the loser in the battle for 3Par likely to be hungry indeed.

One should also consider the potential impact of smaller acquisitions. Although they would not immediately “move the needle” for a massive superpower, there are many excellent technology companies that could be bought low and pushed strongly. The enterprise-class technology at Sepaton, Pillar Data, Xiotech, BlueArc, Extreme Networks, Force10, Blue Coat, Isilon, CommVault, FalconStor, and many others should not be overlooked. If a superpower can drive a larger acquisition to succeed, imagine what they can do with strong but inexpensive technology from one of these!

Stephen’s Stance

This game is nowhere near finished. The 3Par acquisition will not only generate revenue, it will shake up the ranking of data storage array dominance. This is very likely to kick off additional acquisition in the data storage space, spurring either Dell or HP to pick up additional technology and perhaps causing IBM or Oracle to engage as well. With no easy alternatives to 3Par, I expect Compellent, Xiotech, and Pillar to get closer looks, but Sepaton and BlueArc are just as ripe. NetApp may be too expensive at this point, but would be a nice match for Oracle’s strategy.

HP’s acquisition of 3Com could also signal a race to integrate datacenter and campus networking technology into the stack. Many are suggesting a Brocade acquisition, and it would be much cheaper than Juniper, but OEM ties make it a difficult purchase for any of the superpowers. Extreme and Force10 would be excellent and less-expensive alternatives.

We should also keep our eyes outside the superpower space. Intel showed that they can make big moves, and Microsoft might consider a diversification into hardware as well. One should also look to the East, where Huawei could try to enter the Western market with a merger or joint-venture to cast off the China stigma. Although I would love to see a rebel alliance rise (imagine Juniper, NetApp, and Symantec joining forces!) this is not a likely scenario.

Image credit: Chess Board by mosdave

© sfoskett for Stephen Foskett, Pack Rat, 2010. | The Enterprise IT Acquisition Game
This post was categorized as Computer History, Enterprise storage, Everything, Gestalt IT, Virtual Storage. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

Who will power the enterprise? The smart money is betting on a few superpowers taking over.

After years spent focusing on personal technology, businesses are increasingly turning back to the enterprise. There are many reasons for this, but the biggest one is the poor economy. Individuals simply have less free cash to spend on gadgets and software, and the meagre profits are increasingly going into the pockets of a single company: Apple.

The corporate IT market is much more dynamic and competitive, with a few very large “superpower” companies discovering their power to drive purchasing decisions. If a supplier can create an integrated “stack” of hardware and software, they can push product purchases that might otherwise be overlooked or postponed. This is the main reason that enterprise IT acquisitions work so well: Where a small company must fight to sell their product, a large one can hitch it to a much more strategic sale and have it pulled along.

The old IBM model is the prototype, with that company once selling everything from office equipment to datacenter gear as well as the consulting and integration services to make it all work.

HP has spent almost two decades bulking up to become the new IBM, buying their way into open systems laptops, desktops, and servers (Compaq), networking (3Com), services (EDS), and storage (Compaq, LeftHand, Ibrix, and perhaps 3Par). HP has been remarkably proficient at executing on this enterprise plan: In talking to enterprise IT folks, I often hear IBM-esque sentiments regarding the new HP. They tell me they’re willing to give HP the benefit of the doubt when it comes to new technologies and products, buying on basis of the company’s reputation and ability to make everything work. This bodes well for the company’s post-Hurd future, and HP has the most-complete “enterprise stack” in the business.

But HP has a target on its back, pinned there by Dell. The folks from Round Rock believe they can be more efficient (and thus profitable) than HP in the same markets, and have been making moves to fortify their enterprise offerings. Dell was always more of a manufacturing than R&D business, but they have shown a desire to broaden their focus. Intrigued by the high-margin mid-enterprise storage business built from their EqualLogic acquisition and their success selling EMC storage, Dell is moving into the enterprise. They matched HP/EDS by purchasing Perot and have made smaller buys in storage (Ocarina, Exanet) as well as the big move for 3Par.

The next big emerging stack player is Oracle. The acquisition of Sun gave Oracle a strong hardware base to complement their command of enterprise software, and many expect further acquisitions. But Oracle is playing a different game than HP and Dell, focusing on the high-margin enterprise space and ignoring more competitive outlying areas. Many suspect the company might make a play in the network space (Brocade, Juniper, and F5 have been mentioned) but storage is possible as well. CEO Larry Ellison is a major investor in Pillar Data Systems, so many expect a spin-in here. But Oracle has the appetite for something much bigger, even EMC or NetApp.

Then there is Cisco, who have attempted to parlay their data center networking strength into a broader position. But Cisco’s halting moves into storage (Fibre Channel switching and SAN extension) did not displace the market leaders, and their server products (UCS) have not made much of a dent on HP, IBM, and Dell either. A solid partnership with EMC has delayed further forays into the enterprise storage market, and Cisco seems puzzlingly interested in low-margin access businesses (Linksys, Flip) and their Cius tablet.

There are other players in the enterprise space as well. EMC has diversified under CEO Joe Tucci, taking a dominant position in server virtualization (VMware) and making a strong enterprise security acquisition (RSA). But the many faces of enterprise storage remains EMC’s strength, and they seem content to partner with Cisco for a stack sale. Hitachi, NEC, and Fujitsu also offer varying enterprise hardware and software stacks, but their comparatively small sales presence in the US market limits their ability to execute. In the final analysis, only IBM, HP, Dell, and perhaps Oracle can claim to be enterprise IT superpowers at this point.

Image credit: Steam Engine by Stuck in Customs

© sfoskett for Stephen Foskett, Pack Rat, 2010. | Meet the Enterprise IT Superpowers
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But there’s an amazing short-term win to be had for whoever acquires 3Par. According to IDC, the race for number two in external disk storage system sales is a bitter fight. IBM, NetApp, HP, and Dell are all within striking distance of each other, pulling in between $500 and $579 million dollars while big daddy EMC makes more than any two of them. The battle between HP and Dell in storage arrays is a dead heat, with just $6 million separating the two.

The 3Par acquisition creates a massive market-share shift!

It’s no wonder HP and Dell are fighting over 3Par! That acquisition is good for an easy $50 million in quarterly revenue, and a strong sales push could make this $60 million. This extra revenue cements the buyer ahead of his rival and makes him a challenger to IBM and NetApp. It wouldn’t be all that surprising to see the winner vault into the number 2 spot within a year.

This is a huge win for HP or Dell and a serious egg-on-the-face moment for NetApp, IBM and the loser. Sure, $1.7 billion is a lot to pay for $250 million in revenue, but the winner gets immediate bragging rights and a serious prospect of breaking free of the second-place pack. 3Par’s technology is unique in being a real tier-1 threat. This was an issue for the company as a startup, but becomes a serious asset in the hands of HP or Dell (or, dare I suggest, Oracle or NetApp). A well-executed transition and sales execution will cement HP or Dell as the most-credible competitor to EMC within a few years.

Stephen’s Stance

The 3Par acquisition makes so much sense, one wonders why it didn’t happen sooner. Dell clearly sees this as a higher-end repeat of their success with EqualLogic and gives them a chance to earn some additional enterprise credibility. An HP acquisition makes just as much sense, giving them fresh SAN technology and letting them pull ahead of Dell once again. A big deal like this also gives HP’s Dave Donatelli some internal clout in the aftermath of the Hurd fiasco. I expect a counter-offer or two before this is done, but 3Par remains attractive at even a billion more.

Will anyone else join the fray? IBM seems happy with XIV, though the market doesn’t see that product as tier-1. I expect them to stand pat. Oracle should jump in, given the souring of their Sun-era Hitachi OEM deal. Passing on 3Par leaves them with no enterprise SAN chair when the music stops, but they might not feel that they need this kind of hardware. Cisco could use the 3Par technology to reject EMC, but they might not be ready for that move. Another idea is perennial second-place storage company NetApp, who might be able to afford to play this game and could really use a new product line.

What’s left for the loser? Not much. There isn’t another startup with credible tier-1 SAN intentions. Compellent is a great alternative in the midrange SAN market, and Xiotech has great SAN technology here, too. Everyone assumes Oracle will pick up Pillar, and then there’s BlueArc and Isilon waiting in the NAS space. But none of these are a slam-dunk in terms of market share, and the value question looms large when it comes to any high-P/E acquisition. Expect more acquisitions in the coming quarters, but the 3Par game looks like a highlight.

© sfoskett for Stephen Foskett, Pack Rat, 2010. | Everyone Loves 3Par – Here’s Why!
This post was categorized as Enterprise storage, Gestalt IT. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

I’ve long wished for a new enterprise storage superpower. Competition is good for everyone, and the enterprise storage space has always been highly competitive. Traditional SAN storage powers (EMC, HDS, HP, and IBM) have been under continual attack from tech-heavy upstarts like EqualLogic, LeftHand, Compellent, Xiotech, and 3Par. The smaller (revenue-wise) NAS market has been more serial, with NetApp knocking off Auspex, then challenged by EMC. Yet innovators have been thick there as well, from Exanet to Ibrix, Isilon to Onstor.

Through it all, one thing has been clear: The major companies, though perhaps lagging in technology, were usually able to withstand the attack of the upstarts through sheer strength of salesforce. Storage is a strategic investment, and selection of a storage platform is much more far-reaching than many IT product decisions. The inertia of an installed storage environment makes it a real challenge to switch vendors, giving the established players massive leverage.

It became clear to me and many others that the best way for upstart companies (and, by extension, technologies) was to be part of an established vendor’s sales process. OEM relationships were a big part of this (witness the success of BlueArc and even NetApp and HDS) but acquisition was a much stronger proposition. If customers were warmer to OEM products than independent sales, they are much hotter when it comes to acquired technology. HP, Dell, IBM, and EMC have all demonstrated the power that comes when an established company buys a startup and puts the power of their sales force behind these new products.

This explains Dell’s fantastic success with EqualLogic. They took a product that was emerging as dominant in its niche (midrange iSCSI SAN) and blasted it into the market, while at the same time optimizing manufacturing and deployment. EMC did the same with Clariion and DataDomain, and HP is showing strong signs of health with LeftHand and Ibrix. Then there is IBM, who took XIV out of Israel and made it a source of irritation to the rest of the industry.

Many industry watchers have long wondered what would happen if the smaller guys got together, forming a new superpower of their own. Would 3Par, BlueArc, and Sepaton be a real challenger? What about Xiotech or Compellent and Isilon or FalconStor? Is mixing and matching some smaller companies a recipe for success? The answer was often a counter-question: What if someone like Dell, who knows how to manufacture and sell, picked them up instead? This seemed much more like a sure-thing, since the established management and financials stave off potential integration issues.

It appears that this is the future. Established players will pick up smaller companies, fortifying their offerings and accelerating sales in a way the little guys weren’t capable of. Dell’s billion-dollar acquisition of 3Par reportedly headed off a similar offer from HP, and will likely spark another acquisition. I imagine the management teams at Compellent and Xiotech just got a lot busier…

Clearly, Dell and HP are playing this game. IBM and EMC are in it, too. But what about Cisco and Oracle? Could they be planning storage acquisitions of their own, to the detriment of partners like EMC and Hitachi? What about the strong contingent from Japan, NEC and Hitachi? And who gets picked up next? We shall see!

© sfoskett for Stephen Foskett, Pack Rat, 2010. | Dell + EqualLogic, Exanet, Ocarina, 3Par = What?
This post was categorized as Computer History, Enterprise storage, Gestalt IT. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.

Making a list? Who's naughty and who's nice?

Who’s naughty and who’s nice? The average computer geek of the last decade would have placed Microsoft atop the naughty list. The average corporate IT manager’s nice list probably wouldn’t have included EMC and Oracle. Yet Google, Apple, Sun, HP and even IBM don’t have this frequent negativity directed towards them. What’s the difference between naughty and nice when it comes to IT companies? I’ve heard complaints of the greed and arrogance of these companies, though their boosters would point out that it’s easy to envy the success of others.

But things are changing. Microsoft has a bona fide hit on their hands, with Windows 7, Xbox, and Bing re-introducing the company to new customers that don’t harbor old grudges. Inside corporate IT, the halo cast by VMware seems to highlight the re-energized EMC in much the same way. With their competition taking dents in the ongoing battles, Microsoft and EMC just don’t look so bad anymore.

Microsoft: Hearts and Minds

The blooms in many Microsoft competitors’ rose gardens seem to be fading. With “do no evil” Google only finding lucre in the filthy advertising business and the naughtiness of “evil as we wanna be” Apple peaking, Microsoft’s Internet and consumer efforts are starting to seem downright approachable. That’s one way to change your image: Wait for your competitors to catch up and your customers will catch on. The geek parade still loves Google and Apple, but their ambitious drive and massive revenue are distasteful to many.

Every time I write about Apple products, at least one credible geek has to call me out for being a fanboy. The core of their arguments seem to combine scorn for friendly interfaces and pretty hardware, a distaste for Apple’s huge profit margins, and a belief that the faithful wear Apple-tinted glasses when looking at alternatives. I guess Apple users look like a bunch of sissies to the more manly geeks in the audience.

In fact, it’s become something of a badge of pride to stick by Microsoft, even as the UNIX weenies and Apple-heads wander off. They ask “who’s got the most market share in desktops and servers?” Windows Vista’s appetite for hardware and unstable nature might have challenged them, but the quick, slick, solid Windows 7 has reaffirmed their faith. And they know that those who throw stones at Windows Server are living in the past: Ridiculous naming aside, Windows Server 2008 R2 is every bit as great in the data center as Windows 7 is on the desktop.

But there’s more to Microsoft than Windows. Even ardent Microsoft haters have to admit Bing is solid, functional, and even clever. Indeed, Microsoft has taken the search battle right to Google and is working hard to innovate past their rival. Xbox has a solid beachhead in the gaming world, challenging successful and innovative products from Nintendo and Sony. Azure puts a developer-friendly face on the nascent cloud computing market and is anything but a “me-too” to Amazon EC2 and VMware. Barring any major product or PR disasters, Microsoft is well on the way to renovating their sagging corporate image.

EMC: Keeping It Real

EMC is leaving the little storage market behind and doesn't look as big and scary in the larger IT world

What Microsoft is to average computer users, EMC is to enterprise data storage folks. No one denies that they make great products, and have dominated the market for two decades. Although they don’t have the massive share Microsoft has in the desktop OS market, no one comes close to EMC in enterprise storage. They spent the last decade steadily growing to control 25% of the market leaving a wealth of competitors fighting it out far below.

Through all this growth, however, EMC has never been loved by their customers. I’ve known literally dozens of IT shops who refused to buy from EMC, even though the sleazy sales tactics that turned them off (and indeed the sales reps themselves) are reportedly long gone from the company. Like Microsoft, EMC hasn’t softened its approach as much as their competitors have hardened theirs. With the market getting tougher, the tough guy doesn’t look so bad anymore.

I hear that things have improved inside the company, too. All giant corporations have their share of intrigue, politics, and dead weight, and EMC is certainly no exception. But the reports I hear from insiders are positive, and improving all the time. EMC is making some smart moves, giving acquisitions the independence to thrive and building revenue outside their enterprise storage base. Hiring great folks like Scott Lowe, Christopher Kusek, and Ed Saipetch doesn’t hurt, either.

Customers seem to be sensing a change, too. It’s hard to hate VMware, RSA, Legato, and the rest of EMC all at once, though some have grudges against two or three. EMC is successfully diversifying into other areas of information technology. Like Microsoft, EMC’s new customers never learned the old stereotypes. Now that they’re swimming in a much larger pond, EMC looks neither as big or as bad as it once did.

You Will Decide

Are EMC and Microsoft really turning the corner? We will all know in a few years. If the geeks of tomorrow no longer resent their success and hold past mistakes against them, both companies could enter a renaissance not only of credibility but of business success.

Santa Claus image: Public domain from Project Gutenberg

Gorilla image: public domain from Pearson Scott Foresman

© sfoskett for Stephen Foskett, Pack Rat, 2010. | Are Microsoft and EMC beginning a renaissance of geek respect?
This post was categorized as Apple, Computer History, Enterprise storage, Gestalt IT, Personal, Virtual Storage. Each of my categories has its own feed if you'd like to filter out or focus on posts like this.