How could a company as mighty and diverse as HP have had so many issues with executive management?

HP stumbled mightily in 2011, and it had nothing to do with product or people. Even sales remained strong, though the PC business is changing. HP’s mighty stumble was a crisis of confidence due to a chain of shenanigans at the very top. This culminated with the short reign of Léo Apotheker, leaving HP to reassure the market of its strategy.

HP And the Enterprise IT Industry

Sometimes, it’s hard to get a sense of scale when talking about very large things. How big is the solar system? How far away is the nearest star? The same is true of earthly things, exemplified by popular misconceptions about the global financial crisis. It’s difficult for people to understand just how much money a trillion dollars is.

In my little world of enterprise storage, it’s difficult to reconcile “big storage” players like EMC and NetApp with “big storage and everything else” players like HP, Dell, Oracle and IBM. Sure, EMC and NetApp lead the pack in terms of market share, but they’re nowhere near as large as the integrated players. HP has more than 7 times the revenue of EMC, which makes 3 times more than NetApp.

This old slide might need updating, but you get the picture…

HP is an incredibly diverse company, dominant in the PC, printing, and blade server market and top 5 just about everywhere else, including networking, services, and enterprise storage. And HP has nearly 325,000 employees, all working to move the company forward in one direction or another.

NetApp is a motorcycle, with one drive wheel pushing it forward at high speed; HP is more like NASA’s shuttle crawler-transporter, a 16 motor mammoth. Single-purpose companies can be agile, but they can also be derailed by market downturn or technological shift. Storage specialists like NetApp continually try to innovate and acquire to keep themselves vital, while larger companies like Cisco and EMC try to diversify while maintaining market leadership. HP doesn’t need to try; it is diverse.

HP Is a Very Large Thing

I watched HP's rise in the server market of the 1990's

HP has long been synonymous with innovation, high-technology, and silicon Valley. I have been an HP customer as long as I have been in IT, and watched as they integrated technology from Apollo and Convex in the 1990’ s. The server products that resulted became the dominant UNIX platform, but HP’ s innovative storage concepts didn’ t take the market by storm.

After HP merged with Compaq (which brought Tandem and Digital Equipment Corporation), the company vaulted ahead in the Wintel market and also gained valuable storage expertise. Throughout the last decade, HP was firing on all cylinders and dominant in nearly every arena. The company owns half the blade server market, is tied for first in servers, leads in PCs and printers, and is a contender in networking and storage. It’s simply impossible to say what HP is in a single sentence.

HP storage has an extremely broad product range, which management is working to reconcile. Acquisitions of LeftHand, Ibrix, and 3PAR gave HP storage shot in the arm to be sure. An injection of startup mojo has energized the marketing and product groups within HP just when the company needed it. HP’ s market share has grown somewhat as a result, though not as much as the hyper-focused NetApp. HP networking similarly took on 3Com, bedeviling Cisco in the Ethernet switch market.

The Executive Soap Opera

It takes a lot to bring a mammoth to its knees, but a shot between the eyes usually does the trick. While the many engines of HP push it forward, the company’s upper management has seemed, at times, suicidal. Business schools could design an entire curriculum around the folly of Patricia “I spy” Dunn and Mark “penny-pinching” Hurd. Who would think that HP management could top this?

From August 2010 through September 2011, HP dominated IT headlines in completely the wrong way. The board wanted a change, and selected Léo Apotheker to transform HP. But it was a soap opera from the very start, with Oracle hiring Mark Hurd and sending Apotheker into hiding among accusations of corporate espionage while at SAP.

The new CEO didn’t seem to understand HP at all, though he was intent on steering it in a new direction. Apotheker set about dismantling HP’s consumer and end-user businesses, killing Palm/WebOS and threatening to sell off the PC business. The company was to focus instead on enterprise computing, but these drastic moves spooked the entire industry.

It wasn’t long before HP’s board struck again, with a shake up at the hands of Ray Lane and former eBay CEO Meg Whitman brought in to replace Apotheker. The first order of business for the new HP executive team appears to be reassuring the entire world that management has not gone completely insane.

Stephen’s Stance

To an outsider like me, the most disappointing thing about HP’s mighty stumble is that it has nothing to do with the people who really make the company what it is. I have met many creative, hard-working individuals in HP’s storage, server, networking, and printer groups, and they could not be more different from the executive soap opera. I only hope that this new board and CEO will bring some stability and let HP cruise forward once again.

Disclaimer: HP has sponsored the Tech Field Day events which I organize, and has on occasion invited me to attend events at their expense.  But I do similar work with nearly every company in the IT industry, and this piece is my own opinion.

© sfoskett for Stephen Foskett, Pack Rat, 2012. |
HP’s Mighty Stumble


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.

© Stephen Foskett for Gestalt IT, 2012. | HP’s Mighty Stumble
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I Promise Not To Quote That Old Annoying Dell PC Slogan

I’ve been buying Dell computers for decades, but not really because I loved them. Sure, my XPS laptop was awesome, but it burned out its motherboard and I never really touched the RMA replacement, having bought a MacBook Pro in the meantime. Enterprise buyers seem to have the same ambivalence about Dell. They buy it, but I’m not sure they really “buy” the company as an IT partner.

I’m sure you’ve heard the same comments as me: “Dell just assembles off-the-shelf components and sells them in volume” or “Dell’s a follower, not an innovator.” There seems to be a great deal of respect for Dell’s ability to produce competitive products and sell them at reasonable cost. Truly, most of their competitors would love to have this kind of reputation. But most of their competitors also have a reputation for partnership, innovation, and solution selling.

Dell Is Making An Effort

It seems clear that Dell would like to change this attitude, and they are investing serious resources to make it happen. While acquisitions like Compellent and Force10 raised eyebrows in storage and networking, it is the activity I see behind the scenes that paints the clearest picture. Dell isn’t just buying into new markets, they’re investing to change the company.

When Dell acquired EqualLogic in 2008, many assumed it was a tactical investment to increase margins over the (resold) EMC storage equipment the company was then pushing. Pundits were similarly dismissive of the acquisition of Perot Systems in 2009, calling it a “me too” effort after HP acquired rival EDS. Regardless of the motivations, however, Dell was becoming more of a serious challenger to HP and IBM every day.

After failing to acquire 3PAR in 2010, then picking up Compllent shortly after, accusations that Dell was “mini me” to HP were rampant. But HP stumbled mightily in 2011, and many in IT quickly lost confidence in that company’s management. All the while, Dell moved forward, increasing in-house IP and expanding enterprise offerings.

What Is The Result?

Today, one sees a very different landscape than just last year. Dell’s acquisitions focused on some of the ripest spots in storage and networking, and no one would disagree that the company has the ability strongly to push these products. Compellent and Force10 went from interesting startups to serious contenders overnight.

Dell really pulled out all the stops to tell us they are "Fluid by Design"

More importantly, Dell has retained much of the innovation these companies offered, from employees to support programs. Last week, I attended the Dell Storage Forum in London, an event initiated by Compellent prior to the acquisition. At the event, I talked to many Dell employees who came to the company through acquisition but had now been given power to challenge the status quo in their respective areas.

If Dell really intended only to push product, why retain marketing personnel? Why invest in the Dell Storage Forum? Why continue Compellent’s beloved Co-Pilot support program?

Then there are the products. Dell leveraged its investment in Ocarina Networks to create a deduplicating backup appliance, the new DR4000. They salvaged file system startup ExaNet and are beginning to bring scale out technology to market. The latest revision of the Compellent software finally brings it to parity in terms of VMware support. And Dell is really working to sell their DX Object Store.

This is the sort of activity one would expect from a contender, not a “box pusher”.

Stephen’s Stance

In the words of Malcolm Reynolds, my days of not taking Dell seriously are certainly coming to a middle. Dell is investing in product IP, innovative marketing and PR events, customer support, and personnel. This does not mean that Dell is instantly a player in the enterprise storage and networking markets, or that all this work will pay off. But I don’t laugh when I hear Dell boast that they intend to be a “top three” enterprise storage company in a few years. It could happen.

Disclaimer: Dell sponsored two Tech Field Day events in 2011, paid me as a speaker at two DX events, and paid for my trip to Dell Storage Forum in London. But no one can buy a post on this site, and I did similar business with IBM, HP, Cisco, and many other companies. This is my opinion.

© sfoskett for Stephen Foskett, Pack Rat, 2012. |
Why Should Anyone Take Dell Seriously in Enterprise Storage?


This post was categorized as Computer History, 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.

© Stephen Foskett for Gestalt IT, 2012. | Why Should Anyone Take Dell Seriously in Enterprise Storage?
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Symantec

The first portion of the session covered the NetBackup product. While I agree that the product sounds great, I appreciate the level of detail that the presenters were able to offer. The second portion covered the BackupExec product. I am a little more familiar with this product as my day job fits perfectly in their target market. However, there was much more marketing talk in this presentation for our liking. We like details versus marketing.

Curtis Preston commented that the biggest mistake a backup admin can make is to rip and replace their backup solution. So, while I am not about to jump ship on what we have right now, I am going to consider making a jump to BackupExec or NetBackup when the time comes. I like what Symantec is bringing to the table and I can see why they are a/the major player in their field.

Drobo

Talk about a cool company… Drobo is just that… absolutely cool. Prior to the TFD presentation, Drobo made an announcement that they are presenting a new business oriented product, the 12-bay Drobo for Business. We were allowed to be the first group of people to see the insides of the SAN outside of Drobo employees. How cool is that! Plus, Mario is the next best thing to Billy Mays. Seriously, I think his presentation skills were great. Seeing people so enthused about their products makes the product that much more appealing.

I am concerned, though, about the feature set of the new line, though. I appreciate their identification of their place in the storage world. They are not trying to compete with EMC, NetApp, etc… in the corporate environment. They recognize that and target the smaller markets heavily. However, the functions and design decisions for the new business quality arrays are questionable. Making these decisions for small businesses with little/no IT staff makes some sense. However, trying to move into business areas with IT staff and no enterprise management available makes it difficult to penetrate into the environment. Plus, having single controllers with NICs built in to it makes it a difficult pill to swallow for enterprises.

Drobo is not going away with their existing market. But, I hope they are able to make some more business level changes to appeal to a larger business market.

Druva

Tech Field Day always seems to have surprises… and the introduction of a new company was great. Although, I must say that I question the “new-ness” of Druva seeing as they already have a large amount of customers in 26 countries (or so).

The laptop/mobile backup product they are peddling seems fairly compelling… especially the user empowerment to retrieve their own data without IT intervention. We were unable to see a proper demo of the product features as the limited network connectivity (via the MiFi) was hamstringing the demo. But, what we did see looks to be fairly cool. I really liked the thought they put into the client portion. Not only was the client deduplicating the data and sending the changes to the backup storage, but the ability to have a backup upon startup of the device was great. The startup function includes logic to wait until X amount of time after startup and for the load on the laptop to drop to a usable level. The last thing they wanted was for the backup service to start during startup and make the laptop experience horrible.

The ability to interact with the backup environment via an iPad is nice proof of concept. But, I did not get the sense of true functionality that the iPad provides. Until the iPad can be a backup source, I would stick to laptops.

Where I run into a problem is that this is a secondary tier backup environment and there needs to be a way to backup the backup. While Druva client backups are deduplicated on their server, the server files are such that makes the deduplication into a primary storage environment difficult.

I see the value in laptop backup and a product like Druva. But, I cannot justify the additional backup environment when many existing backup environments can handle laptop backups now. A Druva solution would be added for user convenience, but policies exist to ensure users save their data in locations that are accessible via the primary backup environment. If the Druva server died… meh.

Xangati

I am glad to see that Xangati was able to get involved with TFD! Their product is an amazing addition to the virtual admin utility belt. Seeing statistics with this much detail and history is extremely useful. Plus, being able to identify “events” and having the data available in a DVR style makes it super useful and intuitive. Not only are the events and DVR great, Xangati took the concept further and allow VDI users to create “events” when they feel the VDI environment is not working as expected. Now, the users can alert to performance issues that may become difficult to identify by the VDI admin!

Xangati looks like a great company for another company to pick up. My first reaction to seeing this was VMware’s acquisition of Integrien for monitoring and analysis. So, while this handles VMware well, VMware is not necessarily in the market to pick them up. I can see Citrix or Microsoft loving what they see and picking them up as a way to battle against VMware. If/when this happens, that company will have an amazing tool at their disposal.

NetEx (or HyperIP)

WAN acceleration is always something that intrigued me. Companies like Riverbed and Citrix (with WAN Scaler) make sense because they store copies of data on the device and, essentially, deduplicate the data so it is not sent across the WAN. So, the NetEx approach was interesting. In my network-light world, using UDP and aggregating the data into larger chunks is an interesting method.

NetEx used beer as an analogy for what they do. Normal networks send data in beer bottles. However, rather than send beer bottles around and track all of them, NetEx sends the beer in a keg and pushes the keg around the network. Then, once it reaches the destination network, HyperIP will break the kegs back into bottles. That made perfect sense to me! Plus, they left the beer for those drinkers in our group!

I am not entirely sure where this would fit in my everyday life. But, based on my simpleton reaction to their product and the network guys like of the product, I think there is definitely something to it.

Infoblox

This was the most difficult presentation for me to sit through… reason being that I really felt like they were creating FUD around what is a fairly simple issue… assigning IP addresses and DNS. Plus, it took forever to get to that point. However, once the fluff was pushed aside, the Infoblox product looks great. With a simple demo, the true value of their product really stepped forward and I began to see how it may fit in an environment like my everyday workplace.

HP

The HP presentations were very interesting. The first presentation dealt with HP’s commitment to standards and modularity to ensure convergence in the datacenter. However, that was short lived as the following presentations dealt with their new deduplication product which appeared to become a proprietary solution (not quite in line with their standards in the datacenter) and some proprietary networking.

Coming into Tech Field Day, I was really amped to hear what HP was going to present on… especially with our being on their corporate campus. I was a little let down with what I saw and that most of the speakers were in the Marketing department.

However, the datacenter tour at the end of the day was really valuable. I was able to ask some questions of the datacenter manager about different product lines. I must admit that I am not an active HP customer. So, I was a little naive as to what they offered.

Conclusion

Tech Field Day #5 was amazing. The group of delegates I was surrounded by were amazing and I walked away with so much information from them and because of them. I appreciate all of the presentations and the time/resources that the presenting companies provided to have us onsite. I cannot wait to see what happens to the companies and the products they presented!

© Bill for Gestalt IT, 2011. | Virtual Bill’s Tech Field Day 5 Review
Read more posts categorized as Networking, Server Virtualization, Storage

Many people are saying that HP Networking is likely to do well, and we may even see a resurgence in multi-vendor networks, so it timely to hear about your career options and choices.

Here are topics that we raised:

• What are the major HP certification tiers and tracks?
• What’s the best way to prepare for an HP certification exam?
• ASE / MASE – what the difference ?
• How does real-world experience and lab work factor into a candidate’s ability to pass an HP exam?
• How hard is it to make the jump to the HP command-line if you’re more of an IOS engineer? How widely do the HP command lines vary from product to product?
• What prerequisites are in place to be allowed to take an HP certification exams? How does this compare to Cisco prerequisites?
• Where do you go to take an HP exam, and what is the exam like (multiple choice, etc.)?
• If a candidate fails an exam, what is the retake policy?
• What is HP doing to preserve the integrity and reliability of their certifications?
• Do the HP certifications teams have an online community or other social media to engage candidates?
• How often does an HP certification holder need to recertify?
• What benefits does HP extend to certification holders?

Feedback

Follow the Packet Pushers on Twitter (@packetpushers | Greg @etherealmind | Ethan @ecbanks), and send your queries & comments about the show to packetpushers@gmail.com.  We want to hear from you!

Subscribe in iTunes and RSS

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You can subscribe to the RSS feed or head over to the Packet Pushers website to download the MP3 file directly from the blog post for that episode. Also, subscription options for Zune, Boxee and a range of other podcatchers are listed on the website.

© Etherealmind for Gestalt IT, 2011. | Show 30 – HP ExpertOne Certifications
Read more posts categorized as All, Favorites, Networking

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.

© Stephen Foskett for Gestalt IT, 2010. | Every Company Is Gunning For Someone Else
Read more posts categorized as All, Featured, Networking, Server Virtualization, Storage

We talked a bit about the history of HP Networking and the convergence of the product lines (Procurve and 3Com).

Then we talked about OpenFlow, a control plane software technology that I haven’t heard about before and it’s impact on very large networks. I think it replaces the Operating System on the switch so that you can program a controller based network architecture. Controller based network architecture are used in Wireless LAN Controllers where only one or two controllers act the control plane for the entire network. This is still in research mode, but the potential is huge.

http://www.openflowswitch.org/foswiki/bin/view/OpenFlow/Deployment/Vendor/HP

And here’s an OpenFlow whitepaper: http://www.openflowswitch.org/documents/openflow-wp-latest.pdf

Some interesting discussions around the future of storage networking (hint: unexpected agreement on FC and FCoE and Storage needs and the future of storage networking).

And rounded it off with some speeds and feeds on the A-Series.

Feedback

Follow the Packet Pushers on Twitter (@packetpushers | Greg @etherealmind | Ethan @ecbanks), and send your queries & comments about the show to packetpushers@gmail.com.  We want to hear from you!

Subscribe in iTunes and RSS

You can subscribe to Packet Pushers in iTunes by clicking on the logo here.

You can subscribe to the RSS feed or head over to the Packet Pushers website to download the MP3 file directly from the blog post for that episode. Also, subscription options for Zune, Boxee and a range of other podcatchers are listed on the website.

© Etherealmind for Gestalt IT, 2010. | Show 25 – Omniscient Logic – HP Networking in the Data Centre
Read more posts categorized as Favorites, Networking

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

© Stephen Foskett for Gestalt IT, 2010. | Could Oracle’s Next Acquisition Be HP or NetApp?
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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

© Stephen Foskett for Gestalt IT, 2010. | The Enterprise IT Acquisition Game
Read more posts categorized as Featured, Networking, Storage

This may seem like a bold statement to make, however we need to look forward to where the industry is headed.  First of all, vendors want us to buy their unified hardware stacks; it represents that move back to a consolidated architecture that kept one vendor dominant in the mainframe days – IBM.  “No-one gets fired for buying IBM” the saying goes (or used to go), demonstrating how IBM was seen as the data centre supplier for all things computing in the 70’s and 80’s.  Of course we know that politics within organisations and the cost of IBM hardware eventually broke the monopoly, but the status quo worked well for many companies for many years.

Now, Cisco, EMC, VMware, HP, Oracle and potentially many others want to own your data centre.  They want you bought into their computing stack.  Over time, I suspect many of those same companies want to move you to their cloud infrastructure offerings, even if they don’t offer them today.  This will be both directly and indirectly.  There will be the direct model, where the vendor offers cloud services to you under their name; there will be the indirect model where their technology powers the cloud provider, or is offered as a service.  It’s at this point the 3Par acquisition becomes much more interesting.

3Par already have many customers in the cloud services sector.  In fact they sell their hardware on the virtues of multi-tenancy, reduced cost through thin provisioning, tight integration with virtual hypervisors and so on.  In this growth sector of the industry, cost is a key driver and no end user or company will pay more than they need for storage.  This means Enterprise arrays like those from Hitachi and EMC won’t play a central role in this future, but rather storage devices which provide the highest efficiency will.  Where do all the major players stand?

• EMC have entered the market with a brand new platform – Atmos.  Although withdrawn as a direct service, Atmos continues to be available from partners.  EMC have chosen to use their own technology as the foundation for cloud.  In addition, VPLEX provides the ability to virtualise the storage layer, including federation features that fit well with VMware.
• HP have a strong blade server offering for their cloud infrastructure.  Matrix provides orchestration for the server, network and some parts of the storage layer, however this work is incomplete and doesn’t fit well with the high end XP arrays.  Slotting 3Par into the storage layer would provide a storage platform well suited to HPs unified computing infrastructure.  It means EVA can be quietly dropped and XP can be retained (in whatever future guise) for high end customers (including mainframe) and if required, gradually dropped.
• Cisco have chosen to partner with EMC rather than acquire storage technology itself.  In fact, looking and both EMC and Cisco, they need each other; EMC have no server platform, Cisco have no storage; it’s a mutually beneficial arrangement, a bit like Jack Sprat and his wife.  At this stage, Cisco could have purchased 3Par and provided and end-to-end solution, but clearly that would be a big step and would require kicking EMC to the kerb, something they obviously don’t want to do (yet).
• Hitachi have server and storage offerings, however Blade Symphony is mainly sold in domestic Japan and not widely advertised globally.  They do have the potential to provide an end-to-end offering as Hitachi also sell networking equipment.  Key for Hitachi will be credibility in a market they don’t currently play in.
• IBM should have all the components of a consolidated infrastructure but there doesn’t appear to be a lot of discussion about their offerings.  They appear to have two strategies – Dynamic Infrastructure and Cloud Computing but their offerings aren’t clear.
• Dell clearly wanted 3Par to fit into their medium to high-end storage offerings.  Today Equallogic has successfully met their SMB requirements, but they OEM technology from EMC (CLARiiON and Symmetrix) for the rest.  Acquiring 3Par would remove that dependency and allow Dell to offer end-to-end technology as their own products.
• Netapp have a self-proclaimed unified architecture that does fit well with virtualisation from VMware.  However they don’t own any other parts of the technology stack and so must partner to deliver unified offerings.  Netapp are covering all bases by offering solutions with VMware, Microsoft and Citrix, but none of these could be described as the unified stack other vendors have.
• Oracle already provide an integrated infrastructure based around their Exadata acquisitions and of course all of the Sun Microsystems technology, however I’m not sure many companies would see the Oracle offerings as other than tied directly to their database platform and not for virtualisation.

Overall, 3Par fit the requirements of HP & Dell to provide integrated technology offerings.  The move to the cloud will require leaner and efficient storage products, plus tight integration and orchestration.  It’s all about positioning today for bigger returns tomorrow.

© Chris for Gestalt IT, 2010. | 3Par Acquisition: The Future For The Storage Industry
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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

© Stephen Foskett for Gestalt IT, 2010. | Meet the Enterprise IT Superpowers
Read more posts categorized as Featured, Networking, Server Virtualization, Storage