On August 16, Dell announced its intention to acquire 3PAR Data, better recognized as one of the early pioneers of virtualized storage. A week HP made a counter offer that ups the bidding war for one of the few remaining storage pureplay startups in the once crowded enterprise storage marketplace.

Why is Dell interested in 3PAR? Dell’s storage business has largely depended on its OEM agreement with EMC (in force until 2013). But its storage buys of the last decade (ConvergeNet Technologies, EquaLogic, Exanet, Ocarina Networks) coupled with its Perot Systems acquisition suggests that Dell has higher ambitions than being a successful reseller of storage boxes that plug and play to its servers. The EquaLogic buy gave it iSCSI SANs (despite Dell having rights to sell EMC Celerra NX4).

For its part, HP has as much interest to keep Dell from acquiring 3PAR. Adding 3PAR to its portfolio puts Dell in the thick of the data center. A serious mid to high-end storage virtualization offering means more opportunities to sell high-end services, and possibly making a serious dent on HP’s ProLiant server and EVA/low-end XP storage business. A 3PAR solution overlaps with some of the XP and EVA so there might be a consolidation. I would not be surprised if HDS will come out the loser since it gives HP one more reason to stop the OEM relationship with the Japanese manufacturer (Rumors of HP trying to buy the system storage business of Hitachi have been playing around for well close to a decade now. So far the Japanese vendor has resisted the offer).

HP with 3PAR also puts the Palo Alto stalwart into serious contention in the cloud storage business, something EMC has been building over the last few years.The latest entrant to the cloud bandwagon is HDS.

The storage industry remains vibrant if not shrinking. The last few brands worth buying, remaining untethered to any system vendor, Brocade and Qlogic. Acquiring Brocade would give HP the ump it needs to up the ante in the storage networking space, seriously putting a rock in front of the Cisco jauggernaut. HP would also do well to buy Qlogic making further inroads into the total server-storage-networking storyline.

If Dell loses 3PAR to HP, the only other target on sight would be Compellent. Not exactly near the possibilities that 3PAR offers to the company. The next battleground is in the software space with backup and recovery solutions a consistent enterprise requirement and for which the choices are aplenty despite Symantec’s dominance. The Veritas acquisition has made Symantec vulnerable to enterprise-grade, low-cost solutions from the likes of Acronis, Commvault and BakBone.

For the moment, the storage market is not the most boring place in the tech industry.

Streetinsider.com recently posted its commentary following IDC’s 2010 prediction that IBM would acquire Juniper Network. This may be a response to HP’s ongoing acquisition of 3Com and the continuing speculation of a potential Cisco-EMC merger.

The much delayed completion of the acquisiton of Sun Microsystems by Oracle will likely come to conclusion during the first of 2010.

Seeing itself more a bridesmaid than a bride is Brocade, which has put up its “For Sale” sign and seen no real suitor moving to take the offer. As far back as October 2009, Gigaom analysts pointed to Juniper as a potential buyer for Brocade. IBM would have also been a good suitor but the overlap is in the Foundry products (assuming Big Blue does acquire Juniper).

I still think Brocade would made a fine addition to HP. Of course Brocade may need to get rid of its Foundry portfolio to minimize overlap with HP’s Procurve offerring.

Assuming that Cisco and EMC do combine, that would leave NetApp and HDS as the lone pure play storage vendors. Can these two survive in an environment where customers want true ease of use, best possible integration, and one throat-to-choke accountability from their vendors?

If you look back at all this a proliferation of vendors came about because customers clamored for more choice. But while enterprises say they like choice because it allows them to haggle on the price, in reality, they will turn to one vendor who has everything because its simply easier to deal with one supplier than a multitude of vendors.

Having a choice of sources is great only in as much as it gives you the perception of freedom to pick what you want. But choice brings chaos to the equation. This goes agaiinst the grain of businesses that must operate in an orderly fashion so that processes can be streamlined resulting in greater efficiency, higher productivity and lower total cost of doing business. Which if my math is correct will mean greater profits and better shareholder value.

So the old adage of vendor lock-in doesn’t hold sway in today’s highly competitive world. As one CEO told me recently, “At the end of the day, its really not a matter of giving customers a wide array of choices to choose from. It is giving each customer the product that he or she will want to buy. And that could be just one product it just so happens to look a little different to the individual customer.”

Smoke and mirrors!

Picked up early this morning on Wall Street Journal is breaking news about a potential sale of Brocade to the right buyer. Among the parties interested in the networking vendor are Hewlett-Packard and Oracle.

Brocade has a market cap of US$3.2 billion with 2008 revenue at nearly US$1.5 billion.

Any sale of Brocade will likely impact the business of HP, IBM, HDS, Sun Microsystems and EMC. All these vendors resell Brocade-made products either under OEM or the Brocade label. In the short-term, Cisco sales people will have a field day running after long-time Brocade customers and channel partners as the usual “fear, uncertainty and doubt” or FUD gets thrown in to wreck the nerves of companies that have invested heavily in Brocade technology to keep their storage area networks up and running.

Brocade dominates the Fibre Channel switch market following its acquisiton of McData in 2006. Recognizing the importance of Ethernet in the overall network storage fabric ecosystem, it bought Foundry Networks in 2008.

Rumors of Brocade being up for sale dates back as far as 2003 when McData was rumored to be in talks with Brocade to acquire the latter. But three years later, it was the other way around. I doubt that we will see Cisco buying Brocade if only to kill the competition and dominate the market. but certainly if HP acquires Brocade it would significantly enhance its networking capability.

Rumors of HP’s interest in Brocade have been floating around for years. It would certainly complement’s HP’s networking portfolio which is largely hinged on the HP ProCurve business and supplemented by its OEM deal with Brocade.

Oracle is the bigger wildcard here. Oracle is in the midst of closing its Sun Microsystems acquisitions. The market is awash with rumors that the hardware piece of Sun would be sold off. But if Oracle were to acquire another hardware vendor – say Brocade – it would certainly mean that any potential sale of Sun hardware may no longer be on the table and that Oracle is really commited to its CEO’s vision of offering customers complete systems.

Ittai Kidron, an analyst at Oppenheimer & Co., explains in a research note that an Oracle acquisition of Brocade suggests the company will have to commit to the hardware business for the long-term. Brocade is a nice fit and has no overlap with its Sun purchase according to Kidron.

Any acquisition of Brocade by any of the server vendor will have to be thought out properly. Brocade has large OEM and reseller deals with a number of server vendors. As the Cisco entry into the server business has shown, vendors will more than likely shop elsewhere if Brocade becomes just another product line of a server vendor.

Enterprise Strategy Group analyst Bob Laliberte reckons IBM and Dell may also be potential buyers, “I don’t think you’ll see EMC or Cisco buy them.”

Stifel Nicolaus Equity Research analyst Aaron Rakers also put in Juniper as another possible buyer.

Watch this space as we monitor, report and analyze the developments surrounding the potential sale of Brocade. At this point it is everyone’s guess as neither Brocade nor the potential suitors are saying mum. It is also very possible that Brocade is just trying to get a feel for the market. Afterall rumors are the stuff of the tech industry.