I just read Steve Duplessie’s take on the HDS acquisition of Bluearc. If I had a dollar for every time I read about HDS buying a NAS appliance, I’d still be poor. They tried it a few times with some small OEMs over the years and in most cases the problem was part technology and part a sales issue.

Let’s face it… HDS is used to selling humongosaur-like systems to the very large enterprises who can afford to buy big iron. Much of HDS’ traditional hardware (manufactured by parent Hitachi) is designed around block-based storage (yes, agree with Steve on this).

Unfortunately for HDS, and lucky for NAS-behemoth NetApp, there are still customers out there, even the big ones, who need file storage  because companies still store a lot of information in the form of files – probably a lot more than you feel comfortable with. I have a 1.5TB redundant NAS appliance at home serving the four members of my family. Yes, applications like ERP, CRM and SCM have limited use for NAS systems and will run a lot faster if the database is running off a powerful SAN engine. But for 100% of employees in any company, they will need to store their files in the network somewhere – and a NAS is a perfect place for that.

So back to HDS… why does HDS need a NAS solution? Likely because customers are hinting they need it. But more importantly lacking a NAS  solution gives competitors like NetApp a window to get in and slowly eat through the HDS armor that surrounds Mr Enterprise customer.

Will this ever work for HDS? I think the bigger challenge for HDS is understanding the technology and being able to sell it convincingly.  From history, this is where the rubber meets the road. This is where all those countless NAS technologies that HDS tried to sell got buried. The good news is HDS has had a few years of history selling BlueArc. Now its just a matter of getting the sales people (in Asia) to get moving.

Advertisements

Some months back I spoke to a senior executive discussing about their product strategy. At one point in the discussion, he quoted an old Arabian Proverb: “the enemy of my enemy is my friend”. It is his interpretation of how partnerships are created in the business world. What scares me is that I understood what he meant and see its practical applications.

A week ago I wrote about SAP’s acquisition of Sybase and its implication to the software arms race. I follow this rant with a twist that comes in the form of new partnerships that are shaping up, not directly as a result of SAP’s acquisition, but as a progression of what’s been happening in the IT industry over the last five years.

And it begins with an interesting article written by Gavin Clarke (the UK Register) around the budding relationship between SAP and HP, as they go after Oracle in a more concerted effort. For HP, its because Oracle dumped its technology (Exadata 1) in favor of Sun (Exadata 2), following Oracle’s acquisition last year of Scott McNealy’s company. And to think that at the 2009 Oracle OpenWorld there was scant anonymity between HP and Oracle despite the Sun relationship.

So with all the knowledge gained from the first Exadata, HP brings a lot of knowledge to bear. Still I think the new SAP appliance will have a tough time competing with the Oracle product (now on Gen 2). SAP will likely integrate its expertise around in-memory architecture (NetWeaver Business Warehouse Accelerator) to market a “powerful calculation engine” for data modeling applications.

SAP Co-CEO  Bill McDermott told Informationweek’s Doug Henschen that SAP had briefed partners including IBM, HP, EMC and Cisco on its plans. Partners are eager to embrace the innovation, he said, and said they will find opportunities to build new products and services around the engine.

Granted that HP, IBM and EMC are interested in building an appliance to compete with the Exadata (with HP having a leg-up at this point in time), at this point IBM would be in the best position given that it has a strong database business, has a captive “mainframe” market, and the resources to spend on R&D. All this without necessarily working with SAP assuming that the German software giant will want to push its Sybase database as part of the bundle. HP may be more interested in this although it would hurt its relationship with Oracle big time (we’ve seen this with HP’s relationship with Cisco).

Speaking of which, a Cisco-EMC-SAP triumvirate may present the best opportunity to run against Oracle.

For the moment, Oracle has the upper hand, having created an opportunity with the Exadata and the rest of the industry is playing catch-up. Larry Ellison is having a ball.

SAP [7] agreed to buy Sybase [8] for US$5.8 billion further accelerating the software arms race that appears to have no end in sight. The acquistion is just a tad bit shy from the German software giant’s 2007 acquisition of Business Objects [9] for US$ 6.78 billion.

The Sybase acquisition gives SAP two things: a database of its own, and a foothold into the mobile marketplace by way of Sybase 365.

For years SAP has been content on selling its ERP applications to interested Oracle [10] database customers. The co-opetition scenario benefited both companies as it allowed them to ride on each other’s brands to grow their business. Ray Wang, an analyst with Altimeter Group [11], estimates that SAP sells about US$1 billion of Oracle databases annually. With the Sybase acquisition expect that number to come down a bit in the long term as the German giant uses its size to sway customers away from Oracle.

But not everyone thinks SAP can dance their way around the Oracle strangledhold on customers. WSJ quoted Peter Goldmacher, an analyst with Cowen & Co [12]., said the deal seems to be a desperate move by SAP. “Their business is terrible,” he said. “They’ve been out-executed at every turn by Oracle.” Goldmacher said he believes SAP will have a hard time convincing customers to move from Oracle database software to Sybase offerings.

IBM [13] benefited on this as well but mostly through its systems business and middleware offering. But with Oracle beefing up its middleware stack and offering a single-box solution, IBM should start feeling the pinch from the Oracle Exadata offering. The selling point for many business executives is still faster, better and cheaper – all the elements you will find in the Oracle Exadata product brochure.

The Sybase365 [14] business should be an interesting new field for SAP as it is aimed squarely at the mobile market – an area many analysts agree should get very hot very fast, not only in the consumer space but in the enterprise arena as well.

IBM CEO Samuel Palmisano is quoted on Wall Street Journal as indicating software is the top priority [15] for Big Blue. Palmisano is aiming to have software account for about half of the company’s pre-tax profit by 2015. IBM has spent US$13 billion over a period of seven years acquiring a total of 57 software companies.

One particular area on Palmisano’s analytics. Itself a broad segment of the software industry although around the area of business intelligence and analytics, there is only one vendor left standing by itself – SAS [16].

Wang believes that this acquisition is good for SAP [17]. It allows the vendor to prepare for the next generation of applications that are heavy into mobile and cloud technologies.

At the same time, the Sybase acquisition gives it better access into the financial services and public sector markets. The bonus for SAP is China. Sybase has a strong presence in that market.

M&A, a gentler way of saying takeover, continues to be the norm. I’m not seeing any changes to this strategy anytime. It is the goal of many a small or mid-sized niche software vendors to get rich quick by being acquired and retiring to the Bahamas.

Which leaves me to wonder, what is Microsoft [18] doing?

Back in the days when IBM still had a personal computer division, the Thinkpad series (first released in 1992) were targeted at mid- to large enterprises that wanted transportable computers that were rugged, asthetic and had the computing power needed to run most business applications. The classic Thinkpad designed has remained largely unchained over the years. However, the business dynamics of enterprises have changed. Economic downturns and the need for greater cost control have led managers to agree to use other brands as long as they did the job.

This changed in the perception among business executives is one of the reasons why Dell and HP successfully penetrated the enterprise despite being considered of inferior design and manufacture (to date, I still hear executives swear they will never use either brand with reliability cited as the most common reason).

When Lenovo bought the PC division from IBM, the Chinese company (in China they were known as Legend) decided to keep what it saw was a ‘winning’ design formula in the Thinkpad. Lenovo launched less the less pricy, 3000 series to target small businesses as well as consumers. The 3000 (C, N and V) series was eventually discontinued and giving rise to the Ideapad series with a much better aesthetic formfactor to meet a more design-conscious market. The Thinkpad family continued to be sold at a premium and despite new technology and materials, the external design remained the same – staid, boxy, heavy and black. Most executives I see carried their Thinkpad on a carry-case with wheels (that should tell you something).

If Apple Computer were to be credited with changing industry perception about personal computers is that you don’t have to be drab (dressed in black) to be productive, efficient and business-like. In fact you can be all of these and also be cool.

At the Consumer Electronics Show in January 2010, Lenovo decided to give the Thinkpad a facelift. The first two models to come off the show floor were the Thinkpad X100e and the Thinkpad Edge. The X100e is the first netbook for the business executive. I’ve read a number of very positive reviews about the X100e and so did my own review when I was handed the new netbook for a few days of handholding. True to its legacy, the X100e is a laptop with the business executive in mind. It carried everything you ever needed from your laptop at netbook prices. There were only two things I didn’t like about the X100e – weight (it was heavy at 1.36 kg) and the processor that came with the test unit was and AMD Athlon Neo MV-40 was not as energy efficient as the Intel Atom processors (of course the AMD chip has more compute horsepower compared to its Intel counterpart).

In the conventional laptop category, Lenovo launched the Thinkpad Edge, a 13.3″ laptop sporting a new body and new keyboard, while retaining the Thinkpad tradition of rugged, solid design. (more…)

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.

It sounds apocalyptic but its nowhere near that. Following Dell’s acquisition of Perot Systems, Norwalk-based Xerox announced it is buying Affiliated Computer Services (ACS) for US$6.4 billion. Xerox is best known for its copier business and more resently repositioned itself (a little) as a document management company – much the same ways as its traditional competitors like Canon and Ricoh.

According to the Xerox press release, the acquisition will create a US$22 billion “global enterprise for documnet technology and business process outsourcing”. This deal puts Xerox in the US$150 billion BPO map.

ACS is one of those American companies that outsources a large chunk of its operations to outside the US, having started this model outsourcing to Mexico and Ghana in the early years – according to the Wall Street Journal. It gets majority of its business in the US though, particularly in the US healthcare sector where it claims it did about US$1 billion (out of US$6.5 billion). ACS reports that 40% of its revenue comes from government contracts.

The debate around the merits of this acquisition will run for sometime with industry observers watching how Xerox integrates the much larger ACS into the fold and train its own sales organization to sell BPO services. Expect to see a scramble among back-office BPO players to reposition themselves against a much larger, albeit less focused, Xerox/ACS.

Phil Fersht, a research director at AMR Research, wrote on his blog that the challenge for the combined entity is “a new throng of competitors in this space: Cognizant, Genpact, Infosys, TCS et al., and not solely the incumbents such as Accenture, Capgemini and IBM. The combined Xerox-ACS business will have a short-term potential to consolidate a commanding position in back-office BPO areas such as document management, call center, payroll, benefits admin and accounts payable.”

Robert Brown, an analyst with Gartner, believes this acquisition is about combining Xerox’ technologies, brand and global reach to ACS’ BPO leadership. The fact that ACS has strong penetrayion into the US healthcare industry is a tangetial piece to the rationale.” He concedes that healthcare BPO services will remain strong for the coming years.

What is the impact of this deal to Asia Pacific? Not much at least in the short term according to TJ Singh, Gartner research director for BPO. “It’s important to note that in Asia, Xerox operates through their JV with Fuji (FujiXerox). Currently Fuji Xerox has BPO assets in Asia Pacific, especially in Australia whilst ACS uses the region primarily as an offshore service delivery location. In the near term, the focus of this merger will be on North America and EMEA but over the medium to long term we should see greater engagement in Asia Pacific as the new entity streamlines its (BPO) sales, marketing and operations with FujiXerox and explores new opportunities.”

What he means is that incumbent BPOs in Asia can relax… for now. But when the BPO-armed Xerox comes to town, then the weeping and grinding of teeth can begin.

What can we expect after this? More M&As in the outsourcing front. Companies worth considering include CSC (USA), CGI (Canada), WNS (India) and Patni (India).

The New York Times quotes Rod Bourgeois, an analyst at Bernstein Research as saying “the merger trend isn’t over, but you are running out of companies that are small enough to reasonably acquire and yet large enough to make a difference”.

Gartner senior vice president of Research, Pete Sondergaard, notes that the outsourcing trend will continue not because labor costs are high but because technology is getting too complex to manage cost-effectively. Operating expenses are up, fix asset costs are coming down.