Tectonic shifts: HP Plus 3Com versus Cisco Plus EMC

Just when it looked clear where the markets were lining up around data center automation and cloud computing, things change. I guess that is what makes this industry so very interesting.  The proposed acquisition by HP of 3Com is a direct challenge to Cisco’s network management franchise. However, the implications of this move go further than what meets the eye.  It also pits HP in a direct path against EMC with its Cisco partnership. And to make things even more interesting, it also puts these two companies in a competitive three way race against IBM and its cloud/data center automation strategy. And of course, it doesn’t stop there. A myriad of emerging companies like Google and Amazon want a larger share of the enterprise market for cloud services. Companies like Unisys and CSC that has focused on the outsourced secure data centers are getting into the act.

I don’t think that we will see a single winner — no matter what any one of these companies will tell you.  The winners in this market shift will be those companies can build a compelling platform and a compelling value proposition for a partner ecosystem.  The truth about the cloud is that it is not simply a network or a data center. It is a new way of providing services of all sorts that can support changing customer workloads in a secure and predictable manner.

In light of this, what does this say for HP’s plans to acquire 3Com? If we assume that the network infrastructure is a key component of an emerging cloud and data center strategy, HP is making a calculated risk in acquiring more assets in this market.  The company that has found that its ProCurve networking division has begun gaining traction. HP ProCurve Networking is the networking division of HP.  The division includes network switches, wireless access points, WAN routers, and Access Control servers and software.   ProCurve competes directly with Cisco in the networking switch market. When HP had a tight partnership with Cisco, the company de-emphasized the networking. However, once Cisco started to move into the server market, the handcuffs came off. The 3Com acquisition takes the competitive play to a new level. 3Com has a variety of good pieces of technology that HP could leverage within ProCurve. Even more significantly, it picks up a strong security product called TippingPoint, a 3Com acquisition. TippingPoint fills a critical hole in HP’s security offering. TippingPoint, offers network security offerings including intrusion prevention and a product that inspects network packets.  The former 3Com subsidiary has also established a database of security threats based a network of external researchers.

But I think that one of the most important reasons that HP bought 3Com is its strong relationships in the Chinese market. In fiscal year 2008 half of 3Com’s revenue came from its H3C joint venture with Chinese vendor, Huawei Technology. Therefore, it is not surprising that HP would have paid a premium to gain a foothold in this lucrative market. If HP is smart, it will do a good job leveraging the many software assets to build out both its networking assets as well as beefing up its software organization. In reality, HP is much more comfortable in the hardware market. Therefore, adding networking as a core competency makes sense. It will also bolster its position as a player in the high end data center market and in the private cloud space.

Cisco, on the other hand, is coming from the network and moving agressively into the cloud and the data center market.  The company has purchased a position with VMWare and has established a tight partnership with EMC as a go to market strategy.  For Cisco, it gives the company credibility and access to customers outside of its traditional markets. For EMC, the Cisco relationship strengthens its networking play.  But an even bigger value for the relationship is to present a bigger footprint to customers as they move to take on HP, IBM, and the assortment of other players who all want to win.  The Cisco/EMC/VMware play is to focus on the private cloud.  In their view a private cloud is very similar to a private, preconfigured data center.  It can be a compelling value proposition to a customer that needs a data center fast without having to deal with a lot of moving parts.  The real question from a cloud computing perspective is the key question: is this really a cloud?

It was inevitable that this quiet market dominated by Google and Amazon would heat up as the cloud becomes a real market force.  But I don’t expect that HP or Cisco/EMC will have a free run. They are being joined by IBM and Microsoft — among others. The impact could be better options for customers and prices that invariably will fall. The key to success for all of these players will be how well they manage what will be an increasingly heterogeneous, federated, and highly distributed hardware and software world. Management comes in many flavors: management of these highly distributed services and management of the workloads.

I love the smell of acquisitions in the morning: BMC Gets BladeLogic

The great thing about acquisitions is that it provides a lot of fodder for bloggers and pundits. And there have certainly been a lot lately. For example, just yesterday BMC finally got a data center automation company. It almost had landed OpsWare when HP swooped down and landed the deal. Now BMC is planning to purchase BladeLogic for about $800 million. This acquisition allows BMC to claim that it has all of the pieces to elevate its position in the data center automation market along side HP — its biggest rival. It also helps BMC demonstrate that it can use its cash to fund growth. BMC has more than a billion dollars in the bank and was under pressure to do something with the cash to fuel growth.

BMC has an interesting challenge. Much of the company’s growth has come from its acquisition of Remedy Software — which provides help desk automation solutions. While the company might have used Remedy as the center of its future strategy it decided to try for a bigger play. In 2004 it announced its Business Service Management strategy focused on providing measurement and management of IT resources from a business impact perspective.

The BladeLogic acquisition is a continuation of this strategy. BladeLogic adds more data center automation software into the platform. While this is a good move for BMC is not without risk. BMC has some much bigger and stronger competitors who seem the same potential for helping customers create a next generation computing environment. HP, for example, has a jump start on BMC through its Opsware acquisition. Ospware, now part of HP’s Business Technology Optimization (BTO) platform, adds to the depth of the HP management portfolio. In addition to HP’s some significant software assets for data center automation but HP has at least 15 of experience in both its consulting and outsourcing organization. In addition, HP picked up some significant talent from the Opsware team. IBM has been building its service management platform for years both through development and a slew of aquisitions too numerous to mention (I would definitely leave a couple dozen out if I tried). IBM has begun to leverage its resources to build a significant in Service Management portfolio under the Tivoli brand. Tivoli has been working over the last few years to rearchitect these assets into a platform. Some interesting assets that IBM has put into the mix include management software such as Netcool and Micromuse to ISS Solutions for security management. IBM has a significant consulting, services, and outsourcing organization in management as well.

Two other companies that BMC has to be worried about: CA which has been quitely rearchitecting its managment platform over the last few years with good results and EMC which has been buying management assets over the past several years and is putting together a potentially powerful platform.

Why is data center automation and service management suddenly the rage?

The next generation data centers is a big deal because organizations are trying to consolidate the number of data centers they are managing and they are trying to make those resulting data centers more efficient in terms of resources and energy. These companies also want to be able to treat all of their systems and software as though they are a set of assets that can be moved around and reused in a safe and predictable way. At the same time, existing data center technology has been aging. During the tech downturn during the last recession, companies stopped buying and updating their infrastructure until they figured out how to absorb what they had already bought. While customers were doing this, massive changes were happening in the industry — most notable has been the rise of virtualization –everything from grid computing to server virtualization to desktop virtualization. Now, combine virtualization of resources with the ability to manage this combination of resources as though it were an integrated environment based on business needs. This is where we are headed. It is little wonder that the acquisitions are happening. I think that it only the beginning of the big players buying the resources they need to win.

Top 10 Predictions: Innovation, ROI, Cloud Computing and more…

I love the end of the year. I get to sneak out of the office for a few days and stay off of airplanes. I also have a chance to look ahead to the new year. I like making predictions. Sometimes, I am years ahead of the market; other times I am able to hit the nail on the head. So, for what it is worth, here are my top ten predictions for 2008 (Hey, how did that happen? What happened to 2007? I thought it just started!)

1. There will be two hot buzzwords this year: innovation and ROI. Companies want to find ways to leverage the technology they have invested in, to do things in totally new ways. At the same time, companies are nervous about investing in technology. They want assurances that there will be a return on their investment — quickly. So, you will see a lot of discussion of both issues. But here is one prediction that I guarantee: most of the proof about innovation and ROI will be fluffy and devoid of any real meat!

2. Here come the clouds! I think that cloud computing, one of the latest versions of virtualization, will become one of the hottest trends of 2008. Any infrastructure company you can name will come up with a cloud computing strategy. No single leader will emerge in 2008 but you won’t be able to move without bumping into the hype.

3. Software as a Service goes mainstream. Sure, SalesForce.com has been the industry darling over the past few years. There can be no doubt that SalesForce CEO Marc Benioff’s imaginative adventure hit the bulls-eye. But I expect that in 2008 there will be numerous mainstream, innovative approaches to Software as a Service. We already saw SAP announce SAP By Design as its entry into the SaaS market. Expect a lot more from mainstream players. Now add a social networking twist and things really get interesting.

4. The world gets more virtual. VMWare’s spectacular IPO made the rest of the market wakeup and smell the roses. Maybe there is money in this virtualization stuff after all. There will be three virtualization market segments: client, server, and application. I can’t decide which one I think is more important. How about all three!

5. More vendors will make more acquisitions (that’s another one you can take to the bank). Yes, Oracle will certainly make more acquisitions, but I don’ t think that BEA will be in the mix. Nor will HP buy BEA. However, I do predict that BEA will probably go private. I predict that HP will buy more software companies, especially in the data management area. IBM will continue its buying especially in software — more companies in what they call information management, more in systems management, and in the collaboration space. I expect to see more action from EMC as well primarily in management and security. The list is too long for this entry but stay tuned, it is going to be a very, very busy year.

6. So, I didn’t mention Microsoft yet. This is the year when Microsoft’s server/enterprise business will get the respect it deserves. Therefore, I expect to see Microsoft continue to make small but strategic acquisitions that will fit into the forthcoming Oslo strategy. I would expect to see Microsoft look for information management picks (among others). However, I don’t expect that Microsoft will be buying big, traditional software companies. I expect that Microsoft will make interesting acquisitions in web collaboration, social networking, and advertising.

7. Online goes off-line. Companies like Zoho are starting to gain traction because they can provide both online services combined with offline usage. Being able to continue working when you can’t get connectivity is the tipping point for these collaboration offerings to challenge Microsoft in the office and collaboration space.

8. This is the year that Service Oriented Architectures (SOA) moves from IT strategy to business strategy. Therefore, SOA will officially move out of the hype cycle and into mainstream. CEOs and CIOs have bought into the importance of consistent business oriented services. Therefore, expect that customers will get down to serious business of moving out of pilots into slow, deliberate implementations. This doesn’t make for splashy headlines but it does make business sense.

9. Google will continue to move into any market that leverages the advertising revenue model — including collaboration software and various cloud computing options. No surprise there. I do not expect that Google will make a bid for the traditional enterprise applications. I do expect to see a strengthening partnership with IBM.

10. Partner ecosystems will reach a new level of intensity this year. Enterprise software leaders will be working hard to make sure the most popular emerging players support their platforms. They will be joined in the mix by Software as a Service players who are trying to build up their arsenal of partners. Emerging players will live or die by their ability to sign the best partnerships. At the same time, enterprise software leaders are upping the requirements for participation. The bottom line is: what’s in it for me?

11. I know I promised 10 predictions but I have to add one more. There will be at least a few trends that will come out of the blue. But that is what makes things interesting!

 

EMC’s Innovation Journey: from storage to information centric computing

Today I am at EMC’s annual analyst meeting. Just like IBM, EMC’s theme is innovation. EMC is on an interesting journey from its roots in storage managment. EMC has been on a journey for a number of years with acquisitions in information and content management (Documentum and eRoom) and security (RSA, Verid), management software (Smarts, and NLayers), virtualization (VMware), Software as a Service (with the Mozy acquisition). Initially, it looked as though EMC was going to position itself as a technology holding company. I have changed my mind after listening to the management team talking about EMC’s evolution. Over the past four years EMC has spent an average of $2 billion a year acquiring 30 software companies. So far, EMC has spent $8 billion acquiring software companies. I expect that we will see more over the coming years.

Joe Tucci, EMC’s CEO provided some interesting insights about EMC’s transition. Clearly, it was a lot easier in the days when the company could only worry about storing and retrieving information. Now that EMC has gone well beyond that vision, Tucci has done a good job of both focusing on the core competencies of the company. Tucci has made this look easy. But, in fact, it is hard. In essence, what he has done is to keep to its knitting — buying software that is adjacent and complementary to storage. And this makes sense — storage is about putting information somewhere (obviously an over simplification). So, not surprisingly, the theme is information.

Now, EMC is trying to take its core assets focused on “information” so that there is cross leverage across product lines. For example, EMC is leveraging its security software in order to provide higher levels of security in storage and document management. I think that Tucci put it well, “the information infrastructure is a shared set of products, serivces, and best practices for storing, protecting, optimizing, and leveraging information.”

Where is EMC taking this strategy? Clearly the Mozy acquisition demonstrates that EMC is looking at the SMB market and at Software as a Service (SaaS). How about information and storage in the cloud? Why not.

I expect to see EMC focus a lot of attention on unstructured and semi-structured information. One executive during the meeting commented that 90 percent of a customer’s information is unstructured in a variety of formats (images, documents, etc.). Not surprising, this unstructured data has huge storage requirements. Now think about the security of this information including rules for who is allowed to look at, copy, and modify that information.

And, of course, virtualization of information, storage, and collaboration isn’t lose on EMC — with VMware. VMware is clearly one of the jewels in the crown and I expect that EMC is going to find more and more ways to leverage virtualization across its portfolio.

According to Jeff Nick, EMC’s CTO, EMC is focused from a strategy perspective on infrastructure, information assets, applications, and interaction. From his perspective, security is at the core of this approach — not an unreasonable assumption. I like his view on taking a holistic view of how all of these components are interrelated. Taking a holistic view of information management is music to my ears! I also liked the fact that Nick spent considerable time talking about the fact that you can only provide this holistic approach through a service oriented approach. He went on to point out there is a whole different way of managing based on SOA. In this way, you take applications and operating systems and leverage them as elements and virtualize them in the context of how they are used within the customer environment.

This thinking is good but it will require that a lot of pieces come together. Clearly, this isn’t a short term strategy. If EMC can pull this off, it will be quite interesting for the company’s future.

The bottom line is that I see EMC as a company that is changing itself from a storage leader to one that is reaching beyond its comfort zone. Suddenly, its acquisitions make a lot more sense. However, the road will not be especially easy. There is a lot of work to do on information management itself — including the entire areas of meta data and master data management. EMC doesn’t have a master data management strategy and it does not control the databases and data stores where this information lives. Clearly, the key players in this market will not necessarily want EMC to emerge as the leader. In the management space, EMC has made some good strides in leveraging its Smarts and NLayers acquisitions to make its products more manageable. Will it strive to be a management vendor and take on players like HP and IBM? Not clear yet.

EMC is a well managed company that has made good acquisitions and managed their integration into the company fabric well.