Stephen Foskett has a great post today on The Enterprise IT Acquisition Game, wherein he talks about how it’s open season on data storage companies, with a lesser emphasis on networking:
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.
Right on, especially with the “coveting the extra profits” part. For years, Dell, IBM, and HP have been busy commoditizing the compute node side of things. They’ve been driving the prices down on CPU and RAM for so long that the margins aren’t there anymore. And now, with the onset of widespread virtualization, the volume is no longer there to make up for it. However, storage is still a high-margin endeavor, and probably the single most expensive thing in my data center; I have $400K in CPU & RAM connected to $2m in storage. It is not surprising that there is a huge bidding war for 3PAR, and an open season on data storage companies. It’s one of the best ways for big companies to continue bleeding IT budgets, at least until SSD capacities rise and prices fall, and it does to storage what virtualization is doing to servers.
The thing is, virtualization is all about driving costs down in IT, and I just don’t see these big consolidation efforts as an actual way to do that in the long term. EMC has been downright nasty with my organization because they thought we were locked in. Cisco has done the same, and Oracle is generally regarded a bunch of jerks. Why would anybody choose UCS, VBlocks, or an all-in-one option from Oracle knowing that you’re locking yourself in? Even if the pricing is competitive right now, it won’t be for the fourth or fifth year of support where they think they’ve got you trapped.
Stephen’s last paragraph speaks of rebel alliances:
Although I would love to see a rebel alliance rise (imagine Juniper, NetApp, and Symantec joining forces!) this is not a likely scenario.
Like Stephen, I would enjoy seeing a rebel alliance, but I doubt it is likely, for two reasons. One, companies like buying from a single source, because they can get support guarantees, the purchasing process is a lot easier. Second, consolidated efforts like UCS and Vblocks are about software as much as they are about hardware. The promise of a true single pane of glass is very appealing.
If you look at some of the rebels in the software world, like Automattic and Flickr, you’ll notice something: their openness. In both of these cases they allow customers to do whatever they want with their own data. Want to pick it up and leave? That’s fine by them. Contrary to the thinking behind the sales models of EMC and Cisco, though, those companies have great customer retention rates. Because the fundamental idea that their customers are free to choose colors everything they do, they spend their time looking to make customers happy, not lock them in. And as a result you get products people want to use, and not products that are just a little less evil than the other guy.
Seeing that a true rebel alliance is unlikely, I’d love to see Dell become the open, rebel alternative to companies like EMC, Cisco, and Oracle. Even going so far as to develop a “Dblock” based on open technology, sold in increments, delivered in 19″ racks, managed through a single pane of glass, and marketed as the antithesis to vendor lock in. A Dblock could have Dell servers in it, Equallogic/3PAR storage, and Xsigo interconnects (imagine an array full of SSD and quad-rate Infiniband connections), and be very compelling. Especially if their answer to a question like “Can I attach my NetApp to it?” was “the ports are on the top left.” I’d be happy to do business with a company like that.
It’d just need one little twist: a change in attitude.