Saturday, May 2, 2009

Vendors Survival: Will EMC Survive until 2018?

This post is another post in the Vendors Survival series following posts on Microsoft, Google, HP and Sun.
I read a post by Jason Hiner the Editor in Chief of TechRepublic in his Zdnet blog. The post presents 7 possible vendors' acquisitions and merges during 2009. EMC is a player in hypothesis number 1: Dell and EMC merge and in hypothesis number 2: Cisco buys Vmware.

I do not think these two hypotheses will be realized. I do think that EMC management team will not make these two mistakes in 2009, if the company would like to survive until 2018.

Why EMC should not sell Vmware?
Jason Hiner wrote "EMC, the world’s leading storage vendor, is flush with cash and has the opportunity to make a big move". If a company has a big amount of cash, it should have a good reason for selling a company it owns.

I do not find any reasonable Business Case for selling Vmware.
It is true that Vmware is no longer the only leader in Virtualization functionality, but it is still the market leader. The main competitors are Microsoft and Citrix.
Microsoft is a competitor of Windows only Virtualization, so it is not a competitor as far as heterogeneous platforms Virtualization is concerned and it is not a competitor in UNIX or/and Linux Virtualization.

It should be remembered that Virtualization is a growing market, so the probability of higher Vmware revenues is high.
It should also be remembered that EMC strategy was based on changing from a storage hardware only vendor to a vendor with software portfolio. As a result of that strategy it acquired companies such as Documentum, RSA, Legato and Vmware.
My conclusion is that EMC is not going to kill the golden egged chicken Vmware and will not sell it in 2009 to Cisco or any other company.

Why EMC should not buy Dell?
Jason Hiner wrote about merging of the two companies and compares it to HP-Compaq merge. However, HP headed by Carly Fiorina acquired Compaq and did not merge with Compaq; same as if the scenario of merging between EMC and Dell will take place it will not be a merge but acquisition of financially weaker company (Dell) by the company having much more cash (EMC).

It is true that many years ago EMC acquired Data General which produced servers for proprietary Operating System (AOS/VS) as well as UNIX servers, but EMC acquired it only because of the midrange storage line and did not compete in the server market utilizing DG UNIX servers.
Acquiring Dell is a different story. It does not have a leading storage product line for SMBs and it is bigger than DG, therefore its acquisition will be more complex, will require allocation of more resources and time for completing a merge.

Will it enter into new crowded markets (Servers and PCs) during a Recession? I doubt EMC will try to enter to these markets which are not growing fast in such an unstable period.
As a company which is focused on the High-End market, the PCs division could be a difficult challenge. Some of the potential clients will be little Computers shops and many of the customers will be home users.
Should it kill Dell's PC division after an acquisition? Probably not, Dell is a leading vendor in that market.
Will it buy Dell and look afterwards for a Chinese or Indian company which will buy the PC business line? There is no good answer to these questions.
EMC could continue its partnership with Dell but it would not and should not buy Dell.

What should EMC do in order to survive?
The key for EMC's survival until 2018 is keeping its position as a leader in the Storage market. However, the storage market is changing and storage vendors should innovate in order to keep their current position or even improve it.

Storage solutions should be adapted to a more distributed environment with a varied data types and formats including less structured data than typical data stored in traditional Relational Databases. Sometimes the data is distributed in a Grid and in many cases it there is a Web based data.
EMC could use its cash for acquiring innovative storage companies (HIV acquisition by IBM is an example of such an acquisition). It also may acquire software companies, especially software products for information management.

Are the days of the High End market disks over?
The answer is definitely not. Large enterprises storage is growing in high rates (about 20% a year) and some of midsize enterprises growth rate is even higher.
Cloud Computing market growth rate is very high. Clouds will utilize High End disks.
This statement could be related to EMC's directions. I would not be surprised at all; if instead of buying Dell as suggested by Jason Hiner, EMC cash will be used for investments in the Cloud. Recently EMC formed a Cloud Infrastructure and Services Division and hired a former Microsoft executive to lead it.

It is obvious that EMC will aim at the Storage for Clouds market segment. For that purpose its traditional storage devices should be adapted to the characteristics of that market. However, the new division's name includes also the term services.
My hypothesis is that the company may also consider providing Cloud Computing services same as Amazon, Google, IBM, Microsoft and other companies are doing.

In that case one of the smaller Cloud Computing providers could be a target acquisition for EMC.
Virtualization is a must in a Cloud (External Cloud as well as Internal Cloud).

Vmware could serve as a Virtualization software company for EMC, creating new and extended Virtualization solutions for EMC's Cloud Computing services, as well as for selling these future products to other Cloud Computing providers.
The scenario cited above is additional reason why not to sell Vmware.  

Probably, each Cloud Computing provider will provide specialized services based on its previous expertise. Microsoft's and Google's Cloud services are good examples of providing Cloud services based on former expertise.

What kind of specialized Cloud services would EMC provide, if any?
The following answer is a guess or a speculation. Probably my guess as a SOA expert and not a Storage expert (although I have some experience in evaluating, selecting and properly utilizing Storage in a Data center) is not better than other people's guesses. Anyway, I think of the following types of Cloud Computing services EMC may provide:
  • Infrastructure as a Service (IaaS) – storing large amounts of data in the Cloud Computing Data Center. Backups of data located in the Data Center could also be stored in the Cloud Computing Data Center.

  • Providing data synchronization services between Data Center applications and applications data in the Cloud.
Data Synchronization with a Cloud is an emerging challenge today, when External Clouds usage for Core applications is rare in large enterprises. The reason for not using the Cloud for Core applications is there interconnections with other core applications, which are available only in the Data Center. It will be a major challenge, when some Core applications of large enterprises will run in the Data Center and others in a Cloud (If different applications will be executed in different clouds the challenge will be magnified).

Data Synchronization may be achieved by improved techniques of near parallel write operations in the Data Center and the Cloud executed transparently by the Storage Servers or Controllers.
It should be noted that a capability of that kind for a reasonable cost could provide a solution to the synchronization challenge.
  • Content storing and Management
This service could be based on Documentum software which is included in EMC's portfolio. Its RSA products line could used for protecting the content from unauthorized access.

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