Storage is dead. Viva information lifecycle management.
Antony Adshead examines the changing market and how users
should react.
The storage market is going through huge changes. Sun's £2.4bn
acquisition of StorageTek in June was the latest in a wave of
consolidation to hit the sector, including possibly the biggest
ever software acquisition: Symantec's purchase of Veritas for
£7.7bn in December 2004.
This last deal illustrates a salient feature of the storage
market in the second half of 2005. The fact that Veritas - a Unix
storage provider - is being acquired by Symantec - a Windows
security player - signifies a move away from pure-play storage
towards information lifecycle management, an approach that
addresses the management of data from cradle to grave.
Just as the storage industry has for years been chasing the holy
grail of virtualisation and consolidation of storage assets, the
industry now finds itself being consolidated: and some unexpected
bedfellows have resulted. So what exactly is happening and why? And
what will be the effect on users?
Three examples - EMC, Sun and Symantec - and the various ways
they are combining are an illustration of new directions in the
storage sector. In fact, it would be true to say the storage sector
is becoming a thing of the past with the move towards management of
the lifecycle of documents and data from the moment they come
through the firewall until compliance regimes dictate you no longer
need to store them.
What we are seeing is an overlapping of previously separate
spaces, with, for example, a traditional storage player such as EMC
acquiring content management specialist Documentum, while pursuing
virtualisation with the purchase of Rainfinity.
Even more of an overlap is Symantec, which, with its purchase of
Veritas, will seek to work the synergies inherent in securely
handling documents coming into the enterprise and their subsequent
storage.
The trend is toward market sector consolidation, says Susan
Clarke, senior research analyst with Butler Group, and one of the
drivers is the need to compete with even bigger players.
"The acquisition of Veritas by Symantec and Documentum by EMC
has started a trend of vertical acquisitions in the storage
industry, which will continue as it becomes increasingly difficult
for suppliers that operate within a single market, such as storage,
to compete with multi-discipline suppliers such as IBM and
Hewlett-Packard.
"These vertical acquisitions see suppliers buying up other
suppliers in complementary areas to provide additional
opportunities. For EMC, the acquisition of Documentum was part of
its information lifecycle management strategy, and for Symantec, a
driver was information management."
Graham Titterington, principal analyst with Ovum, agrees. "To
use a football analogy, these companies are first division rather
than premier league, and what they are trying to do is compete with
the premiership teams like IBM," he says.
"All these recent cases involve a storage supplier and
non-storage supplier coming together to create something with wider
market coverage. We will be seeing more of this move to the
one-stop-shop supplier as companies try to maintain expansion in a
flat IT market. And storage is a steady earner, particularly when
you consider factors such as compliance."
But while such imperatives may have driven these acquisitions at
a general level, looking at the cases in detail gives an idea of
the motivations involved as well as some clues for users about
what to expect.
Many who watched Sun's acquisition of StorageTek have concluded
it is not necessarily about technology but more to do with
bolstering the company after several years of poor performance.
StorageTek is a well-established tape supplier and brings in £0.6bn
a year in IT services revenue. It will become one of Sun's four key
brands and will put more than 1,000 "feet on the street".
Clarke says, "Sun had lost its position as a major storage
supplier over the past few years and this acquisition will help
restore that. Another driver is to provide information lifecycle
management, in which StorageTek is a leading supplier. In addition,
it will be able to exploit StorageTek's sales team to increase its
sales in storage.
But she warns, "There is a risk for customers. Following an
acquisition, there is nearly always integration work to produce
solutions made up from each supplier's products. If this is done
badly, the result will be separate products that are only loosely
integrated and are bundled together, requiring the customer to
carry out any integration work required."
Titterington says, "The StorageTek take-over may actually
stabilise Sun, which has been a bit shaky in recent times."
But if you are a StorageTek user, things might not look as
bright, says Clive Longbottom, service director, business process
facilitation at analyst firm Quocirca, who fears uncertainty over
Sun's performance and advises users to keep their options open.
"All of a sudden StorageTek is not independent and the user
perception will be: now Sun will try to sell me StorEdge when it
was not even on my radar before. Also, there is the worry, will
Storagetek be there in a year's time? My advice is to start talking
with your Sun account manager and make sure service level
agreements are in place for existing kit. For future needs, you
should review the market and look at other suppliers, just in
case."
The effect of these acquisitions will probably be felt first
when the company's salespeople come knocking on IT directors'
doors, says Claus Egge, programme director, European storage
research, at IDC. "There will be some businesses that have not been
targeted before that will be targeted by Sun reps to sell them
things they have not traditionally bought. Mainframe users who have
been StorageTek customers will be targeted, for example."
Although Sun's acquisition of StorageTek appears to be for
business reasons only, EMC's purchases of Documentum and VMWare
have obvious technology and business process synergies. Both
companies bring strong technologies to EMC's efforts to evolve from
a storage company to an information lifecycle management provider:
Documentum brings skills in managing unstructured data, while
VMWare's strength is in virtualisation across Intel-based
servers.
Egge says EMC has lots of cash for acquisitions and is going
about it in a determined way. "Like others, EMC has identified
storage management as important in the future. The VMWare
acquisition is a sign that EMC is becoming more than a storage
player and is getting into storage infrastructure, because the
system suppliers continue to grab mindshare. We ask people who they
think the top storage suppliers are and they consistently say IBM
and HP."
But incorporating VMWare into EMC will be tricky for EMC because
the many players it has to work with in the server arena mean it
must be treated carefully by its new owners. To this end, EMC has
decided to maintain VMWare as a separate brand to protect existing
partnerships.
"Because of the nature of its business, VMWare needs to maintain
its reputation for independence across all the server companies,"
says Titterington. "In some ways it is an odd acquisition. EMC
cannot swallow it whole or it will become worthless."
Analysts also regard Symantec's acquisition of Veritas as
unusual. Longbottom says, "Symantec is a
yellow-box-in-PC-World-type company, while Veritas sends people
into enterprises to consult on large-scale solutions."
But although that is a common perception, Symantec is changing,
with the Veritas takeover viewed by some as a pre-emptive strike
against Microsoft, which is throwing a long shadow over the
security and storage markets.
Symantec CEO and ex-IBM man John Thompson has made no secret of
wanting the company to be the next software giant. Big names such
as Mercury Interactive, Compuware and Novell are touted among those
likely to be on Thompson's shopping list.
Clarke predicts that the Veritas acquisition will help Symantec
gain a firmer foothold in the enterprise market. "It will provide
opportunities for Symantec to do more business in the enterprise
market, which is where it needs to be to remain competitive," she
says. "It also fits in with Symantec's aim of managing information.
It has the security and the storage management. If it wants to do
true information management, it now needs content management.
"The Veritas-Symantec deal will see security embedded into
storage solutions as a way of helping to manage information. The
product where this is likely to be seen first is in the e-mail
archiving product Enterprise Vault, where anti-spam and anti-virus
software will provide protection to the e-mail system. This will be
a differentiator for the new Symantec and will provide customers
with a single product for e-mail management: something that is not
currently possible."
So, besides the prospect of new products and companies
developing new areas of expertise, what should users make of these
changes? With the market consolidating, you should expect
salespeople to try to sell you more, says Titterington.
"In the short term I can foresee no particular effect on users,
but in the long term there will be pressure to buy more than just
the storage products you have traditionally bought from them."
Customers should try to take advantage of the fact that
once-separate companies are now under the same roof to strike deals
for licences that span product categories. After all, if one
company now owns several of those you have dealt with in the past,
you should reap the benefit of the efficiencies this brings.
"Customers should be looking for integration between products
and their sale as a single product with a single licence, and not
simply the bundling together of different products with separate
licences and support. They should also be looking for a single
point of contact for terms and conditions, products or support,"
says Clarke.
So will there be more consolidation in the future? Probably not
between major storage companies because most of them are big
players now. But there is plenty of scope for the type of
overlapping between sectors that has characterised recent deals.
More multi-discipline suppliers are likely to enter the storage
market through acquisition, and storage suppliers will acquire
other suppliers outside the storage industry.
It is a case of watch this space. The sector's next big
acquisition is rumoured to be a planned £24.4bn bid by Cisco for
EMC. We have long heard of the increasing importance of storage as
we produce more and more data every year and that would further
prove the willingness of big players to bet on it.