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.