A massive battle for a little-known storage vendor 3PAR broke out this week, driven by forward-looking executives at Dell and HP. This is unusual in a world where companies seem overly concerned with quarterly income and not concerned enough about long-term strategic goals.
HP recently fired its CEO, who seemed excessively focused on quarterly revenues and likely would not have agreed to trade these results no matter how strategic 3PAR was to HP. Founding CEOs almost always think strategically, and Michael Dell still leads the company that bears his name. This battle may have raised David Donatelli, a former EMC exec who now leads HP's Enterprise Servers, Storage and Networking division, to the status of CEO contender -- or to a strong No. 2. It is clear the HP board is looking for someone with a more strategic eye this round and someone who by nature is more protective of HP employees. Donatelli appears to be both.
As a result, 3PAR may represent a critical strategic block for both HP and Dell, making its acquisition critical for both companies. Let's explore that.
The Virtual Cloud
The battle for the next big wave of revenue targeted at the server market, both stand-alone and hosted, is cloud computing or "the cloud." It represents a blend of technologies ranging from high end-servers to storage systems and the software that makes it all work.
Vendors are targeting this opportunity with full solutions, but few have the needed breadth of offerings. Each has critical holes in its offerings. The major players often have to partner to complete their solution, an approach that provides faster times to market and higher consistency. But this approach lacks competitive advantage because partners generally can also partner with competitors and Microsoft and VMware, two of the pivotal players.
This fight has resulted in huge unanticipated acquisitions like the purchase of Sun Microsystems by Oracle (Snorkel) and unique power blocks like that created by the formation of Acadia and the powerful coalition of Cisco/EMC/VMware targeted at this very space. IBM is one of the most powerful players, second only to Oracle on software, HP on hardware, and no one on services.
This puts the total amount of resources pointed at this opportunity in line with the initial move to the Internet in the 1990s.
3PAR is seen as a critical link between virtualized systems and storage. It has demonstrated that it can significantly increase the effectiveness of systems using either Microsoft or VMware technology. HP and Dell are the vendors using the highest mix of VMware and Microsoft technology; most of the other players use more proprietary stacks of software in their solutions.
This makes 3PAR uniquely valuable to both HP and Dell. For HP, Which has a light software unit compared to companies like Oracle and IBM, this fills a distinct gap. For Dell, this would help form the core of a stronger software component as that company builds out its solution.
Both see this technology and company as a must-have, driving them in this bidding war.
Wrapping Up: Pivotal Impact
This may be a pivotal fight for both companies. For Dell, it is the true beginning of what might become a software competence in an area strategic to its future. For HP, it's a critical part of its war against a field of increasingly software-heavy competitors such as Oracle and IBM. It's Michael Dell's way of moving Dell from the image of a badly aging PC maker to a cutting-edge cloud provider. For HP, it puts David Donatelli in the strategy gap that has been left vacant since Carly Fiorina left and also positions the company for a brighter future. This makes 3PAR far more pivotal than just a software acquisition because it is key to the successful future vision of both companies. Neither HP or Dell is likely to give up that vision easily to the other.