Some weeks are quiet and some not so much. EMC pulled together one of the most powerful partnerships this week, from an enterprise standpoint. Dell acquired Perot Systems and became a true enterprise player. And the Oracle-Sun deal began to look like a disaster. Individually, these are interesting moves. Collectively, they indicate a changing power structure in the enterprise space, and all of this will directly affect the move to cloud computing.
EMC/Cisco/VMware: Building a Virtual HP or IBM
This alliance, focused sharply on the opportunity represented by the emerging private cloud market, is positioned sharply against similar efforts by IBM and HP. Individually, these companies simply don't have the scale they need to compete effectively against the highly integrated offerings from HP or IBM. Collectively, they represent the leading independent storage company, the leading networking company, and the founder of the technology most heavily used in cloud computing, the virtual machine.
This combination of products and services is competitive to the offerings that IBM and HP bring to the table. It likely will lead where networking and information management is critical, given that this is where the partners individually have market leading positions, and lag where server hardware breadth is critical, since HP and IBM have vastly stronger server blade offerings. On services, an integrated effort will be critical to making this all work and EMC, whose focus on customer satisfaction I've written about, is playing the role of general contractor. This is a solid effort to step up to this new opportunity but its success will depend on either getting a partner that is stronger on servers or Cisco rapidly ramping its own server efforts to be more competitive to IBM and HP. The latter, given IBM and HP's scale, will be difficult. But given Cisco's size and resources and the special nature of this market, it's not impossible. This does represent a major attempt to balance HP and IBM and create a third major competitor for the private cloud market.
Dell Goes Enterprise Class
Dell traditionally avoided services because services tend to collapse margins and slow growth. But, in a down market, services ensure customer loyalty and don't decline very rapidly either, providing much more predictable quarterly numbers. Not having services has really locked Dell out of a lot of the potential business and while it has historically partnered, even with IBM Global Services, the result was that Dell really wasn't considered a true enterprise player.
With Perot Systems, which just closed this week, it now has a comparatively small but nearly complete enterprise services offering and can realistically sit at the table with the major players. Dell may lack the breadth of products, both hardware and services, but what it does have sits in the middle of where most of the volume appears to be at the moment. This merger effectively now adds a fourth chair at the table for enterprise companies that can handle large-scale projects like private cloud efforts and once again changes the corporate dynamic.
Oracle Repeats Mistakes, Looking to Exit Sun Deal: Is Snorkel Dead?
Large companies, for whatever reason, seem to think that they don't really have to listen to regulatory agencies, particularly if these agencies don't exist in the U.S. We first saw Microsoft get into a pissing match with the EU and, after some legendary fines adjusted its behavior, Intel got similar treatment. Now Oracle seems to have lined up behind these two firms by not complying with the EU's requests, which has put the Sun merger at risk. This seems particularly stupid for a company that has historically been anything but -- which makes me wonder whether this is intentional.
Sun has been bleeding value at a massive rate. IBM, and to a lesser extent, HP, has been mining Sun customer accounts very successfully. Oracle has indicated it is losing $100 million a month in value while approval for this deal has languished, suggesting it has dropped nearly $1 billion in value since it bid for the company -- and this may be conservative.
Walking away from the deal would have serious penalties associated with it but if an EU decision forced it to walk away, there likely is a provision that protects it in case a government blocks the deal that would come into play.
I've been wondering for some time if Snorkel (Sun and Oracle) is dead, but this may now be intentional. So I wonder if Oracle isn't using the EU to help it exit the deal and all of the posturing showing support for it is in anticipation of any lawsuits that could result when it exits, to simply to make it look like it is trying its best. Stranger things have happened, but this merger is clearly at risk.
Changes at the top between players in what is becoming a suddenly dynamic enterprise market are hard to miss. EMC, Cisco, VMware, Dell and Oracle clearly want a seat at the super-company table. The path that each is taking is different and Oracle may be deciding that a seat just isn't worth the cost at the moment. But the players at the top are certainly changing and that suddenly makes this large-scale, private cloud-focused market very interesting.