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12/22/2010
01:50 PM
George Crump
George Crump
Commentary
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Why All The Big Deals?

Have you noticed that there seems to be a lot more "big" deals when it comes to storage acquisitions lately? Dell-Compellent, EMC-Isilon, HP-3PAR, EMC-Data Domain. This is not to say that there hasn't been smaller deals and part of the reason for the increase in big deals is perception, there is more to discuss which generates more press. There is however strategic reasoning behind the increase in larger deals.

Have you noticed that there seems to be a lot more "big" deals when it comes to storage acquisitions lately? Dell-Compellent, EMC-Isilon, HP-3PAR, EMC-Data Domain. This is not to say that there hasn't been smaller deals and part of the reason for the increase in big deals is perception, there is more to discuss which generates more press. There is however strategic reasoning behind the increase in larger deals.The companies getting bought like those listed above are mature and in almost every case had been a stand alone company for five years. They had established products, salesforces and channels. They also had measurable customer bases and obviously mature products. The reason I believe these types of transactions are so attractive to the larger companies is all they have to do is not mess it up. In most cases their plans are to just leave the company getting bought alone, fund their growth and watch the profits roll in.

There is often not even the veiled discussion of integration of the new company's technology into the existing product line. Ironically the only real integration tends to be in people but typically only the sales organizations and the back end financials. Product development in particular is left alone. As we discussed in our recent article "Which Storage Company Gets Bought Next: Areas of Need" what is really happening is that the purchases are being made to fill the holes in the product line so that the sales organization has multiple products to solve every problem.

This is not a bad strategy. The acquiring company gets a needed infusion of money and, possibly more important, access to a significantly larger sales organization to help promote its products. They are, in most cases, left on their own to continue to develop and innovate the product. The larger company in theory can now solve more of their customer's storage related problems.

I do think this puts more pressure on the larger vendors to educate their sales and engineering organizations on how to best solve each individual customer problem. I fear that too often the sales pitch is going to be you (the customer) pick what storage solution you think is best and we'll sell it to you. Until then the IT team is going to have to be better educated on the various differences in the technologies. If you ask a vendor 'should I use NAS or SAN for my virtual infrastructure' I fear the answer being "you pick and we'll sell it" instead of a thorough discussion of the pros and cons of each storage protocol.

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George Crump is lead analyst of Storage Switzerland, an IT analyst firm focused on the storage and virtualization segments. Find Storage Switzerland's disclosure statement here.

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