This morning, Dell agreed to acquire 3PAR for $1.15 billion for one simple reason: 3PAR is the only smaller independent company with a viable competitive offering to the higher end of EMC’s product lineup. The high end of the storage market has long been dominated by EMC, IBM, and Hitachi Data Systems. Dell just turned that trio into a quartet.
In October 2001, Dell and EMC inked a 5-year pact for Dell to resell EMC storage solutions. It was the height of the Fibre Channel market, and Dell needed a way to maintain account control across both servers and storage. The partnership appears to have worked well, as it extended far beyond the initial term.
However, Dell could not rest having such a large portion of its business controlled by a partner and potential competitor. In part because the original Dell and EMC deal was centered on Fibre Channel storage, Dell acquired EqualLogic, the independent market leader for iSCSI storage, in 2007 for $1.4 billion. Fibre Channel tends to dominate the higher end of the block-based storage market, while IP network based iSCSI products fit well in the small to mid-sized enterprise arena.
With the major technology players working fast and furiously to lock enterprise customers in a soup-to-nuts stack across servers, networking, and storage, Dell had little choice but to boost its portfolio in the high end of the storage market. And again, 3PAR is really the only smaller company with a product that can stand shoulder-to-shoulder with EMC, the traditional go-to player for high-end storage solutions.
There are other trends working in 3PAR’s favor, specifically virtualization. When VMware shaped the virtualization landscape, it made a decision to focus on block-based storage attachment. In this configuration, all the file system intelligence remains in the virtual host, hypervisor, and server layer, and not further down within the storage system. It was a match made in heaven for EMC. In many ways, virtualization is the new file system, as system architects decide on their hypervisor strategy first, then go from there.
3PAR has a unique product line that is both block-based and more scalable other available solutions. So even in the midst of an unstructured data explosion, the block-based players are enjoying a resurgence thanks to architectural decisions made by VMware.
Slowly but surely, Dell will wean its way off the EMC storage machine. Not immediately, but eventually. In the meantime, IBM will continue to sell storage solutions to those companies that buy into the 100 percent integrated IBM approach, and will also make use of its recent XIV acquisition. HP is perhaps the most exposed, still relying on Hitachi to provide the hardware and some software for its high end XP arrays. Supposedly HP was in the bidding for 3PAR as well, but likely could not move quickly enough with other short-term priorities on its plate.
With both enterprise and cloud providers moving toward virtualized computing environments in need of scalable block-based storage, stay tuned for the maneuvers of these big four players — EMC, IBM, Hitachi, and Dell– as they capitalize on opportunities to showcase their high end offerings, and for HP to figure out a way to maintain or improve its position.
Gary Orenstein is Host of The Cloud Computing Show