Nothing like a market meltdown to encourage co-operation.
If the rumours are true that EMC is forming a channel relationship whereby Dell will resell its midrange Clariion storage systems, then the industry has finally reached the nadir of what once seemed like a foolproof profit sector.
When data storage evolved from servers surrounded by hard disks into relatively independent components of enterprise infrastructure, it made sense that companies like EMC and Netapp would prosper. The business proposition here runs something along the lines of what we’re now seeing in the Web hosting market, or the outsourced security space: if it’s mission-critical, only specialists can give it the attention it deserves.
Of course, we’d all prefer to deal with specialists, if we could afford them. But when times are tight, sometimes a general practitioner will do.
Such is the dilemma for EMC, which recently said it would cut more than 2,000 jobs this year and warned of a third-quarter loss. This news came only a few weeks after it launched the Symmetrix 8830, its latest offering for the high-end enterprise customer set.
Companies like IBM and HP are wisely mapping their storage plans to that of their server products. At one point, these same vendors sought to build out their storage business somewhat, clearly jealous of the market share EMC had captured. But it’s a delicate balance between emphasizing the “complete solution” versus specialization. Like it or not, these aren’t specialty storage shops, and it has taken the market downturn to teach them that.
Dell is relatively late in accepting this reality. Earlier this year it signaled a change in philosophy by allowing its high-end storage products to work on its competitors’ servers. IBM and HP had made these concessions — if that’s what they were — long ago. (If everyone was as committed to openness as they say they are, we would have seen this kind of compatibility from the get-go.) It must have been a bitter pill for Dell to swallow. The company made its first — and so far only — acquisition two years ago with the purchase of ConvergeNet, a maker of high-end storage products. This was supposed to be Dell’s answer to its rivals. The offices it closed in May were part of that buyout.
As the storage market stagnates, we’re going to see more partnerships born more out of necessity than strategic advantage. A company like Sun, which for years has lacked any high-end storage offering, can sneak its way in through a partnership with Hitachi to sell its Lightning line. EMC, meanwhile, can benefit from the exposure to Dell’s server customers in the mid-range.
In an earlier editorial, I mentioned the pressure Sun VARs who had been selling EMC’s wares would be facing in the wake of the Sun-Hitachi partnership. Choosing the direct PC giant as its mid-range partner does little to suggest EMC sees a great future in the reseller channel. Whereas Sun faces a challenge in converting those VARs, it has the server advantage, particularly in light of the “Starcat” offering released Tuesday. Unless there is a very good reason why customers want to stick with EMC, Sun could see some gradual shift in market share, but only once the overall economic picture brightens.
It might be more logical at this point for EMC to divest itself of Clariion entirely and concentrate on the high end while it still has the chance. Whatever happens, there will be important technology innovations where it could still differentiate itself. A good example is virtualization, a buzzword that refers to the automation of backup and the addition of new storage devices. While Sun executives recently told me true virtualization was still several years away, companies like HP are already preparing for it with the acquisition of StorageApps, which was also completed Tuesday.
The server companies have the liberty of going back to their original strategy of treating storage as one of many pieces to the puzzle. EMC must continue to prove it takes a standalone organization to make the pieces fit. Working with Dell does not deliver that message.[email protected]