Friday, March 27, 2009

Reading tea leaves

There has been a lot of discussion in the trade press about the IBM and SUN merger and some folks are looking at the storage side of the merger .

It's perhaps the storage side that will see the most fireworks, as there is more than a whiff of monopoly in some market segments, not to mention a large amount of product overlap. The complete IBM storage line up, of course, will probably remain intact. At the high end, in particular, IBM has its own mainframe-based storage with the DS8000, whereas Sun resells a Hitachi solution.

Otherwise, both Sun and IBM OEM their entry and enterprise midrange storage from LSI, so there is no real conflict there. Similarly, on the virtual tape library (VTL) side for open systems, both have leveraged Falconstor, although IBM recently bought Diligent for VTL — a solution that also has the much in demand deduplication technology. In addition, Schulz thinks IBM will probably continue with its OEMing of NetApp-based N series while boosting its own capabilities by combining the best of Sun/IBM hardware and software technologies for NAS as well as object-based and archiving solutions.

The tape side, however, is where things could get really contentious and possible fall afoul of regulators. Uniting Sun's StorageTek holdings with IBM's considerable tape offerings give the resulting firm a huge market share and control over much of tape landscape. This may not pass muster with the DOJ.

If that regulatory minefield can be negotiated successfully, there might well be major Sun casualties in the StorageTek line. However, Olds said he believes Sun's low-cost 'open source' storage line will survive as it can be used as a weapon against major competitors such as EMC

Over the last twenty years in business I have noticed a strong correlation between salesman, compensation schedules, and the strength of a product line's sales. When looking at the merger and its effect on product lines, I would think that the merged company would provide a better compensation schedule to sales folks on products that it makes the most margin on. Therefore, I would expect products where the combined company is making margins as a reseller to slowly fade away.

Monday, March 23, 2009

Strategy and Tactics

There is a lot of discussion about the possible acquisition of SUN by IBM. Whether it happens or not presents the issue again of how to manage legacy equipment in your data center. Critical components in your data center might be unsupported after an acquisition because they are not profitable or compete with other components owned by the acquirer. Hardware companies and software companies go out of business all the time, and customers are left looking for third party support to get them over the transition.

Most companies have some sort of formal or informal D/R plan, but very rarely have I seen a plan where a company deliberately has competing vendors in their data center in case of the acquisition or collapse of one of their vendors. One of our customers in the Southeast, keeps us in their data center in case NetApp gets acquired or for whatever reason terminates support for their legacy equipment. This strategy also works to lower the cost of maintenance and support because two companies are competing for the business, forcing sales folks to sharpen pencils.

NetApp and SUN have seemed to compete and cooperated for many years since they co exist in many data centers. The lawsuits between them seem to have strengthened the the wing in each organization that wants to compete instead of cooperate. If IBM purchases SUN the competition wing of SUN might not want to continue the OEM relationship that IBM has for NetApp's filers.

I am certain that the lawyers are having some interesting discussions about this and other subjects related to cooperating with the competition.

WSJ on Saturday

By WILLIAM M. BULKELEY

Teams of International Business Machines Corp. lawyers are examining Sun Microsystems Inc.'s contracts and documents in a due-diligence process that could take a number of days, according to people familiar with takeover negotiations between the two companies.

These people said it isn't clear how many days will be needed for the lawyers to finish their work.

Barron's on Saturday
SATURDAY, MARCH 21, 2009
PLUGGED IN
IBM Deal May Hurt NetApp
By MARK VEVERKA | MORE ARTICLES BY AUTHOR
NetApp's dimmer outlook.

IBM'S ACQUISITION OF Sun Microsystems might make sense if Big Blue could snap up Sun on the cheap. Then IBM could justify a potential deal as an inexpensive way to acquire Sun's customer base, provided it succeeds in drastically slashing costs at the Silicon Valley computer maker. From a hardware perspective, however, there are many questions regarding overlap and fit (see Follow-Up).

The biggest loser in an IBM (ticker: IBM) takeover of Sun (JAVA) could be NetApp (NTAP), a maker of networked storage systems, as the pool of potential buyers for the company would shrink.

Wednesday, March 18, 2009

If IBM buys Sun, will the lawsuits continue?

This morning's news of negotiations between IBM and Sun could have a direct effect on NetApp users and also on the NetApp / IBM relationship of re branded filers. After all Sun makes the ZFS powered Thumper and there are lawsuits between Sun and NetApp about ZFS and Ontap. If IBM buys Sun - wouldn't that mean that IBM is now suing its partner NetApp?

Also, how would IBM position its re branded filers against its own Sun products? IBM is a big portion of NetApp's sales and this acquisition could seriously jeopardize the relationship between the two.

Here is the article:

Technology Alert
from The Wall Street Journal


March 18, 2009

International Business Machines is in talks to buy Sun Microsystems in a combination that would bolster IBM's heft on the Internet, in data storage and in government and telecommunications areas, according to people familiar with the matter.

It is unclear whether the negotiations will result in a transaction, but if the deal does go through, IBM is likely to pay at least $6.5 billion in cash to acquire Sun, the people said. That would translate into a premium of about 100% over Sun's closing share price Tuesday.

Monday, March 16, 2009

Cisco enters the storage broom closet

Cisco is looking to reduce the TCO (Total Cost of Ownership) of the complete data center and they seem to be looking to partner with EMC and NetApp to enable an integrated solution. NetApp is famous for talking up interoperability while in fact locking customers into their set of solutions. It will be interesting to see if Cisco can herd NetApp and EMC salesman into the same room with a customer to see if they can work together to close a sale to the customer. I predict a collision of interests as both companies are fighting for market share and floorspace within the customers data center.

Cisco has a lot of leverage, but salesman never change .

Let's watch this as it develops.

Starting in the second quarter of 2009, it plans to offer complete systems of up to 320 compute nodes housed in 40 chassis, with data flowing across 10 gigabit Ethernet.

Critical to its challenge will be its ability to draw on the expertise of key partners. Its compute capabilities, UCS B-Series blades, will be based on Intel Nehalem processors, the follow-on generation from Intel Xeon; VMware will supply the critical virtualisation software; BMC will enable “a single management environment for all data centre devices”; EMC and NetApp will be responsible for the storage system units; Emulex and Qlogic will input storage networking technology; Oracle will deliver middleware; and key systems software will come from Microsoft and Red Hat.

The company is already making bold claims for the savings that clients will reap from such an integrated fabric. UCS “reduces total cost of ownership: up to 20% reduction in capital expenditure and up to 30% reduction in operational expenditures”.

Monday, March 09, 2009

Mixed Messages

Are your storage purchases in 2009 increasing or decreasing?

By Paul Travis, March 6, 2009, 1:40 PM


For the first time in more than five years, worldwide factory revenues for external disk storage systems posted a decline in the fourth quarter of 2008, according to IDC's Worldwide Disk Storage Systems Quarterly Tracker. Revenues totaled $5.3 billion, down 0.5 percent, IDC said. The numbers show that storage, one of the stronger tech sectors, isn't immune to the global economic slowdown and cutbacks in IT spending by businesses and other enterprises.

EWeek

Eighty-nine percent of storage survey respondents report that they will either maintain or increase their storage purchasing in 2009. There is reason for most of the storage business to remain confident looking ahead to next year -- despite the free falls in other sectors of the economy.


My viewpoint - Even in a slow economy some customers are requiring more storage, and some customers are requiring less. Companies laying off thousands of employees will probably see their storage needs flat line or decrease. Fewer employees are going to store less than a full staff would.

All the companies we speak with and visit are looking for a better deal on their storage purchases and support. Hardware vendors are extremely negotiable now on price and terms. If you have money and are looking at new equipment it is definitely a good time to get competitive quotes. If you are looking for ways to stretch your storage maintenance budget there are many options available. Our travel budget has increased, as we are seeing more people who are interested in our services all over the country.

Saving money in hard times is not easy, but efficiencies can be found that were over looked when times were good.

Tuesday, March 03, 2009

Time of great changes

Today I was on the phone with a series of customers in the South and Southwest, because I am going to visit with them in the next few weeks. The Economic situation is on everyone's mind. One customer told me that "capital is on strike" and then he told me to look up the IBD editorial. I did and it is sobering. I have pasted a few portions from the article below.

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In the three months since the election, the broadest measure of the stock market's value, the Wilshire 5000 Index, has plunged more than 30%, slicing over $3 trillion from Americans' wealth. Investors have walked away from investing, while businesses shut down factories and offices and slash jobs.

This is both highly significant and dangerous. Capital, bluntly put, has gone on strike. Those who own wealth are pushing it to the sidelines, as a young and inexperienced president tries to jam through the most sweeping economic changes in over 70 years.

The prospect of these changes becoming law has already radically altered our nation's economy. Entrepreneurs and CEOs who once created new products, new services, jobs and trillions in wealth for America's workers and retirees now find themselves vilified and punished for their success.

*SNIP**

This isn't the only warning sign. A new study asserts that some 100,000 highly educated, well-trained Indians now living in the U.S. will return home in the next few years. Ditto China.

Immigrant entrepreneurs are highly sensitive bellwethers of economic and social conditions. They know where the opportunities are — and where they aren't. They're voting with their feet.

***SNIP**

An estimated $1.4 trillion in new taxes planned by the new administration over the next decade explicitly target the people President Teddy Roosevelt once derided as the "malefactors of great wealth" — those in the top 5% of the income spectrum. Yet, they're the ones who've made our economy the envy of the world.

By the way, under Obama's plan the rich won't pick up the whole tab. New energy taxes of $646 billion will hit the middle-class hard. Meanwhile, in just eight years, our national debt will double to $20 trillion, as nondefense federal spending jumps from the long-term average of 16.5% of GDP to above 23%.

You — or your children — face higher taxes for decades to come.

As our stock markets melt under a barrage of new taxes on incomes, estates, capital gains, dividends and energy, it's good to recall that more than 100 million people own stocks or mutual funds. And that the stock market is the main wealth- and growth-creating mechanism in our capitalist society.

But when taxes go up, regulations proliferate and the rule of law and private property protections are weakened, the economy will invariably suffer. This is a universal lesson of economic history, one we ignore at our peril. And yes, this is what's happening now.

No, we don't blame all our current ills on President Obama. He came in at a tough time, when many bad decisions had already been made. But he is responsible for what he's done since.

His stimulus package is little more than a down payment on a socialist economy. It raises taxes on the successful, brings back the welfare state, hands out favors and cash to friends of one political party, while imposing government control over the entire free market in ways that just a year ago would have seemed unimaginable.

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This is my twentieth year in business and as an entrepreneur, I can assure you that I am always listening to what our customers are doing and how they may need our help. Our customers are hunkering down, they don't see a short term fix. They are looking to us to provide them a lifeline to get through these tough times, they don't know how long they will last. I hear from our European customers and they say the economy of the world is in flux. Markets are looking for long term answers not short term patches. We are providing answers to our customers that solve their problems in our tiny niche, but they are worried about Macro trends. Our customers come in all sizes - they are spread all over. There is a lack of confidence in our leaders. There is a lack of confidence in everyone's leaders.

As an entrepreneur, I am an optimist and I take risks with my capital to grow the business. I can assure you that I will bitch, complain, argue and laugh with my friends, customers and maybe even a competitor about the economic situation. I remain optimistic that over the long term we will continue to bring the innovations to our niche market that our customers want. We will figure out a way to solve problems creatively. But we need a steady hand at the controls, which we don't seem to have today.