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.

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