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EMC: Virtually a New Company EMC Corporation has announced that it has signed an
agreement to acquire Palo Alto-based VMware, Inc., a privately held software
company, in a cash transaction valued at approximately $635 million. The
acquisition is subject to customary closing conditions and regulatory
approvals, and is expected to be completed early in the first quarter of
2004. Upon completion of the acquisition, EMC plans to operate VMware as a
software subsidiary of EMC, headquartered in VMware's technology enables Microsoft Windows, Linux, and
NetWare to run simultaneously and independently on the Intel-based servers or
workstations. This allows datacenter managers to integrate these
"virtual machines" into their existing physical infrastructures and
management frameworks. The value of the VMware solution is the consolidation
of underutilized Intel servers, significant reduction in server provisioning
time, and the dynamic reconfiguration of application workloads across servers
and workstations, all without service interruption or downtime for hardware
maintenance, deployment, or migration. The company has strong ties to IBM, HP,
and Dell with all three hardware makers reselling VMware's software. IBM, in
particular, includes the VMware technology as a key piece of its Intel-based
server software strategy. EMC has stated that VMware will remain "open
and committed" to past OEM and ISV relationships. Net/Net Starting with the Legato acquisition and continuing with Documentum,
EMC has been securing strategic value-adds to their
tactical storage platform heritage. With the acquisition of VMware, EMC has
identified both their strategic vision for the future of the company and the
tactical keystone for bridging from their legacy as one of yesterday’s
leading storage hardware vendors to today’s strategic software value-add
vendor to tomorrow’s virtual information solution powerhouse. With this newly
expressed vision of a “virtual information infrastructure,” EMC has effectively
declared that information management is the software lever in this
transformation, virtualization is the fulcrum, and the object they are trying
to move is a holistic notion of information lifecycle management (ILM). In model, VMware's leadership in Intel server
virtualization together with EMC's efforts in
storage virtualization and information management will be the foundation of
this next-generation information lifecycle solution. The company’s expressed
goal of deploying virtualization technologies across a heterogeneous IT
infrastructure to create a single pool of available storage and computing
resources, enabling organizations to dynamically configure and reconfigure
both their compute and storage environments, is the very essence of the systems abstraction/virtualization that
is driving many system vendors’ current go-to-market strategies. As these
vendors strive to use the same “virtualization” architecture to promote a
bottoms-up rationalization of the piece parts into something “adaptive” or
“autonomic,” EMC gets to develop and promote a top-down information mantra as
it’s focus. The only other vendor story/strategy that has such potential for
customers to understand is IBM’s eBusiness on Demand. This emerging
information solution strategy also leverages EMC’s
7,500 Services personnel and gives their 4,500 strong worldwide, enterprise
sales force a new story for the C-level audience and the opportunity to
maintain and grow the company’s already significant presence in the
datacenter. There are three major challenges we see in deploying
VMware in this pivotal role within the EMC vision. The company has forged
strong partnerships with IBM, in particular, and HP and Dell. All three
hardware makers resell VMware's software, and IBM touts the technology as a
key piece of its Intel-based server software strategy. Where these vendors were willing to allow VMware to
“coat-tail” in exchange for such a solid value-add to their portfolio, it is
unclear how they will respond (except for Dell, already a hardware partner
with EMC and having invested tens of millions in VMware) to EMC, in the
backseat. If EMC can manage these relationships successfully and also enable
VMware (as well as Legato and Documentum) to continue developing solutions
that resonate with customers, it should blunt efforts by IBM and HP to
migrate customers to the companies’ own home-grown (or acquired) solutions. The second major challenge is to deliver a synergy between
EMC and VMware efforts that does not overshadow the VMware-focused product
line of today, but quickly establishes a tangible indication of the value
inherent in EMC’s inclusive vision. According to
EMC President and CEO Joe Tucci, EMC and VMware have
been working on a stealth project over the past year which includes building
parts of VMware's virtual machine technology into EMC's
storage management software. A secure information-oriented solution built on
such a storage-to-server virtualization package/product would give EMC a
demonstrable lead in convincing customers of the immediate value in
virtualization of their infrastructure. The third challenge will be in EMC acquiring or partnering
for the final pieces necessary to make this vision complete. These would
naturally include proven database and directory components, as well as a host
of smaller elements that could bolster EMC’s plans.
What is perhaps most interesting about the successive Legato, Documentum, and
VMware deals is how they have brought EMC’s ongoing
raft of acquisitions during the past two years into tighter focus. With that
in mind, we believe the company is not quite done in building (or acquiring)
the necessary tools to make ILM a real world solution. This is not likely to
be regarded as a happy thought for EMC’s
competitors. Overall, by acquiring VMware EMC has taken a piece of the high ground in industry standard virtualization with its vision of a “virtual information infrastructure.” From its credible position in storage and its new software value-add potential, EMC has a place at the table in the three- to five-year “virtualization” cycle the IT industry is about to embark upon. With no server system business of its own to protect, EMC can create a more level playing field for its interpretation of “virtual”; one that abstracts its systems competitors’ piece parts and includes them in a big tent vision where any kind of information can live. |