It's Off To The Races For 2007 Consolidation

Well, here we go again. Cisco Systems has already laid to rest any speculation that consolidation in high tech will slow down in 2007 with the announcement it will gobble up e-mail security vendor IronPort Systems for $830 million.

ROBERT FALETRA Can be reached at (781) 839-1202 or via e-mail at rfaletra@cmp.com.

Cisco, which has a longstanding strategy of being a serial acquirer of smaller companies that boast solid technology, is pushing heavily into e-mail security. And since IronPort has just 150 solution providers in North America and 500 worldwide, you can bank on Cisco opening up the IronPort channel once the deal closes.

I don't care what Cisco says about not flooding the field, so to speak. It isn't buying IronPort and shelling out $830 million to keep its product availability contained. While Cisco may require channel partners to invest in training and such for the IronPort products in order to get its money's worth, you will see many more Cisco partners carrying IronPort before year's end.

So, if we're starting the year with another buyout of a company that 10 years ago would have been more interested in going public than in selling out, should we expect more of the same in 2007? Hell, yes. This year will be the king of all years in terms of consolidation. Security, storage and managed services players all will be dating potential suitors this year.

Security, of course, is a large playing field that is becoming more specialized all the time. It's technically difficult to do well because the hackers and attackers are continually getting more creative. As such, security lends itself well to a best-of-breed product suite approach—something Cisco clearly understands and is executing on.

	This year will be the king of all years in terms of consolidation. Security, storage and managed services players all will be dating.

Competitors will not stand still. Every small, undercapitalized company that has strong security technology is a target, and many of them will be bought this year.

I'm convinced the same will hold true in the network storage market on both the hardware and software sides. The big dog in this space, of course, is EMC. It, too, hasn't been bashful about acquisitions. I actually think this will be the hotter space to watch because, from an end-user perspective, storage is always a bigger need. While you can't stop storage growth needs, you can find alternative ways of satisfying your thirst with lower-cost alternatives. Those alternatives almost always come from innovative startups that are increasingly pioneering niche growth areas that make them ripe buyout targets.

It's these smaller, innovative companies that you as a solution provider need to spend more time seeking out. The reason is they always present greater margin opportunity than the established players. Often, they give you an ability to offer a unique product that is cutting-edge. Fact is, these smaller players need you more than the big boys, so they are willing to work with you.

WHAT ARE YOUR CONSOLIDATION PREDICTIONS FOR 2007?
MAKE SOMETHING HAPPEN. E-MAIL CMP CHANNEL GROUP PRESIDENT ROBERT FALETRA AT RFALETRA@CMP.COM.