Dell Strikes Out On 3Par, But Plenty Of Storage Options Remain

Concerns about the future of Dell and its storage business in the wake of its failed bid against HP for the acquisition of 3PAR may be premature, as Dell still has plenty of potential moves that could make it a player in the converged networking game.

On that list of next moves are several possible acquisitions that could make Dell a contender in the enterprise storage market. Dell could also do a reseller deal or OEM deal with another storage vendor. It could also start acquiring virtual storage startups that would give it a leg up in that part of the business.

In fact, the only option not available to Dell is doing nothing.

Dell is at a crossroads. Dell's primary business today is in industry-standard servers and PCs at a time when its primary server competitors, HP and IBM, are looking for ways to combine servers, storage, and networking resources into a combined offering.

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That combined offering, called converged infrastructure, brings those resources together into a single architecture with unified management.

HP and IBM, along with Cisco, which has its own nascent blade server offering, are building a converged infrastructure offering as a way to help customers more easily adopt cloud computing and, along the way, lock out offerings from competing vendors.

While Dell has a solid midrange storage technology and business thanks to its 2008 acquisition of EqualLogic, the company also partners with EMC in midrange storage and depends on EMC for the relatively small amount of business it does in the enterprise storage market.

However, by bidding up to nearly $2.3 billion for 3PAR, Dell sent a signal to EMC that it is looking for an alternative for building its enterprise storage business.

Now that HP is getting 3PAR, Dell can use that $2.3 billion to start shopping for other vendors.

Several possibilities come to mind.

Next: Not The Usual List Of Suspects

Among the potential Dell acquisitions most often mentioned by industry watchers are Compellent, Isilon, CommVault, and Brocade. However, none of these completely address the issue of how to get Dell into the enterprise storage business.

Solution providers who partner with and closely follow Dell, HP, and/or EMC also have a list of potential acquisitions for Dell which are not on the industry radar, including Xiotech, Hitachi, or one or more storage virtualization startups.

Storage arrays from Xiotech, an Eden Prairie, Minn.-based developer of enterprise-class storage technology, do not serve the same level of customers that high-end EMC arrays do.

However, such an acquisition would give Dell access to that company's ISE technology, which are self-contained storage modules which include up to 8 TBs of capacity, dual controllers, cache, dual power and cooling units, and dual battery modules in a single package.

Xiotech would also bring Dell two of the storage industry's smartest people, CTO Stephen Sicola and Corporate Fellow Richard Lary. Sicola and Lary both worked with some of Dell's top storage execs years ago at Compaq.

An acquisition of Hitachi's storage business, on the other hand, would give Dell instant credibility in the enterprise storage market.

Mark Gonzalez, president of Nth Generation Computing, a San Diego-based solution provider, said that there are few independent high end offerings that are as viable as 3Par was for the price.

"With HP acquiring 3PAR, and thus over time fewer Hitachi arrays being sold by HP, and with (Oracle) discontinuing its relationship with HDS (Hitachi Data Systems), maybe Hitachi would be willing to sell its storage business to Dell," Gonzalez said. "That would give them a heck of a product both in the mid-range and the high end. If Dell did that, they’d totally be able to sever their relationship with EMC and have all of the storage assets in house."

Next: Thinking Outside The Box, And Inside The Box

Jamie Shepard, executive vice president for technology solutions at International Computerware, a Marlborough, Mass.-based solution provider, said Dell should consider thinking outside of enterprise storage and go for one or more startups with expertise in storage virtualization.

"Dell should buy a Greenbytes or Actifio to attack the virtual space with dedupe, replication, and NFS (network file system) performance, and scale to extend a customer's virtual data center," the solution provider said. "It would then simply do what other vendors are trying to simplify: attack the virtual messaging."

Among the list of usual acquisition mentions is Compellent, Eden Prairie, Minn., is a fast-growing developer of storage virtualization technology that automates the movement and management of data at a granular level to increase storage efficiency, scalability and flexibility. While Compellent considers EMC as its primary competitor, the company has yet to compete at the same level as 3PAR or EMC's VMX products.

Seattle-base Isilon provides scale-out storage, a technology in which both capacity and processing power are increased at the same time so that very large data stores can be accessed as easily as small data stores. However, Isilon is focused on serving data in the file format, which is different from the block format used in most enterprise storage platforms.

An acquisition of San Jose, Calif.-based Brocade would give Dell the enterprise-class storage and IP networking technology to strengthen its hand in the converged infrastructure market. However, Dell would still probably need an enterprise storage vendor to be a serious part of that business.

Also, because of Brocade's importance as the last major independent provider of both storage and IP networking technology, an acquisition bid by Dell could possibly start a bidding war with other Brocade partners, particularly IBM.

Next: Other Alternatives, Including Some Unpleasant Thoughts

CommVault, an Oceanport, N.J.-based provider of data protection, recovery, and dedupe software, is often mentioned as a potential acquisition target. While CommVault would bring Dell a world-class storage software offering, and would probably be a good acquisition, it would not bring Dell the enterprise storage hardware it needs to get into the converged infrastructure business.

Gonzalez said that, absent buying the Hitachi storage business, he would stick with EMC at the high end and continue with its EqualLogic line in the faster-growing entry-level and midrange storage market, and then go and acquire CommVault.

"(CommVault has) a great product," he said. "It’s a high margin business. Dell already sells it, so they have the go to market model down for it. It’s a complex solution sale so it drives services. If I were Dell, that’s the next acquisition that I would try and make."

Other solution providers suggested Dell would be better off working with another storage vendor.

With HP's acquisition of 3PAR, its importance to HP, which currently OEM's Hitachi enterprise-class arrays, is diminished, creating an opening for Dell to step in with its own OEM deal.

Or, as another solution provider suggested, Dell may prefer to OEM some new storage products from Hitachi Data Solutions (HDS). HDS has a whole new line of high-end storage and stack coming out which is technically better than anything in enterprise storage when it gets released," said the solution provider, who requested anonymity.

Other options open to Dell are less optimistic for the future.

Shepard said Dell could carry other storage vendor lines and become a less strategic vendor similar to CDW.

Or Dell could try to repair its strained EMC relationship. "But this will be hard to do given Dell's bold move to acquire 3PAR to break free of EMC," he said.