IBM’s recent move to acquire Cleversafe pales in comparison to this week’s proposed mega-merger of Dell and EMC, but in the long run promises to be much more successful.
With Cleversafe, a supplier of object storage and erasure coding technology, IBM acquires a technology that is already available from other vendors, including open-source object storage Ceph, which is supported by Red Hat much as Linux is. But the fact that Cleversafe introduced the erasure-coding approach to the market well ahead of competition, plus its customer base, are enough to make this a significant step forward for IBM.
When it announced the deal last week, IBM noted that IDC estimates that object storage will reach $28 billion annual revenue in 2018. Cleversafe has some sizable installations, including a rumored deployment at the CIA, which is one of its investors through In-Q-Tel, the venture capital arm of the CIA.
Coupled with the long-term high growth of big data, the object or unified storage model should become the norm in the industry in a few years’ time, so IBM effectively has picked up a key set of technologies and a large share of a potentially huge business.
Still, for all of that, IBM is subject to the same fears that EMC and Dell obviously have as white boxes gain traction and hardware prices fall. However, IBM has been shifting towards software and services, and the Cleversafe deal advances IBM’s software strategy, rather than any plans to build appliances for sale. We can expect the new technologies to augment IBM’s cloud storage software solutions and also be integrated into its cloud services, allowing a competitive position closer to that of AWS and Google.
IBM’s focus on building its software portfolio while deprecating hardware is a good strategic direction and IBM seems to be savvy about how it’s going about it. In contrasts, the Dell-EMC merger seems to reinforce the hardware (or “systems”) focus that both companies have and merger confusion will block the realization that software and services should be the direction the combined company chooses.
Another contrast between the Dell-EMC merger and IBM’s acquisition of Cleversafe is the speed at which the companies will see a return on the investment. Dell and EMC are huge companies with much overlap in their product lines and executive management job functions. Economics demand something of a bloodbath, but whose blood gets spilt? You can hear the trenches being dug and the sandbags being piled already!
IBM obviously has a smaller task on hand, but the synergies of Cleversafe with its cloud business and software operations are much clearer. Technically compatible from the start, designed for COTS-based clusters and clouds and complementary to existing code and operational flows, it will be much more like a user deployment than a merger, in the short term at least. This means that IBM can begin deriving value on its investment almost from the start.
Dell and EMC face a long pre-nuptial dance. There’s a period where EMC can select another suitor, though that doesn’t look likely at this point. More importantly, the merger will not formally complete for about a year. That period will tank company morale, lead to confusion in the channel and delay properly aligning the strategic and organizational plans. Revenue probably will suffer, since the future consolidation of product lines will place users in the position of picking winners. The usual response to that is not to buy until clarity sets in.
Altogether, IBM’s Cleversafe deal looks mighty good compared with Dell+EMC. There will be more from IBM in the M&A area; not huge deals, but strategic and easy to assimilate. The grand gesture of the boys from Austin may have created a bigger target and one that will flounder for a while, while IBM’s move is as elegant as a rapier thrust.