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Ever since the Dell acquisition of EMC was revealed, people in the storage industry have indulged in a lot of "who's next" speculation.
If you had Western Digital buying SanDisk in the "next acquisition" pool, you won. But that $19 billion deal was in the works before Dell made its $67 billion bid for EMC, and was not really a direct result. The real fun is around speculating what the likes of HP, Cisco, Oracle and IBM will do -- or not do -- to counter Dell's blockbuster acquisition.
The industry now views storage vendors in two categories: potential buyers and potential sellers. Conventional wisdom says giant companies that span the IT spectrum, such as HP, Cisco, Oracle and IBM, are the most likely buyers. There are many potential targets in storage. NetApp, the largest pure storage company after the Dell acquisition of EMC, is one of them. But there are cheaper options out there. Rapidly growing systems vendors, such as Nimble Storage, Pure Storage, SolidFire, Tintri and Tegile Systems, could fill a large company's storage gap. Hyper-converged plays, such as Nutanix and SimpliVity, would be a good fit for large server or storage vendors. And data protection software companies Commvault, Veeam Software, Actifio, Arcserve and Catalogic Software could add value to enterprise vendors.
"This will create a ripple effect," Ashish Nadkarni, analyst at IDC in Framingham, Mass., said of the Dell-EMC deal. "I think there will be suitors for NetApp. HP will go vigorously after somebody, although HP just told the world they had to split up because they couldn't survive as a combined company. Dell did the opposite -- they said 'Forget splitting up, we'll go acquire someone and get bigger.' So, there are two opposite maneuvers. If HP goes and acquires someone, it will signal that they're undoing the reason for their breakup. They'll be saying, 'We just told you we're going to be smaller and more nimble, but no more.'"
Greg Schulz, founder of StorageIO, based in Stillwater, Minn., said Dell-EMC might prompt Cisco to buy a storage systems vendor to compete with the combined entity.
"The obvious question is, will Cisco do something and who will it be?" Schulz said. "The obvious target is NetApp. But would that be enough give Cisco what it needs? I think NetApp would have to be on some shopping lists right now. I think we'll see something else happen. Some of these big players like Cisco, HP and Oracle don't want to be seen as playing second fiddle [to Dell]."
It could be hard to determine which side of mergers and acquisitions vendors will end up on these days. EMC devoured more storage companies than any of its rivals and ended up getting swallowed.
"This transaction signals the end of an era," Pure Storage CEO Scott Dietzen wrote on a blog on his company's site. "EMC has been a leader and an iconic brand in the storage industry … Just a few years ago, the idea that EMC would be an acquisition target would have been unthinkable, and yet, here we are."
Kedem said he doesn't see reaction to EMC getting bought as the biggest impetus for more deals. He thinks Dell's handling of VMware is the real key to what will happen next.
"HP has its storage line. So does IBM," he said. "Cisco's storage situation is more challenging. But at the end of the day, the question is, what will happen with VMware? If VMware doesn't have the same independence under Dell that it had under EMC, companies like Cisco and HP will have to pursue other hypervisor companies."
SolidFire CEO Dave Wright said Cisco has an obvious gap in storage, and it failed to fill that with its ill-fated acquisition of all-flash startup Whiptail in 2013. Cisco killed the resulting Invicta product in 2015.
"Cisco clearly is fascinated by storage, and is trying to figure out what they want to do with storage," Wright said. "Whiptail was a little bit of a false step into that world. I'm sure they learned a lot from that, but it will probably inform what they will do next. Whether it's a small step or big step, storage is a big piece of the data center. I don't see Cisco ignoring it. Cisco's largest storage partner, EMC, is now owned by one of their biggest competitors on the networking and server side -- and that will probably affect their thinking."
Ash Ashutosh, founder and CEO of copy data management software vendor Actifio, said he doesn't see storage system vendors as lucrative targets, despite Dell's $67 billion payout. Ashutosh, who was an HP executive for nearly three years after selling storage management startup AppIQ to HP in 2005, said storage boxes are becoming commoditized.
"Why buy a storage company at all?" he said. "Most users are focused on how they can get by with a commodity white box infrastructure. It will be like with telcos, every year the price keeps dropping. The same thing with the disk-drive business, we're down to two. I think from a use perspective, you might have a choice of a handful of commodity products from no more than four vendors."
The coming months will tell us if large IT vendors see storage systems as a commodity, or part of a lucrative enough business to spend billions of dollars to acquire.
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