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HPE acquisition of Nimble gives it another SAN platform

Surprising HPE acquisition snares hybrid flash vendor Nimble Storage for proposed $1.2 billion. HPE picks up Nimble arrays and vaunts InfoSight storage analytics and monitoring.

Hewlett Packard Enterprise's $1.2 billion acquisition of Nimble Storage left industry analysts wondering how HPE will mix Nimble's branded Adaptive Flash hybrid and Predictive All Flash arrays with its 3PAR flash storage.

The second HPE acquisition of the year came as a surprise to storage insiders, who were split on how much Tuesday's deal will help HPE.

Scott Sinclair, a storage analyst at Enterprise Strategy Group in Milford, Mass., called the deal a smart move for HPE, particularly the pickup of Nimble's InfoSight analytics. InfoSight technology provides proactive monitoring at the application level.

"I'm a big fan of Nimble's technology, "Sinclair said. "Their predictive flash is very compelling in its ability to blend both all-flash and hybrid in a single pool. The Nimble InfoSight predictive capability isn't easy to do and really helps build a passionate fan base among customers."

The deal can give a boost to sagging HPE storage sales, which declined 12% year over year to $730 million in January. Nimble generated $403 million in revenue last year and claims more than 10,000 customers.

"Seems like more of an eliminate-a-competitor play and [the chance to] acquire Nimble's installed base and channel. It also gives HPE a storage system to sell that is not a server-based technology," said Eric Slack, a senior analyst at Evaluator Group on Boulder, Colo.

Nimble gives HPE a set of storage products designed for the small and midsize market, said Eric Burgener, a research director of storage at IT analyst firm IDC.

The InfoSight data analytics is unique in that data scientists behind the scene look at trending information.
Bill PhilbinGM of storage and big data, HPE

"3PAR StoreServ has some products in those price points, but it does not provide as good a value as Nimble. [It requires] downscaling what, in effect, is enterprise storage architecture. Nimble was made for that space, so now HPE will have a stronger product set with higher customer value," Burgener said.

This marks the second HPE acquisition in 2017, coming less than two months after it bought hyper-convergence pioneer SimpliVity for $650 million.

"Nimble continues our additive approach," said Bill Philbin, HPE's GM of storage and big data. "We have 3PAR (StoreServ) for our enterprise-class customers and StoreVirtual for customers that are more price-conscious. With Nimble, we now have a strong SMB and midmarket play."

Philbin said HPE will integrate InfoSight technology into its other storage systems, staring with its 3PAR StoreServ hybrid and all-flash arrays.

"The InfoSight data analytics is unique in that data scientists behind the scene look at trending information. That allows them to fingerprint cases found by a customer and apply that to (other) customers en masse," Philbin said.

Nimble finds escape hatch, can focus on midsize storage

Nimble this week announced 30% year-over-year revenue growth to $117 million last quarter. Still, it faced headwinds moving up market as more companies explore converged infrastructure and hyper-converged systems. Nimble continued to lose money -- $36 million last quarter and $158 for last year. Those losses were greater than the previous year. Nimble finished the year with $185 million in cash.

"Nimble's expansion from midrange to enterprise was always going to be difficult. Under HPE, there is less pressure to move upmarket. HPE already has 3PAR and (XP) OEM systems from Hitachi in the tier one space," said Henry Baltazar, research director of storage at 451 Research in San Francisco.

In a blog post about the HPE acquisition, Nimble CEO Suresh Vasudevan acknowledged the "challenge of scale and significant exposure" that impelled its decision to sell.

The deal rescues Nimble from an uncertain fate, said Roger Cox, a Gartner research vice president covering data center infrastructure. But he wonders why HPE wants to buy Nimble.

"Nimble just gives HPE another SAN platform, which is in complete conflict and overlaps with the HPE MSA Series, the P Series (Smart Array) and the entry level 3PAR series," Cox said. "I don't see the synergy. It also doesn't solve the basic problem HPE has in its storage portfolio. They still lack a competitive scale-out NAS product and their own object storage." HPE sells object storage in partnership with Scality.

Sinclair, however, said HPE can take its time and decide how to use the different storage platforms.

"I'm a big believer that having overlap in your portfolio is better than having a gap," he said. "I would assume they'll just add Nimble to the portfolio and not make any major changes right away. That allows each of the portfolio technologies to more naturally address the space it was designed for. Over the long run, they'll have to see which technologies make the most sense to invest in."

Was HPE acquisition done with Dell EMC in mind?

George Crump, president and founder of Storage Switzerland, said HPE may be looking to match up better against its chief rival Dell EMC.

"They probably feel the need to match Dell EMC in each category," Crump said. "Getting Nimble allows HPE to push 3PAR to the extreme high end, where VMAX is. Nimble becomes their response to Dell EMC Unity in the midrange space. And they have StoreVirtual to go after customers buying (Dell EMC) ScaleIO and MSA systems for customers buying Dell PowerVault."

HPE's Philbin said the vendor was not yet prepared to discuss its roadmap for Nimble Storage, including branding and how it will handle duplicate platforms. He declined to say how many Nimble employees will be retained or whether Vasudevan will join HPE's executive management.

He said the general implementation will follow the blueprint that followed the HPE' acquisition of 3PAR. HPE paid $2.35 billion for 3PAR following a bidding war with Dell in 2010, and 3PAR quickly became HPE's flagship storage platform.

"With 3PAR we took high-end features that were available to the service provider market and brought them down to the midrange," Philbin said. "The other thing we did was make flash available without compromising data resiliency and data compaction capabilities. Adding Nimble allows us to take those same rich data service capabilities and extend them to our midmarket customers."

Next Steps

HPE annual storage revenue hits skids

Nimble finally joins the all-flash bash

HPE wants to make storage its shining star

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What impact will HPE's acquisition of Nimble Storage have on remaining independent hybrid array vendors?

That’s a good question Gary, it got me thinking.  In the short term, I believe HPE’s acquisition of Nimble Storage won’t impact independent hybrid vendors significantly. At least not as a direct result of this merger. In the long run, storage vendors whose business rely on hybrid arrays that are targeted at the primary storage market for 2nd platform block workloads are doomed due to the disruptive externalities taking place.  If HPE is successful with integrating Nimble, this acquisition may have just accelerated the inevitable for remaining independent hybrid storage vendors. The market for hybrid arrays for 1st & 2nd platform workloads will continue to decline as applications transform to the 3rd platform running on software defined storage, public cloud, and CI/HCIA. 

I see four potential outcomes / decisions remaining independent storage vendors are faced with: 

  1. Do Nothing
  2. Be Acquired
  3. Pivot via internal innovation
  4. Pivot via external innovation with acquisitions

Do Nothing – This is the equivalent of staying on the current course while the violin continues to play after striking an iceberg. (The storage professional who’s a careful reader was just treated to two storage puns in that last sentence. I wouldn’t have dual punned if it weren’t applicable to this post, as neither iceberg nor violin exist modern day). 

Best case for them “as-is”….they survive as a commoditized storage company and become cheap but reliable capacity for something else in front of it (virtualization controller, flier or gateway) or something that lives on it (SW that’s providing persistence, resiliency and data services that USED to be array based). There’s also opportunities for them to become the cheap and deep persistent storage for BYO content stores or general purpose NAS for DB dump exports or general use file shares.  Regardless, with any of these possibilities all the customer value lies in something that’s not the hybrid array (JBOD 2.0).

Be Acquired – A server, network, SDS, hypervisor or OS company may pick them up, should they require a storage solution to complete their stack in a CI/HCIA offering. It may be cheaper to buy a proven array company versus build internally, especially if their core competency is rooted in software.  They may be picked up for vertical integration reasons, similar to Seagate’s acquisition of Dot Hill Systems.  Both SanDisk Ventures and Western Digital Technologies invested in Tegile’s most recent Series D.

Pivot Internally – Expedite innovation of an AFA and shift the product mix away from hybrid. But that’ll take a while and even if they were successful pivoting toward an AFA based company, it’s a crowded market. Plus it doesn’t overcome the externalities taking place, as an AFA is storage for 2nd platform applications (albeit faster).

Therefore, they may look to survive in the secondary or recovery tiers in the data center. They could “reinvent” themselves and innovate SDS ready nodes for Open Source offerings, for instance. Or partner with ISV’s for specific use cases like cold archive or a backup target for software based VTL’s.  Since enterprise primary storage is crowded by big storage companies competing for shrinking dollars in the data center, the smaller storage companies may be better suited to pivot outside the data center for specific use cases.

The ROBO / Distributed Enterprise may be the perfect place for this kind of pivot. They could innovate specifically for it by adding capabilities & data services that solve customer’s pains associated with the Distributed Enterprise. A wide variety of verticals like retail, banks, hospitality, etc. have many remote locations (some over 10,000) that require capacity for physical security solutions.  They could target edge niches like NVR storage sold as part of an overall security solution.

Staying with the approach of an edge-bound pivot, firms are rapidly deploying IoT sensors everywhere.  These devices create large amounts of machine data that’s spread throughout the distributed enterprise.  So investing & rebranding in that space as the “IoT distributed storage company” may be an option for their survival. Many of these sensors are deployed in harsh environments and the data is essentially flat files which needs to get back to the core (or cloud) eventually but not immediately for analytic applications, BI, etc. Therefor there’s an opportunity to differentiate their storage beyond JBOD and add value specific to this use case with ruggedized storage and data services like replication, dedupe, compression, etc.

A multi-protocol / multi-access array that offered services like a PDC and print server could also be the block storage for apps that need to run resident to the branch. Imagine how valuable it would be as a Back-Up Target for workstations located there that in turn replicated the backup set back to the core or cloud using built-in IP traffic shaping or dedupe capabilities.  Customers could benefit further from a solution like this if it had NAS accelerator caching capabilities with SMB/CIFS for local file shares that were also replicated back to the data center.

A company who’s still rooted in hybrid-based technologies obviously missed the AFA boat.  So they’re in a unique position that only a laggard can take advantage of. They may innovate right past AFA’s toward the next being thing in storage like NVMe or other external persistence technologies. Or shoot for the next-next thing in storage by tooling on some far out thing like RDMA attached arrays with carbon nanotubes.

Pivot Externally – Pretty much the same kind of examples listed in “Be Acquired” and “Pivot Externally” but instead of being the acquiree they’d be the acquirer.

Either way, if I’m them I’d retain Goldman Sachs or JPMC to “evaluate and consider strategic options” as the investment bankers say!