In a move called "brilliant" by one analyst, EMC Corp. last week acquired CrosStor Software, Inc., a network-attached storage (NAS) software vendor, giving the Hopkinton, Mass.-based storage giant control of the popular operating system (OS) used by many of its major competitors and a leg up in the NAS market.
CrosStor supplied multiple NAS vendors like Hewlett-Packard and Connex, Inc., with its NAS (OS) through OEM agreements. Now, those companies may seek out alternative software vendors rather than deal with EMC.
This move could gum up the works for many NAS players and leaving EMC to stand-alone with NAS leader Network Appliance, Inc., at least for the time being.
"They just eliminated about 85% of their would-be competitors," said Steve Duplessie, senior analyst, The Enterprise Storage Group, Inc., Milford, Mass."Companies that were not already on board with EMC were using CrosStor software. Now where do they go?"
Duplessie believes that those companies that choose to look elsewhere for software rather than deal with EMC will ultimately turn to Linux as the OS of choice. Most of the NAS vendors are already dabbling in Linux, said Duplessie, this play by EMC may cause them to ramp up those efforts.
He also pointed out that EMC will honor every OEM contract, as they did when they acquired the Clariion line of storage systems through the acquisition of Data General.
Not every CrosStor customer will look to break from the new relationship with EMC, however. Steven Rogers, director of technical marketing for Connex, said that the company will continue using the now EMC-owned OS for its N1000 and N3000 NAS solutions. "[EMC] assured us that they're going to honor the existing contract. They weren't just going to drop us and run." Rogers said that Connex does not expect this news to in any way effect Connex future production schedules for any of its NAS products.
John Webster, senior analyst and IT advisor for the Nashua, N.H.-based analyst firm Illuminata, Inc., explained that EMC has gained more than just a better market position through its acquisition of CrosStor. "EMC gets SAN/NAS convergence technology plus some very talented and hard-working people who are in a vanguard position in the campaign to establish interoperability standards (CIFS as a SAN file system for example)."
Webster added "I believe that there will be at least two side effects, possibly contemplated by EMC prior to the acquisition: First, this will have a chilling effect on OEM sales of NAS software in particular and, in general, could slow down OEM deals with small storage players as well. The net effect will be a moderating effect on falling NAS prices as barriers to market entry become higher."
"Second," he said, "CrosStor sold its software on an OEM basis to Connex, HP and others. These OEM customers must assess the impact of this sale with the understanding that they now have an OEM relationship with EMC."
According to Webster, EMC prefers going direct with its technology. Therefore, he surmised, CrosStor customers must surely be looking for alternatives.
The deal could also negatively impact others who OEM NAS technology. "The big fish are out there looking for small fish to eat, and with a strong IPO market for storage companies, the small are happily eaten. Storage-related OEM relationships must now be looked at with that expectation in mind," he concluded.
If the "chilling effect" Webster alluded to comes to pass, the NAS market will leave two main competitors, NetApp versus EMC. But NetApp said it has no expectation of losing any market share to EMC.
"We can't see how this news is going to change the competitive landscape, since it was not a well kept secret that EMC was planning to use CrosStor in the new products," said NetApp spokesperson Adam Trunkey. "We don't see EMC taking market share from NetApp. They may be successful in increasing theirs, but most share gains will probably come from companies that sell direct attached solutions like the PC and Unix systems companies."
EMC acquired privately held CrosStor in a pooling-of-interests transaction. EMC issued approximately $300 million in stock at the closing of this transaction in exchange for all of CrosStor's outstanding capital stock.Kevin Komiega, assistant news editor