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Storage Acquisitions

Brocade's purchase of Foundry Networks seems like a smart move, but technology acquisitions in general and storage acquisitions in specific never seem to pay off well. OK, never is a bit extreme, but it does seem rare and failure here hurts everyone. It distracts the buying company, often ruins the software from the bought company, and leaves users hanging in the balance.

I think the question as to "why is the acquisition occurring?" is a big factor in determining the success. If it is one of mutual survival, as I believe is the case with Brocade's purchase of Foundry, then I think it makes sense. There are many external factors that make this particular transaction make sense; the convergence of IP and Fibre Channel and the need for Brocade to compete with Cisco in more than only storage are just two. While I would not pronounce the deal a success until we see innovative and integrated solutions, clearly their mutual survival against a common competitor is something to start with.

Another "why" of acquisition that often seems successful is the one done for investment purposes. This is an acquisition that was typically made as an investment in a new technology or company. Here you will see the purchasing company keep the purchased company as a separate entity. EMC and VMware are a textbook example of that and an amazing example, so far, of restraint on EMC's part, although the latest CEO change at VMware has me nervous.

When buyers seem to go off-course is when there is a desire to expand market share for the buying company, essentially leveraging its market share or sales force to sell additional related product. During these purchases you'll hear my favorite term, "We are going to develop tight integration between our products." Most often this never happens and if it does it is a common management GUI of some sort. GUI's are nice, but integration to eliminate redundant resources, or meta-data stores and redundant policy application, is what is needed and is very rarely delivered.

The challenge is that software integration is hard work. Its like trying to build a car out of American and Japanese auto parts -- you are better off starting from scratch. That's one of the reasons that new companies keep showing up. They can start from a clean slate; take advantage of the latest software development tools with no real concern about backward compatibility. The market leaders can choose to do this as well. But there is a decision to be made -- take the time to develop the product in-house and guarantee integration, or purchase the product, be to market with it now, and worry about integration later.

In the end, 1+1 does not often make three, which is the goal of an acquisition -- usually it equals 1.5. I think, however, that the Brocade acquisition has some key ingredients to be successful, but only time will really tell the tale.

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George Crump is founder of Storage Switzerland, an analyst firm focused on the virtualization and storage marketplaces. It provides strategic consulting and analysis to storage users, suppliers, and integrators. An industry veteran of more than 25 years, Crump has held engineering and sales positions at various IT industry manufacturers and integrators. Prior to Storage Switzerland, he was CTO at one of the nation's largest integrators.

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