We are in the midst of a tectonic shift in enterprise technology as the cloud has an ever-growing impact on how businesses provision infrastructure and software. Established vendors used to selling copious amounts of hardware and software have been experimenting with various strategies to deal with a rapidly changing marketplace. This has taken several forms including getting bigger, forming partnerships, splitting in two and selling off unprofitable pieces.
Just this morning, we heard about Ericsson and Cisco coming together on a strategic partnership that they claim could result in a billion dollars in sales for each company in the coming years. While that’s not nearly as big a number as it sounds in enterprise tech terms, it’s not chicken feed either. It’s also a sign of two old-school networking companies recognizing that by working together they can help increase sales in a changing market.
Just last week, Red Hat and Microsoft announced a similar partnership, reaching a deal to sell Red Hat Enterprise Linux on Microsoft Azure. Talk about strange bedfellows, but both companies recognize they are better off trying to work together. Enterprise companies want to use Linux, and increasingly they are launching servers in the cloud. It’s a win-win situation for companies used to competing with one another, and it’s just smart business.
Sometimes two heads are really better than one and you can do something together that’s hard to do as an individual (disrupted) company.
That’s the idea behind the Dell-EMC deal. Dell believes that by buying EMC and VMware, and getting much bigger, it can compete more strongly in the enterprise. Whether that’s the case or not, time will tell.
While Dell-EMC and Cisco-Ericsson try to come together and bulk up to compete, many other companies are doing the exact opposite. Just last week, we saw the official split of HP into two separate companies — Hewlett Packard Enterprise and HP Inc. This is a move that probably should have happened long ago when former CEO Leo Apotheker suggested it in 2011.
Perhaps the current conditions are friendlier to this approach. In fact, we’ve seen this type of spin out more than once recently, including Symantec spinning off Veritas, then selling it for $8 billion and eBay splitting from PayPal.
These moves could have a number of purposes including providing more focus for the companies involved. Using HP as an example, it could see HPE working better on its own, concentrating on enterprise customers and their needs without worrying about how printers and PCs are doing (and vice versa).
This makes sense, and you could argue that in today’s world, smaller is actually better. It provides less bureaucracy, more agility and each company operates and is traded independently.
Shedding Unprofitable Stuff
Another strategy is simply discarding what’s not working and concentrating your resources on more profitable parts of the business.
On Friday, rumors emerged that Verizon (the parent company of TechCrunch), might be trying to sell off some of its enterprise cloud assets for a cool $10 billion. Recently HP announced it was shutting down its unprofitable Helion public cloud at the beginning of next year and that it sold TippingPoint to Trend Micro for $300 million.
Large enterprise technology companies appear to be looking at the broader market and if they don’t see a way to compete successfully, they are selling off the pieces — or in the case of HP, simply throwing up the white flag and quitting the business.
AWS is the clear leader in public cloud infrastructure services and HP was way back in the pack. It decided the best move, was to simply admit it couldn’t compete and move on. Perhaps Verizon sees that too and figures it should sell and concentrate more on the core business.
All of these approaches give these companies various techniques to compete in a dramatically shifting marketplace where the cloud is changing the market dynamic for companies selling enterprise technology.
Established enterprise vendors are looking at various ways to deal with these changes and are taking these different approaches in an effort to remain stable and profitable long into the future.