An observation on vertical integration
by Michael Hay on Apr 29, 2010
There has been a lot of positive reaction to our unified compute announcement from last week. However there were very interesting words from both 3PAR and Storagebod about our announcement in their blogs. (As for 3PAR, well like NetApp they don’t have any kind of a server business in their back pocket — we’ll get to this point a little later on in my post — so I’m less concerned about their reaction.) What I am most interested in is the opinion that Martin, Storagebod, puts forward and the comments in 3PAR’s blog. I’ll summarize what I see as a critical message from both blogs: concern about change. What the concept of vertical integration represents is a change in how people in the IT industry work. Specifically they will move from having to deploy, operate and maintain discrete server, networking, and storage components to deploying, operating and maintaining vertically integrated stacks. Already many of our customers are internally building and deploying their own vertical stacks, some call them PODs. As a result they are beginning to partner with their IT vendors to do things like winnowing down and fixing the components included (servers, OSes, TCP/IP networking, SAN fabrics, etc.) and asking for their vendors to commit to longer term delivery of these key components. As with any large shift, which vendor supplied vertical stacks represent, people are uncertain and therefore react by downplaying, attacking, or generally disbelieving what is happening. At some point there is enough momentum from the silent majority, and the folks who are reactive have figured out how to adapt, that the noise goes away. In some sense this is a kind of social description of the hype-curve Gartner talks about. For vertical stacks we are in the high gradient portion of the curve so there is well a lot of market and social noise.
I think that these discussions, as represented by Storagebod and the comments on the 3PAR blog, are helpful and in fact I want to encourage them. That is because there are kernels of truth expressed within the noise which we as folks who plan and design products can mine to make our offerings better. So I’m not afraid of the naysayers or folks spouting the doom coming just real soon now. Instead I think that the fact of vertically integrated stacks is something customers have been asking for and we are merely in the early adoption phase. Now what I suppose is happening is that it is the IT executives who are pushing this concept forward due to their span of observation and control. Such a wide span let’s them see that for every $1 of capital equipment purchased there is another $8-$12 in O&M. To them the concept of vertical integration at least represents a chance to eat into the $8-$12 of O&M. And by freeing up some capital from the IT O&M bucket they can both participate in making their companies more profitable and deploy new services and/or develop the next killer application. I believe that one key issue is that the executives’ intentions have yet to be communicated to the rank and file IT professionals. As a result some of the churn that is presently on the blog-o-sphere is a result of organizations still in the throws of communicating and understanding these new strategic directions. As everyone becomes comfortable with vertical integration they will recognize that this movement of customers in purchasing vertical stacks is not unlike the outsourcing approach of IT vendors, and is therefore okay. You see one core theme of outsourcing is to move what a company thinks is the valueless outside of the company, while retaining the valued portions that supply a competitive advantage internally. One example, related to vertical integration, could be the extra qualification and packaging steps which are being performed by customers today. Many customers view this as a necessary evil and would like to move the responsibility back to their vendor. To get this done by a vendor in a reasonable time with strong quality means that the components must be limited and well defined, which results in well vertical integration…
Now as to 3PAR and NetApp, well neither have server platforms. With the Cisco-VMWare-EMC tie up NetApp ran swiftly into the arms of Cisco to not be excluded from the party. 3PAR has no story at all and therefore it is not surprising that they are up in arms and talking about stack wars.
[...] have blogged before on vertical stacks in “An observation on vertical integration” and again in response to George Crump in “The Rack is the New Server, the Data Center [...]