Piling on the Dell/3Par News

Whenever some news comes out about an acquisition, everyone chimes in. It’s like kids playing little league football. Someone tackles the kid with the ball and all the other kids pile on.  I promised myself I wouldn’t do that. I lied. Hey, if you can’t lie to yourself, who can you lie to?

But really, I follow the storage segment but don’t claim in-depth technical knowledge anymore. I’m too interested in technology and business strategy to dive into the deep technical details. I can make a thin provisioning joke but that doesn’t mean I have the kind of encyclopedic knowledge of the segment that folks like Marc Farley (of 3Par – ready to buy that boat?) or Chuck Hollis of EMC have. Sticking to what I know here are some thoughts.

Why it’s a good thing (in list form):

1. 3Par would have eventually hit the wall. The hardware industry is a game of numbers. Big volume plus low cost equals great margins. You need market share and manufacturing prowess for that. A company the size of 3Par would have eventually gotten eaten alive by the big boys.Or faded into irrelevance. That would have been the slow death.
2. The deal provides a nice Return on Investment for 3Par investors. I like it when people make money in startups. It provides fuel for more startups and gives hope to the rest of us entrepreneurs. Now, if you all want to swing some of that cash my way…
3. I bet Dell really wants 3Par. 3Par could have gotten bought up by someone who just wanted them out of the way.  That would have been sad for the industry. There is a better chance that some of what makes 3Par unique will continue to live on at Dell. It’s nice to be loved.
4. 3Par employees can get great deals on Alienware computers. I’m just speculating but wouldn’t that be cool. Those babies are hot! If that’s not in the term sheet then amend that puppy now.

Why it’s not a good thing (also in list form):

1. US$1.15B is a lot of money. Dell is going to have to sell a lot of storage to make that back. That’s especially hard to do when the 3Par message has often been how you could buy less storage at a cheaper price to get the same functionality. I get the “less is more” messaging for a startup but you all have to make back a big pile of money now.
2. Dell’s bought a lot of storage companies but still doesn’t have a cohesive storage message. This is actually a good-not good thing. On the one hand, you don’t think of Dell as being in storage the way you do, say, HP or EMC. They’ve bought up a boatload of storage companies but it’s like Yatzee - all tossed in an incomprehensible pile. On the other hand the scrappy 3Par people are really good at new marketing. If they stick around (and Dell should make it worth their while to stick around) they could have a positive effect on Dell’s overall storage marketing. If they’re allowed to which brings us to…
3. They can’t use what makes 3Par special. People think that companies like 3Par are about technology. Not really. They are about ideas. The simple audacity of 3Par is part of what makes it successful. That rarely translates well in a big company. Just because Dell wants 3Par doesn’t mean they know what to do with them.  The impact of the creative folks that have been driving the company will be diluted once they are just a cog in the Dell machinery. 
4. On some level, this has to annoy EMC, Dell’s big storage partner. The more meat Dell adds to the storage stew, the less tasty it is for EMC. I keep wondering how long EMC will put up with this. Dell clearly wants to create a business that competes with EMC. An ugly breakup would be bad for Dell since EMC could probably crush them in the enterprise storage segment. My guess is that the only reason this has yet to happen is that Dell has not gotten it’s act together enough to really get in EMC’s way. Maybe this is what EMC needs to go buy a server company and finally become the full service provider that they should. Some of those Taiwanese computer companies have good SOHO servers that would fit in well with Iomega and Mozy. Just sayin’…

Ultimately, this is very good for 3Par, it’s investors, and many of it’s employees. Making honest money always is. Whether Dell gets it’s $1.15B out of the deal remains to be seen.  They need to develop a simplified but cohesive product line. Better storage marketing would also help. 3Par people can help but will they be allowed to? Wish i knew.