Big announcement today concerning Michael Dell’s little computer company and their drive to keep up with the Joneses in the data center.  Dell has been a player in the server market for many years, but in the data center they are quickly losing out to the likes of HP, Cisco, and even IBM.  Until they hired away HP’s chief blade architect a few years ago, they weren’t even interested in blade servers/enclosures.  Instead, they relied on the tried-and-true model of 1U rack-mounted servers everywhere.  That has all changed recently with the explosion of high-density server enclosures becoming the rage with customers.  Now, the push seems to be headed toward offering a soup-to-nuts portfolio that allows your customers to go to one vendor to get all their data center needs, whether it be storage, servers, or networking.  HP was the first company to really do this, having acquired 3Com last year and integrating their core switching products into the Flex family of data center offerings.  Cisco has always had a strong background in networking, and their UCS product line appears to be coming on strong as of late.  IBM has been a constant bellweather in the market, offering storage and servers, but being forced to outsource their networking offerings.  Dell found itself in the same boat as IBM, relying on Brocade and Juniper as OEM partners to offer their networking connectivity for anything beyond simple low-end ports, which are covered by the Dell PowerConnect line.  However, the days of OEM relationships are quickly drying up, as the bigger vendors are on an acquisition spree and the little fish in the market are becoming meals for hungry vendors.

Dell has enjoyed a very strong relationship with Brocade in the past, and the positioning of Brocade as a strong player in the data center made them a very logical target for Dell’s pocketbook.  In fact, it had been reported several weeks ago that a deal between Dell and Brocade was all but done.  So, imagine the surprise of everyone when Dell announced on July 20th that they were buying Force10 Networks, a smaller vendor that specializes in high-performance switching for markets such as stock market trading floors.  To say that my Twitter stream erupted was an understatement.  We all knew that Dell was going to buy someone, but most figured it would be Brocade.  I even ranked Arista ahead of Force10 as the likely target of Dell’s acquisition fever.  I just figured that Force10 was a little too small and specialized to garner much attention from the big boys.  Don’t get me wrong, I think that Force10 makes some great products.  Their presentation at Network Field Day was well received, and they several customers that will swear by their performance.

What I expected from Dell was a purchase that would serve them across their whole network portfolio.  Brocade would have given them a replacement for the PowerConnect line at the low end as well as data center and fibre channel connectivity options.  They were already OEM-ing Brocade’s product line, so why not buy them outright?  I think that comes down the fact that EVERYONE is OEM-ing from Brocade (or so it seems).  EMC, IBM, and even HP have products from Brocade in their offerings.  If Dell had purchased Brocade outright, it would have forced those vendors to look elsewhere for fibre channel connectivity.  This would either be due to a desire to not inflate a competitor’s bottom line, or perhaps later if and when Dell decided to change the rules of how other vendors OEM from them.  This move away from a Dell-owned Brocade would have really muddied the waters for those inside Dell that wanted Brocade for it’s revenue stream.  As it is, I’m pretty sure that Dell is going to scale back on the B-series PowerConnect stuff everywhere but the fibre channel line and use Force10 as the main data center core technology group, while at the same time maintaining the PowerConnect line at the lower end for campus connectivity.  This will allow them to keep their margins on the PowerConnect side while at the same time increasing them in the data center, since they’ll no longer have to pay OEM fees to Brocade.

Whither Juniper?

The next most popular topic of conversation after Force10 involved…Juniper.  Juniper was a long-shot target of acquisition for Dell (and others), and now that the only major server vendor without a solid networking background is IBM, people are staring to ask who, if not IBM, is going to buy Juniper?  And when?

Folks, Juniper isn’t an easy acquisition.  Add in the fact that the IBM you see today isn’t the IBM of your father (or my early networking days for that matter), and you’ll see that Juniper is best left to its own devices for the time being.  Juniper isn’t really what I would consider a “data center switching” company like Force10 or Arista.  They tend to fall more in the service provider/campus LAN market to me.  I think that if someone like IBM could pony up the billions to buy them, they’d quickly find themselves lost in what to do with Juniper’s other technologies.  Buying Juniper for their data center offerings would be like buying a Porsche because you like the stereo.  You’re missing the point.  I’d wager money that Juniper is more likely to buy twenty more companies before they get bought themselves.  Their networking business is growing by leaps and bounds right now, and saddling them with a large company as ‘oversight’ would probably cripple their innovation.

IBM already owns a high-speed, low-latency networking company that they bought about this time last year, Blade Networks.  Why should they go out and spend more money right now?  Especially if they are happy with their OEM partnerships with Brocade and Juniper (like Dell has been doing previously)?  IBM has shed so much of what it used to be that it no longer resembles the monster that it once was.  Gone are the PCs and Thinkpads and low-end servers.  Instead, they’ve moved to the blade and high end server market, with storage to complement.  They used to be number one, but have long since been passed by HP.  Now they find themselves fighting off their old foe Dell and this new upstart, Cisco.  Does it really make sense for them to mortgage the family farm to buy Juniper, only to let it die off?  I’d rather see them make a play for a smaller company, maybe even one as well-known as Arista.  It would fit the profile a bit better than buying Juniper.  That’s more HP’s style.

Tom’s Take

I fully expect the trumpets of Dell’s new-found data center switching expertise to start sounding as soon as the ink is dry on Force10.  In fact, don’t be surprised to see it come up during Tech Field Day 7 next month in Austin, TX.  I think Dell will get a lot of mileage out of their new stalking horse, as most of the complaints I’ve heard about Force10 come from their sales staff, and we all know how great Dell is at selling.

For now, Juniper needs to sit back and bide its time, perhaps stroking a white Persian cat.  They can go down the interoperability road, telling their customers that since they have strong OEM relationships with many vendors, they can tie all these new switches together will very little effort.  They shouldn’t worry themselves with the idea that anyone is going to buy them anytime soon.