HP and Dell Interest in 3PAR Started 9 Months Ago; 3PAR Solves Storage Problems for HP on Multiple Fronts

After a final flurry of exchanges yesterday with Dell first outbidding HP and then HP re-upping its bid for 3PAR to $33, Dell’s management finally announced that it was pulling out of the bidding for 3PAR leaving HP the likely victor in the battle for 3PAR unless some last minute suitor appears. But now that the bidding for 3PAR appears to be over, there are two important questions to be answered. First, was HP’s bid as haphazard as it appeared? Second, what does this acquisition mean for HP? The news is better than most have been led to believe.

3PAR solves two big problems for HP. Everyone already knows that the reason for HP’s interest in 3PAR centered on 3PAR’s ability to deliver cloud storage for enterprise data center but most have overlooked what else 3PAR has in its portfolio and it is these features that HP may have been just as interested in.

Having just come back from VMworld, there was a lot of talk behind the scenes about the 3PAR acquisition. So while 3PAR’s employees were smiling politely but denying comment to everyone who talked to them at their VMworld booth, there were many others at the show who were much more talkative though only willing to talk anonymously.

First, my sources at the show tell me that HP’s and Dell’s interest in 3PAR actually started 9 months ago with both companies in regular contact with 3PAR’s CEO David Scott and management team over that period of time. So while the bidding war started just a few weeks ago (possibly prompted in part by Dell looking to take advantage of HP’s shakeup in management with the sudden departure of its CEO), both HP and Dell had already done their homework so they knew exactly what 3PAR had to offer.

Granted, Dell jumping in when it did probably forced HP’s hand but HP came to the game ready to play so this back and forth was not as reckless on HP’s part as some allege. Rather this was an acquisition that was likely going to happen by the end of the year anyway so Dell’s initial aggressive bid of $18 just a few weeks ago was probably its attempt to upstage HP while it was experiencing management turmoil and grab 3PAR for what now appears to be a bargain price.

Second, HP’s acquisition solves a TON of storage problems at HP. HP has been riding HDS’s coat tails for years in the enterprise space and even with that did not have a very compelling story in that arena.

Having previously worked at First Data Corp, HP’s sales reps were always ill-equipped to sell HDS’s high end storage gear. They often looked like complete buffoons when selling these high end systems as they sometimes took notes from First Data’s IT storage architects during sales presentations as to how to configure their XP systems to do the most basic of storage tasks.

However even if HP had its act together, it was not going to win many storage deals anyway. Everyone knew it was reselling HDS gear and, since First Data also bought directly from HDS as do many other enterprise companies, these companies did not derive a great deal of value by buying HDS gear through HP instead of buying directly from HDS.

HP’s acquisition of 3PAR dramatically improves the value proposition of its storage story. Now HP can officially cut its ties with HDS as 3PAR T-Series systems give HP a high end storage system that more than adequately replaces its HDS-based XP systems. Further, the T-Series are better optimized for the virtualized data center than HDS’s systems are ever going to be. Since virtualization is the direction that every intelligent companies is going anyway, HP was wise to dump HDS whose technology is looking increasingly obsolete.

So while the 3PAR T-Series do not provide mainframe connectivity (ESCON or FICON) and HP will no longer be a player in that space, the mainframe was never going to be a strong play for HP anyway. And in the emerging world of cloud storage mainframe connectivity does not really matter so it relieves HP of the pressure to pretend to play in that space going forward.

Two other problems that HP solves with its acquisition of 3PAR are its midrange storage and replication software problems. Along with 3PAR’s cloud storage story HP gains two other important components in 3PAR’s portfolio – its midrange F-Series storage arrays and its replication software.

In fact, when analysts were looking at 3PAR’s portfolio, I strongly suspect they were focusing primarily on 3PAR’s high end T-series cloud storage and overlooking the latent value that 3PAR’s midrange systems and replication software offer. As such, even with 3PAR getting a $2 billion offer from HP, I am convinced that these two components are not fully valued in that price.

HP’s EVA line of midrange storage was getting very long in the tooth and even ranked below models from many emerging, lesser known storage companies like Celeros and RELDATA in DCIG’s recent Midrange Array Buyer’s Guide which is available for a free download. So HP was in desperate need for help in its midrange storage story and by cloaking the acquisition of 3PAR under the mask of cloud storage, it got the help it needed.

3PAR’s midrange F-Series gives HP one of the top ranked midrange array storage arrays in the storage market and, if it is smart, HP will finally put its EVA line to rest and give its storage sales a huge boost by using 3PAR’s F-Series models in their place. Further, with the growing emphasis on storage efficiency in midrange arrays, 3PAR’s F-Series are already better positioned to deliver on these features than HP’s EVA midrange storage systems can ever hope to be.
 
The other advantage that HP gains is that 3PAR uses the same replication software across all of its storage arrays. With multiple storage providers reporting that they ship replication software with as much as 50% of their storage arrays, this gives HP a potent new selling tool in its cloud storage story.

Whereas before its XP and EVA storage lines could not replicate data between one another, the replication software on 3PAR’s T-Series and F-Series are perfectly compatible and, as 3PAR demonstrated at its Analysts Days in June and as I blogged about last month, setup of its replication software is now the easiest in the industry (sorry NetApp) which will be critical to HP telling a convincing and competitive cloud storage story.

HP’s acquisition of 3PAR may seem overpriced and impetuous to many but this acquisition is exactly what HP needed. HP needed a compelling enterprise level cloud storage story plus it needed to solve some of its own internal storage problems that it has been reluctant to publicly address. Its acquisition of 3PAR gives it the cloud storage story that it despera
tely wanted and needed and, in the process, quietly solves some of its own internal storage issues by distracting the market with this larger cloud storage story.

Have a great Labor Day weekend and check in next week as I take a look at a particular storage company that Dell may now have a high interest in acquiring.

Jerome M. Wendt

About Jerome M. Wendt

President & Lead Analyst of DCIG, Inc. Jerome Wendt is the President and Lead Analyst of DCIG Inc., an independent storage analyst and consulting firm. Mr. Wendt founded the company in September 2006.

One Comment

  • I’m surprised by the fact that many a analysts are comparing the T800 with the XP and HDS USP-V.
    The T800 can definitely be called enterprise class but that does not put in the same class as the USP-V or even the DMX for that matter. T800 is modular and the HP XP or the USP-V is monolithic.
    While there are a whole set of metrics that I can compare, how about the data cache.
    The 3PAR T800 can accommodate a max of 96 GBs while the USP-V can host 512GB.
    About HP’s ability to sell the XP’s, I guess you have been unlucky to meet the wrong set of people at HP. I know of many customers who would buy the XP instead of the USP-V, simply because they get superior support from HP. Also the fact that HP has evolved this practice better than the SUN which was very much dependent on HDS for all the expertise. Some tools like the XPINFO are so handy that I sometimes miss them in the HDS world.
    I think HP acquired 3PAR just to keep Dell out of the game. The HP-HDS relationship is much stronger than the Dell-EMC relationship, so acquiring 3PAR would have benefited Dell more than HP for sure.

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