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By Nick Wakeman

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Nick Wakeman

HP/3Com deal marks shift in IT industry

Mark Hurd, Hewlett-Packard’s chairman and chief executive officer, has bristled in interviews when asked if HP is pursuing an IBM-like strategy with the acquisitions the company has made, particularly last year’s EDS deal.

But with the 3Com deal, HP backs up its claim that it is no clone of IBM.

Instead, HP is saying more than anything else that it knows its strengths and knows how to build from them.

With 3Com, HP will move from the edge of the network, right into its heart. Sure, Cisco Systems is the dominant player with more than 50 percent of the market, and 3Com was fading, despite a reputation for innovation.

However, 3Com still has a substantial footprint and now it will have HP’s sales and marketing infrastructure.

A teaming of 3Com and HP could make things interesting. Instead of HP and IBM locked in battle, it looks like HP sees Cisco as a primary challenger.

HP has good reason to want to take on Cisco; after all, the networking giant is pushing into HP and IBM’s space with its Unified Computing System, which targets the data center and server virtualization. That offering was announced in March.

But the 3Com deal says as much about the market as it does the strategy of one company.

Customer demand is a big driver behind this acquisition, not just recognition of a threat from a competitor. Technology has become more powerful and more complex but at there is a certain sameness as well. It makes buying decisions that much more difficult when the differences between A and B are increasingly nuanced.

Another driver is the demand from customers that all this stuff they buy work together. People want to collaborate and share information, while also keeping their data secure.

So it makes perfect sense that a company such as HP wants to own critical parts of the data center, the desktop, the network and the infrastructure. The more you can offer in terms of products and services that seamlessly flow one to the other, the closer a relationship you can build with your customer.

This is also a sign of a maturing industry. We’ve moved beyond the phase where similiar companies acquire each other such as HP buying Compaq. That phase is pretty much done.

Today, the move is the acquisition of companies with adjacent capabilities, so companies can broaden their footprint in the market.

I’m not sure if that means the IT industry is reaching middle age, but it's definitely not a teen-ager anymore.

Posted by Nick Wakeman on Nov 13, 2009 at 7:23 PM


Reader Comments

Mon, Nov 16, 2009 Chad

When do acquisitions or mergers ever work in the equipment space? Even that mighty monopoly, CISCO, is full of acquisition that don't work. Ten years ago, Cisco bought Cerent for $7B and Monterrey Networks for about $1B. Look at NORTEL's acquisition of Bay networks. In the long run, how has that gone? More recently, HP's acquisition of compaq? That ain't gone real good and, if Mark Hurd would have done that one, they'd spell Hurd with a "T" instead of an "H". What about Alcatel-Lucent? Avaya Nortel should go just as well. HP correctly recognizes that CISCO is ripe for the picking for some new competitor. Cisco is too arrogant, not innovative enough, and really expensive. But, HP won't win with this acquisition. They be better off buying a start up with a disruptive technology like Anagran or some other emerging router vendor that could lower prices. or, they'd be better off with some in-house innovation both in R&D and marketing to pick off monopolists like Cisco.

Mon, Nov 16, 2009 RHL NC

Great article, very prescient and shows Wash Tech's continuing journalistic leadership in this market space. All the others like IWeek, etc. are just taking sides and have not broken into and gleaned the real strategy behind the move. HP has correctly seen that IBM is essentially a dying whale with a collapsing market footprint that has decided to focus on software and the analytics back end of the cloud. They will quickly become another vendor to be used as integration tool by others. The real competitor is Cisco, which along with HP are quickly moving back to the rennaisance IT vendors which will provide full IT solutions, soup to nuts, controlled by internal development and support, nothing done via unreliable "partners".

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