New SAN-Script For HP?

HP wants to move to the forefront of the enterprise and Storage Area Network (SAN)market. And it sees Hitachi as its ticket to the top. In what many analysts are calling a"major risk" and a "bold action," HP has signed OEM and jointtechnology agreements with Hitachi, Ltd. (Tokyo, Japan) and its global marketingorganization Hitachi Data Systems (Santa Clara, Calif.) aimed at developing, marketing andsupporting enterprise-storage subsystems with the Hewlett-Packard moniker.

With the advancement of Web-based and OLTP applications, storage is quickly accountingfor as much as 50% of an enterprise's IT budget. And it's a market that, until now, HP hasbeen content with an indirect approach to, being satisfied to market its servers asneutral platforms that will interconnect with most third-party storage providers.

BIG-PACT ATTACK

The HP-Hitachi pact then would seem to undercut HP's long, and (by most accounts)profitable, reseller relationship with storage system manufacturer EMC, which it isestimated, accounts for more than 50% of HP's storage system revenues. From EMC'sviewpoint, the OEM agreement with Hitachi is more about profit and account control thanoffering a superior product.

"HP wanted to sign an OEM agreement with EMC and we consistently refused,"says Rick Lacroix, EMC's public relations program manager. "The agreement meantputting the HP name on the system and allowing HP to service the system. This [HP'sHitachi pact] is not a relationship based on product. It's much more based on profit andaccount control. When you have your name on the box and you're selling a HP storagesystem, there's more you can do on pricing because you're not going in with anothercompany. And you're also servicing the system for another revenue stream."

BEST OF BREED

So, is HP's agreement with Hitachi going to provide less-than-best-of-breed products?Not to worry, says David Hill, an analyst with the Aberdeen Group (Boston, Mass.). Hillexplains that EMC's superior performance and ease of connectivity to multiple computerplatforms allowed it to dominate the mid-range server market share. "They broughtmainframe characteristics to UNIX at the high level, which is the most profitablespace."

But he adds that Hitachi, with its very strong talent for imitation, has more thancaught up with EMC's performance and connectivity over the last several years. Hitachi'sproblem, according to Hill, was, "they didn't know how to sell in the open systemsmarket." Thus, the OEM agreement with HP.

Another area of strength that EMC emphasizes as a major difference is the storagemanagement software that has long been an important part of the EMC message. "WhileHitachi is very good on the hardware side, they haven't been able to catch us insoftware," says Gil Press, EMC's director of corporate communications. "Softwarefor disaster recovery, online backup, load balancing, for security and so on."

But Hitachi's software shortcomings are not an issue, says Hill, because managementsoftware is also a HP strength. In a report entitled, "HP Enterprise Storage BusinessUnit: Bravely Betting its Future on Open Storage Area Networks," Hill did ahead-to-head comparison of functions such as: remote mirroring; point-in-time copy;limiting access to storage volumes in SAN-only environments; remote monitoring, diagnosisand repair facilities; and SAN-device monitoring.

"Comparable functionality, but HP may have more flexible failovercapability." "An EMC specialist must set up the copy volumes." "Bothsupport multi-vendor ... HP also supports IBM AIX." "HP can see every device onthe SAN. EMC cannot."

The report summarizes, except in some very specific situations, EMC has no demonstratedsoftware superiority over HP. In fact, HP has a slight edge in ease-of-use and breadth ofcoverage in most cases.

"Besides," adds Hill, "after remote monitoring and mirroring, nothingelse is that important."

SALES VOLATILITY

Another area of contention that has long simmered just below the surface of HP'srelationship with EMC is a difference of corporate cultures and marketing philosophy. Inhis analysis of the relationship, Hill says that EMC sales reps are trained toaggressively pursue and win every possible dollar, while HP wants its accounts to view itssales reps as trusted advisors.

This schism has led to increasing field tensions and may have ultimately driven HP toHitachi. "That's HP talking because they couldn't get what they wanted out ofEMC," says Lacroix. "In many direct sales situations, there was some channelconflict as EMC tended to want to move a little bit more quickly than HP. I don't believethere's a deep-seated customer or business partner aversion to EMC."

All other considerations aside, what may finally be driving HP's apparent willingnessto ultimately abandon EMC in favor of Hitachi is its continued drive towards open storagesystems and EMC's wavering on the subject. In his report, Hill summarizes that feeling,"... HP and its customers sense that EMC is really building the Proprietary RoachHotel. Once you go in, you never come out. EMC will push all storage to be on its Symetrixproduct line and ... aggressively discourage the use of competitors' products."

LOOKING FORWARD

Press says that the historical closeness of the HP/EMC relationship is not apt tochange anytime soon and several of the offshoots of that relationship will keep EMC at theforefront of HP's enterprise storage market. "We're still part of their five nines,five minutes program. We're part of their mission critical computing suites program and anumber of their other high-availability programs. And we'll continue to be part of thatjust as the reseller relationship between HP and EMC remains in place. Where the Hitachiqualification is, I don't know."

But, in the next breath Lacroix says, "We think the landscape in the ITenvironment has changed from server companies to more of the SIs and the VARs. Rather thanturning to a single server company, they seem to be turning to ... whoever can select andinstall a pretested solution.

WHAT? ME WORRIED?

Hill's bottom line: "HP's challenge will be to instill in its field sales andsupport organizations the knowledge, expertise and confidence to establish a trulycustomer-focused storage systems business division." And finally, "There's a newstorage systems player in town. EMC should be concerned -- very concerned."

Summing up EMC's position, Lacroix adds, "We're going to continue our penetrationof the HP server market with or without HP. Our storage solution is the overwhelmingpreferred solution for HP users, especially the high-end customers who are doingmission-critical applications. The customer selected EMC. None of it was a packageddeal."