Sun Purchases StorageTek: Possible Implications

Many of our customers are both Sun and StorageTek customers so this acquisition has our interest. Zerowait is concerned about how to help our customers maintain their legacy infrastructures to enable them to get the most for their storage investment, and an acquisition often results in the shrinking of support and engineering staffs of the acquired company. Additionally, when you have influential companies like these joining forces there are typically staff reductions in sales staff of the acquired company. Finally there are the long term branding and strategy concerns that customers should be concerned with for the 3 to 5 year period after the initial equipment purchase. For Sun, in our opinion, this acquisition really represents a purchase of a customer list and a brand—technology and real estate play a lesser role.

As Sun takes over the StorageTek marketing and sales functions, they will be forced to slash staff right after they absorb StorageTek’s contact and customer databases. Similarly, StorageTek’s engineering and technical staff will also be affected because both companies brand assemblies made of commodity parts. The business logic maintains that you can get by with fewer engineers to support them. But this would be faulty logic, and problematic for owners of StorageTek equipment. Indeed, the transition period could mean loss of timely technical services support (changing phone/email contacts, changing personnel, untrained techs), but the bigger danger is that, over the next few years, StorageTek customers risk the loss of the long-term expertise required by their niche storage products. As knowledgeable StorageTek personnel find themselves “let go”, the remaining support engineers will have responsibility for more products; this can mean dilution of product knowledge. Additionally, stocks of readily available spare, replacement or upgrade parts will likely diminish—product knowledge disappearing with it. We see that today with our own NetApp legacy parts: newly minted resellers haven’t a clue about which parts are compatible with which systems; nor are most parts available through manufacturer channels. Thus, infrastructure managers need to factor the elimination of support and spares as part of the corporate “right sizing” into mid-term technology refreshment plans. Zerowait considers mid-term to be 2 to 4 years after acquisition of product. Since this type of acquisition takes between 18 months and 24 months to accomplish, we would suggest that customers begin reevaluating their storage infrastructures soon.

We would expect that there will be quite a few orphaned products as soon as Sun’s folks complete the absorption process. Why? The merger brings Sun’s Storage business into competition with its new acquisition’s storage business. They both sell RAID Solutions that are assembled from parts by Xyratex, Seagate, Intel and Qlogic. The internal politics and elimination of overlapping products will take many unforeseen paths, but you can be certain that many customers will be left with unsupported products because of this merger.

Many of you may remember when Chrysler purchased AMC / Jeep. The AMC cars were quickly eliminated from the product mix. And the Jeeps were changed to use more and more Chrysler parts. The brand remained, but the product changed. Chrysler was then absorbed by Daimler. The Plymouth brand was eliminated, and Chrysler’s employees and staff were decimated. Chrysler’s share of the market has tumbled as it has lost its product’s identity. Plymouth is just a memory. I expect that StorageTek will suffer the same fate.

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