While rumors have been flying that EMC has been trying to execute a merger with fellow computing giant HP, it threw a bit of a curve this week when it bought cloud startup Cloudscaling. Just when you’re thinking EMC might be irrelevant, it makes a move that suggests the company is still forging ahead.
While EMC is at its core a storage company, it owns lots of enterprise pieces and works in such as areas as the cloud, big data, security and content management. Yet a substantial percentage of the company’s market cap derives from its 80 percent ownership stake in VMware. In other words, if EMC joined the parade of companies breaking in two, and it spun off VMware, it would be left a modest sized company.
Cloudscaling is one more attempt to stay current giving it a company that provides an OpenStack infrastructure play, one that is in heavy demand. Much like its partnership with Pivotal and its purchase of Syncplicity a couple of years ago, Cloudscaling gives EMC some cache with IT folks who are looking for something different, something you typically don’t find at a large, established enterprise vendor like EMC.
As Andreessen Horowitz COO Scott Kupor pointed out in a recent blog post, stand-alone companies such as Akamai, Cisco, EMC, Oracle, Microsoft, IBM and HP are showing signs of age with slower organic growth, and these companies are using their cash reserves to buy the pieces they need, rather than developing them in-house. But in a market where the cloud evens the playing field and companies born in the cloud have far greater agility than these larger companies, suddenly being bigger isn’t better anymore and these companies are stuck in a very difficult position.
They can split up as HP, eBay and Symantec have done in recent weeks or they can try and move to the cloud, however clumsily, as all these players are doing. It’s no coincidence that HP, IBM, Oracle and EMC have all turned to OpenStack as a life raft of sorts. They see the game changing and they are trying desperately to find a way to play along.
As Kupor pointed out in his post, this transition will not happen over night because these companies can live on their maintenance contracts for years and years and no large customer, whether it’s the government or a large corporate entity is going to rip and replace over night –but the future is clear for anyone willing to look.
The cloud and digital transformation has become so compelling, it’s impossible to ignore –and their customers are beginning to make the transition. These large companies see it, but they are big and slow and it’s hard to move a company from what you know to something entirely different, and while many are making the move, you have to wonder how many of these companies will be around in their current form by 2020.
I wrote about the Boston startup scene the other day and pointed out several waves of glory days that have come and gone in Massachusetts as whole generations of companies have disappeared that were once the stalwarts of the state economy, whether we are talking Polaroid or the entire mini computer industry including Digital, Wang, Data General, Apollo and Prime. They are all gone now. Could EMC be next?
As I’ve written before, disruption is not a fait accompli. Large companies have come off the mat, but we have also seen tidal waves of disruption wipe out companies that were once industry giants, and the thing about the cloud and digital transformation is it moves so much faster and the change comes so much more suddenly. Companies that can’t move quickly can and will disappear at a startling rate.
EMC could be one of those companies at a crossroads. If it can’t figure out how to become a different company (whatever that is), it may not be around forever, at least as we’ve known it. Buying a company like Cloudscaling is one more move on the chess board and one more attempt to avoid the disruption steamroller.