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The wires and blogosphere have been buzzing since The Wall St. Journal reported on Oct. 5 that executives at Brocade Communications Systems, Inc. are considering putting the maker of data center networking equipment up for sale. Since the article was published, other media outlets and pundits have reported that possible suitors may include HP and Oracle. The information is being drawn from unnamed sources close to Brocade and officials for all three companies aren’t commenting on the rumors.
But it’s understandable why Brocade would generate keen interest among big players like HP and Oracle. Both of these companies, as well as IBM and Brocade's rival Cisco are vying for greater control of end-to-end enterprise IT spending. Or at least the biggest and arguably the most profitable areas for enterprise IT spending: software, hardware, services and networking.
Brocade makes IP/Ethernet switches and routers, SAN switches, DCX backbones and the types of networking gear that’s the glue for IT infrastructures. Even though overall IT spending remains relatively flat, there’s steady demand for these types of products as enterprise storage capacity continues to surge.
That could be a key selling point for a company like HP or for Oracle, assuming that the European Commission blesses its proposed union with Sun Microsystems in coming months. A salesperson for HP who’s working on a deal for server upgrades for a healthcare industry customer would jump at the chance to say “And if you’re looking to upgrade your network, we can help with you that, too” and offer a packaged deal.
Once Oracle is able to complete the Sun deal, it will be much better prepared to offer customers a comparable array of software, hardware and services. Given Oracle’s expansion into new markets and penchant for growing by acquisition, a play for Brocade isn’t so far-fetched. Meanwhile, Cisco is expanding more aggressively into the server market and competing more with HP and IBM for business.
The one-stop shopping approach to enterprise IT is hardly new – IBM has been offering a huge assortment of products and services for years. But the market is increasingly shifting to a handful of very big vendors that are controlling a greater portion of enterprise IT spending as titans like IBM, HP and Oracle continue to gobble up smaller niche companies and expand their offerings into different areas.
There are pluses and minuses to these trends for Fortune 1000 CIOs. Many CIOs tend to centralize spending with a smaller set of vendors during a recession. But one of the downsides is that it increasingly leaves IT leaders at the mercy of just a few companies which figure more prominently in the management and control of their IT infrastructures.
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