Breaking Up? It’s More Popular Than Ever

scissors cutting paper in twoOver the years the IT industry has grappled with best-of-breed versus best-of-vendor solutions, or the more recent — and drastic — innovate/disrupt-or-die argument. Kevin Spacey recently told an IT audience that risk takers are rewarded, and perhaps that’s why HP and Symantec have decided that breaking up into smaller, more focused businesses is the way to go, and Cisco and EMC might make similar moves.

Things got interesting when HP ($112.3 billion in annual revenues) unexpectedly announced that it would separate its PC and printer units (to be called HP Inc.) from its enterprise units (Hewlett-Packard Enterprise) and form two $56 billion companies by the end of fiscal 2015. “The decision to separate into two market-leading companies underscores our commitment to the turnaround plan,” said Meg Whitman, Chairman, President and Chief Executive Officer of HP.

A key to success will be innovation, she said. “Over the past three years, we have reignited our innovation engine with breakthrough offerings for the enterprise like Apollo, Gen 9 and Moonshot servers, our 3PAR storage platform, our HP OneView management platform, our HP Helion Cloud and a host of software and services offerings in security, analytics and application transformation.” continued Whitman. “

Three days later Symantec ($6.7 billion in annual revenues) announced it would split itself into two companies focused on security and information management (IM), with the split expected to be complete by December 2015. “As the security and storage industries continue to change at an accelerating pace, Symantec’s security and IM businesses each face unique market opportunities and challenges,” said Michael A. Brown, Symantec president and chief executive officer.

“It has become clear that winning in both security and information management requires distinct strategies, focused investments and go-to market innovation. Separating Symantec into two, independent publicly traded companies will provide each business the flexibility and focus to drive growth and enhance shareholder value.”

Around the same time that HP and Symantec were announcing their divide and conquer strategies, stories started circulating that EMC ($23.22 billion in annual revenues) was exploring merger and other options. The storage, information management, virtualization and security vendor had reportedly been holding off-and-on merger talks with HP for nearly a year.

EMC was also rumored to be in talks with Dell. Other companies considered potential partners for all or part of the company include Cisco Systems and Oracle.

Speaking of networkings’ 800-pound gorilla, with all this talk of splitting up, it only made sense to throw Cisco ($47.1 billion in annual revenues) onto the rightsizing bandwagon. Long-time Cisco follower Mark Sue, an analyst at RBC Capital Markets, recently suggested breaking up the company into two parts, solutions and cloud. He said RBC surveys indicate Cisco has too many people, takes too long to get things done and has become reactive to changing market dynamics through layoffs and restructurings that have become routine and regular over the past four years.

According to Forrester Research, there are at least ten times as many innovators gunning for your business as compared to before, and the costs of entry are less than one-tenth what they were. That translates into having to compete with 100 times the innovation power, and at least some of them are going to be successful.

Between cloud, mobility, Big Data analytics, software-defined everything and the Internet of Things, we are going through a period of unprecedented change, and virtually all of it driving demand for faster, more agile networks. If vendors don’t give customers what they want, when they want it, and at a price they’re prepared to pay, then the customers will quickly find another vendor. According to Gartner, 70% of CIOs will change their technology and sourcing relationships in the next two to three years.

There are no guarantees that focusing on fewer market/technology segments will better enable vendors like HP and Symantec — or EMC and Cisco — to respond more appropriately to the rapid changes confronting them. That will require making the right technology choices and executing as well or better than their new and existing competitors. Interesting times indeed.

About the author
Steve Wexler

Steve is a proficient IT journalist, editor, publisher, and marketing communications professional. For the past two-plus decades, he has worked for the world’s leading high-technology publishers. Currently a contributor to Network Computing, Steve has served as editor and reporter for the Canadian affiliates of IDG and CMP, as well as Ziff Davis and UBM in the U.S. His strong knowledge of computers and networking technology complement his understanding of what’s important to the builders, sellers and buyers of IT products and services.