John Katsaros

The Synthetic Mainframe Vendor

During the EMC Analyst Conference we had a session with Michael Capellas who joined VCE six months ago as Chairman and CEO — VCE is the Virtual Computing Environment company set up by Cisco, EMC and VMware. He's got a huge personality and the resume to back it — most recently he was Chairman and CEO of First Data. Before that he was head of Compaq and drove the merger with HP where he was president for awhile after which he moved on to rebuild MCI which ended up being acquired by Verizon. He's definitely what you would call an industry heavyweight. In May when it was announced that he would run the VCE coalition we pointed out in this newsletter that VCE would change to suit Capellas' goals and not the other way around and that he most likely would want to create something new and visionary in the computer business. With his credentials and capabilities it's unlikely that he took this job just to create some best practices building blocks. VCE has progressed rapidly since Capellas joined but they're still tight lipped about the long term plans. It's our guess that Capellas is building a modern mainframe company — you might want to call it a synthetic mainframe vendor since it sources key technology from other entities so that it can continuously take advantage of the best stuff that's available. Today the big three dominate the server market — HP, IBM and Dell. A year from now we may be talking about the big four.

Where Will All The IT Jobs Go?

If you look through some of the case studies that report on the reduction and consolidation of data centers, one thing stands out — an essential part of the reduction process involves a significant decrease in IT staffing. In HP's famous example of reducing 85 data centers in 40 countries down to four datacenters in two locations resulted in a reduction in IT professionals from 19,000 to fewer than 8,000. A 58% staff reduction is huge. Other data consolidation case studies talk about smaller reductions of around 15%. The good news is that organizations spending less on operations will free up resources that can be put into bringing online new functionality and, with that, partially offsetting the drop in headcount.

"I'll Follow the Sun"

Now that HP has completed its acquisition of ArcSight, it's going to be interesting to see how the new distribution of power in the security business evolves. Intel, with a combination of its semiconductor business and its venture capital investments (many say it's the largest corporate investor) may draw McAfee into the innards of the processor world which could be really disruptive. ArcSight a company which had a comprehensive long term vision of the systems side of security now has the financial capacity to quickly acquire adjacent technologies as a way of quickly filling out its vision encouraged by HP which wants to grow its software business. We can't wait to see what will happen.

New kid on the bloc or the birth of a new computer company?

Last month, Cisco and EMC appointed Michael Capellas to lead the VCE coalition and named him CEO of ACADIA the Cisco-EMC joint venture with investment from Intel and VMware where he reports to Joe Tucci, John Chambers and the ACADIA board (consisting of two EMC execs and two Cisco execs plus Capellas). It's hard to imagine anyone able to have that many top level bosses but Capellas certainly isn't your average CEO. Capellas was Chairman and CEO of Compaq in 1998 leading up to its acquisition by HP where he spent time after the merger as president. After that he ran MCI during a difficult rebuilding phase. You might wonder why Capellas would take on an assignment like ACADIA - we've been told since it was formed in November 2009 that ACADIA was set up to sell Vblocks - preconfigured versions of Cisco's UCS server, EMC storage and VMware software. But maybe there's going to be more to this story than that - what might interest someone like Capellas is the launching pad to build something bigger - more than an entity selling preconfigured packages - more like a new computer company. ACADIA could be the perfect platform for doing this — with a birthright consisting of networking, server, storage, software and with Capellas as CEO can it grow quickly enough to compete with the likes of computer giants IBM and HP?

iPad Envy - - and HP?

While the swine flu epidemic was more or less a bust, iPad Envy has hit Silicon Valley in a big way. Lots of people want one but corporate affiliation may mean that if you get one you might have to keep yours in the closet. If you bought and boasted about your new Kindle in 2009, then buy one of those iPad book covers to conceal it — we don't want to hear how much you love it. If you work for any one of a long list of companies including Intel, Google and Microsoft then you can't take your iPad to work. Probably the worst case of iPad Envy may be HP which on Wednesday said it would pay $1.2 Billion to acquire Palm and subsequently went on to say that Palm's webOS was a key dealmaker cause HP needed an OS for building things like ...iPads. Since we don't know the details it's hard to say whether this will be a success or not and there seems to be a lot of value in the Palm patent portfolio. An argument can be made that HP could have been a stronger player in the mobile market if it was device agnostic and treated things like smart phones and tablets like disposable devices. However, with this acquisition we're past that point. You've got to wonder why HP would want to take on a competitor like Apple. HP's enemies list is pretty big — longstanding were IBM and Dell. More recently Cisco. Now add Apple and Google into that mix and you end up fighting battles on too many fronts. With regard to Palm, one of our readers who shall remain nameless sent in this final advice learned from the Palm debacle — for heaven's sake, don't call your hot new product the "Pixi." Blackberry, iPhone, Danger, Android — all OK names. But Pixi? That's a mistake you can't recover from.

Cisco Joins Dow

This week GM was removed from the Dow Jones industrial index and replaced by Cisco.  GM was the last automaker on the index.  Now there are five high tech companies in the Dow including HP, Intel, IBM, and Microsoft.  I guess the only surprise here is why it took so long.  Cisco has been a bellwether of high tech spending for years.

Barney Goes High Tech

As a background sound effect at the HP Analyst meeting they should have played Barney tunes (you know — "I love you, you love me") and we all could have dressed up in colorful suits to sing along. The only story that came out of the meeting was that HP's Procure group made a bunch of partnerships and that everyone who spoke thought that each of the others were "pretty good guys," gosh darn it. Lots of deep affection all around. It would have been nice to have been told that it was going to be a Seinfeld. HP's computer systems roots were showing as they continuously made the point about how their products use standards (implying that the other guys don't). That's reminiscent of the good old days of computer systems marketing when the words "Open System" meant that my products are open but not the other guys' products. HP might have forgotten that this is the networking business — none of this stuff would work if it weren't for standards.