The Great Split Business Model

There seems to be a new business model appearing: Split the company. Symantec has done this, and now HP. IBM did it by selling off a great chunk of its server line to Lenovo. Cisco did it by divesting itself of ownership of VCE. What is telling is that there is a growing number of large companies splitting rather noisily, all for the same official purpose: to concentrate on core competencies in whatever areas the split resolves into. But this may be a misrepresentation. At least from the outside, it looks like it will be.

However, when a company that is large and diverse splits, the people go with it: the management does not change, the people do not change—they just have a new name. I was part of the Compaq/Digital and HP/Compaq purchases, and my job during those purchases did not change, nor did my management. More importantly, neither did the attitude of the managers and people involved around me. If you want to change the culture by performing a split of this nature, you need to also change the attitude of the people. So I asked myself some questions about the following splits:

1) Do I expect the HP split to produce better HP Proliant and other server hardware? Or even better printers?

Unfortunately, my answer is that I do not expect much of a change. As a customer and an analyst in the space of virtualization and cloud, I just do not see anything changing other than the letterhead, a costly expense that does not do much to address my needs as a customer or what I see as the needs of the community. Does it help with marketing? Perhaps less annoyance, as I might not be asked if I want a printer with my purchase. From a server perspective, the Gen9 Proliants are very good, but I wish to see more integrations with GPUs for all chassis, including blades, not just the sled type approach.

2) Do I expect Symantec’s split to produce better data protection products?

Unfortunately, no. I do not see much of a change. The Veritas name is well known in certain areas, but I just do not see its products changing to be better than they already are. NetBackup and other data protection tools from Symantec are behind the curve. It needs to improve by wide margins to compete on a more level playing field. One way to do this would be to combine some of its data protection tools into one suite of integrated products.

3) Did anything change when IBM sold off Lenovo?

I do not see many changes here beyond IBM’s apparent desire to be a cloud-based business. IBM has spoken about this, but other than SoftLayer, I have seen no big movements in this area. However, I have seen new mainframes produced and the general slow improvements you would expect within SoftLayer, upgrades that were planned long before the purchase by IBM. Has anything changed here? Not really, other than that if I want IBM-branded servers, I have to go elsewhere, unless I want a Unix or mainframe platform.

The Great Split Business Model

For the great split business model to succeed, you do not only need to split the business along user (commodity) and business (server) lines, but you also have to change the overall mindset of the people within the split units. If they go on with more of the same, the split will eventually fail as a business model, with perhaps one half dying off completely, and not the half one would expect.

The user or commodity side of the business is a numbers game: the more buyers, the more you make. But to attract buyers, you need to innovate and publicize those innovations wide and far. Sometimes the numbers work; inertia favors the commodity side of the business.

For the business or server side of the business to succeed, it is important not just to innovate, but also to provide products that are good enough and inexpensive enough to attract the SMBs of the world. As these SMBs grow in size and buy an increasing amount of hardware, they tend to be brand-conscious and to stick with what they know. Once more, inertia favors the business side. This often requires products to be up-to-date with the latest and greatest techniques, to be priced very competitively, and to come with great support regardless of what level of product is purchased.

A startup buying HP hardware will continue with HP hardware only if the support for that hardware excels. Such a company may be small now, but a sudden growth spurt will have it hurtling to buy more hardware. However, most startups these days are investing in cloud services over traditional hardware. How do you market to the startups? Perhaps there needs to be a cloud connector kit: a wireless access point, switch, and localized storage replicated to a cloud or vice versa. Yet, I have not seen such an item on the market. This would be ideal for startups, SMBs, and others wishing to go to the cloud.

Final Thoughts

For these splits to succeed, there is a definite need to change the mindset of the employees: to get everyone thinking as though they were in a startup and to seek to combine products into easily upgradable items. HP has modular hardware; Veritas needs modular software. All five companies (HP x2, Symantec x2, and IBM) need to innovate, to think like startups and be agile. However, that is not the existing mindset of the workers and management.

Start with the people, and that will aim the business in a better direction. I just do not see much of a change, regardless of what they call each other.

How do you feel about the great split business model?

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