A new era of IT consolidation?

by Dirk Knemeyer

I don't use the moniker "IT" very often, typically only to talk about the internal stuff at my company that has to do with computing technology in the vaguest way. Under "IT" falls our hardware and software that runs the gamut of business technology: computers, phones, Internet connection, printers, other peripherals...everything. However, with the recent wave of unexpected and in many cases surprising mergers, it appears we may start talking more about giant "IT" conglomerates that seem to be in any and every technology related to computing and communication.

Let's start with Intel. It was indeed a surprise when, a few weeks ago, Intel purchased McAfee. What made this move so surprising is the seeming lack of synergy: a microprocessing company purchasing a security software company. While some experts were quick to point out that Intel may be going down the road of including security software in or in installed hardware around the microprocessor it nonetheless served as a wake-up call, that past divisions in computing technologies may be starting to evaporate.

More recently HP is in the news, first with its bizarre bidding war for an unknown data storage company, 3PAR and today for purchasing little-known security software company Arcsight. Both deals are seen as grossly overpaying for the assets, which can send only one message: HP sees these particular areas in the IT space as being really important to their strategy.

On the surface that is a specious comment. This isn't like HP buying Compaq, which was a direct competitor and makes linear, logical sense to those of us on the outside - even if the deal didn't seem very good. These latest acquisitions speak to a future HP is envisioning, not a present that is apparent to us. Certainly these acquisitions are logical seen in a properly broad context, but that context necessarily includes HP getting involved in more markets and increased horizontal and vertical diversification than we've been seeing.

Which leads me to the subject of this article. Other than IBM, I can't think of a company - and perhaps I just don't have enough grey hairs yet - that tried to do damn near everything that falls under the umbrella of IT. Hardware, software, operating systems, printers, peripherals, consulting...you name it and, at one point, Big Blue was into it. Since then they've consolidated and consolidated and consolidated. They still do a whole, whole bunch of thing but it is a far cry from the monolith of the past.

Microsoft didn't replace IBM in that way; they stuck, largely, to software. For all the industries Apple is in they really aren't trying to be an IT company: despite their attempts to make inroads into business markets they are, at this point, a consumer products company more than anything else. Google, well...Google is trying to get into seemingly everything but they are still riding a tricycle in a lot of cases while the roadsters on the various niche industry Autobahns are passing them by...for now.

In companies like HP and Intel - coming from the hardware side, seeing the convergence of hardware and software, trying to stake critical claims in sometimes disparate areas - we are witnessing what just might be an unprecedented era of IT consolidation. Start-up companies and product concepts have clearly shown the power of cloud computing and web 2.0 and convergent technologies. All of this stuff really belongs together. And some of the bellwethers of tech over the last few decades are making unexpected, bold and decisive moves into very new parts of the industry.

I can't figure out what IBM or HP claim to do as companies - their websites make them sound more like organizational management or green consulting firms than technology companies! But in Intel's case they still have a very narrow, direct and clear message: "Experience smart performance with Intel's Core processors." The more interesting question to ask narrowly focused tech powers like Intel as well as increasingly diversified properties like HP is: what are you going to be in 5 years?

Don't be surprised if we are bemoaning the demise of small and medium-sized tech companies thanks to the emergence of a smaller number of superpowers that suck all the air out of the room, not unlike the situation 15 years ago but perpetrated by numerous major powers as opposed to the old Evil Empire Microsoft of those perhaps now-halcyon days.

Topics: apple, hardware, microsoft, it, Analysis, Blog, intel, google, software, hp