HP vs. Dell: Bidding War for Storage?

There is currently a sort of bidding war taking place as both Hewlett-Packard and Dell Computers fight over storage services company 3PAR.  The war itself is interesting, but the reasons behind it are even more so.

Currently, the bid price has been raised to $30/share by HP’s bid (the sixth to be given).  This is amazing since the pre-sell valuation of 3PAR put it at only $10/share.  Now it’s trading at $32/share on news of this bidding war and Dell is expected to give yet another counter-bid.

That war, as stated, is not what’s really interesting here.  What’s interesting is why these two computing giants are fighting over what otherwise would seem to be just another virtual storage company.

What they’re really fighting over is the future of cloud computing.

It all boils down to how storage is usually allocated when being used in the cloud or even for large-scale enterprise IT.  Normally, each application or instance of an application (or user, depending on the situation) is given X amount of storage to use.  Normally, that figure will be much larger than the actual use.  So if User A runs an instance of Package A, the server might allocate 100mb of space for that instance.  When User A is done, he’s only use 25mb of space in total and the rest was wasted.

What 3PAR has is a system they call “thin provisioning.”  This is an on-demand, just-enough allocation of storage based on actual usage.  It’s flexible so that in our above scenario, User A’s instance would have only been given 1mb to start with and that would have been allowed to expand to the total use of 25mb and no more.

For cloud computing, this is an immense breakthrough – simple as it sounds.  And 3PAR holds the tech and the patents to go with it.

Dell and HP want in on this tech for different reasons.  HP has been floundering in a lack of innovation lately and it’s losing market share in the storage business to Cisco and IBM.  Dell, on the other hand, is not really an innovation-driven company to start with, but seems to realize that it’s hit the proverbial glass ceiling with personal computing and needs to diversify.

Both companies know that the 3PAR technology may be the near-future of cloud computing and enterprise storage allocation and both want to own it.  For Dell, this is new territory since all of their current similar tech comes from partnerships and up-sells rather than being internal.  For HP, this is an attempt to jump forward and once again become the “innovation” company.

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