Avago/Broadcom & Intel/Altera
Avago is buy/merging with Broadcom to create a company with combined revenues of US$15B. This merger appears to be driven by “System on a Chip” (SOC) demand. Where silicon chips are often single function the next generation will shrunk to fit onto a single die eg. 3G baseband modems, memory bus, multiple CPUs can all fit on a single chip. This convergence is driven in part by operational scale and part by bring multiple chip designs into a single companies so they can shrunk onto a single die.
At the same time, Intel is buying Altera for $15B suggest that Intel wants to get more silicon, specifically FGPA silicon. FPGA chips have been hard to use for a long time, but FPGA software is becoming easier to use as software convergence (driven by open source) makes development simpler. Again, convergence of FPGA in the CPU. Previously, Intel acquired Fulcrum and converged that silicon onto the motherboard.
EMC / Virtustream
EMC is buying Virtusteam for more complex reasons. The obvious need to fill a gap in hybrid cloud is the key motivation for the purchase. Enterprise customers, the life blood of incumbent IT companies, are reluctant to embrace the cloud and are keen to spend money on being half-pregnant. Virtustream enables migration of existing enterprise software from the private data centre to migrate into managed private cloud instances.
Again, this is convergence writ large on the landscape. The EMC Federation has attempted to stay out of the public cloud war and hoped to sell the weapons instead of fight it. Cisco, HP and IBM have all leapt into the war against Amazon/Google/Microsoft and leaves EMC with no choice but to converge on public cloud too.
The volume of convergence and hyper-convergence is probably just starting. For HP, buying Contextream to orchestrate NFV instances is critical to competing with Cisco & Brocade in the service provider market. HP had hoped to partner with lots of software partners but as competitors have built or bought NFV orchestration products/platforms to offer end-to-end SDN/NFV solutions. Service Providers seem to be saying we want “open and interchangeable” but requires fully converged solutions and vendor guarantees at the same time.
Building a fully converged SDN/NFV stack keeps HP on trend. Customers are asking for end-to-end guarantees as they transition to the “new” network and this gives customers what they want.
At a much smaller scale, Meru is selling for 44MM to Fortinet so that its wireless products can be converged into a BYOD platform that s tightly integrated with Fortinet’s existing security products. Again, convergence of wireless into near every product has already happened, why not firewalls ? And Meru gets the benefit of being part of the bigger company (see also SourceFire / Cisco)
The EtherealMind View
The convergence hype-cycle is only just beginning. It is largely driven by advances in software development where small teams can create highly complex software and compete successfully with incumbent vendors on price and exist profitably in the margin overhang. Hardware is converging at a slower rate because physical stuff is hard.
As technology gets easier to create/produce, the convergence cycle will continue to compress features into products. This leads to the concept “hyper convergence” as convergence goes through a transition until we reach a steady state when software development stagnates.
Combined with convergence is scale. Complex technologies need big companies to sell & support them. Profit margins on converged systems work better when systems are scaled up.
The bottom line is that hardware and software convergence will continue to change the IT infrastructure landscape several years. That which is standalone product will become a feature of someone else’s.
News Release | Broadcom
EMC and Virtustream whats up with that?! – Virtual Geek
Here’s the story behind today’s chip M&A frenzy – Fortune
Intel nears $15B deal to purchase Altera | New York Post
Palo Alto Networks acquires cybersecurity company CirroSecure | ZDNet
Fortinet Announces Agreement to Acquire Meru Networks (NASDAQ:FTNT)