Oracle buys Sun Microsystems and now Intel buys McAfee.
News broke here last night that Intel will acquire McAfee for close to US$7.7 billion in a move the chipmaker says will elevate focus on security and augment Intel's mobile wireless strategy. "Providing protection to diverse online worlds requires a fundamentally new approach involving hardware, software and services," the Santa Clara company said.
Software meets hardware, and now hardware meets security. It seems more so today that organizations can't see themselves competing effectively without owning the ability to offer a complete product solution. No one wants to be just a chipmaker or just a software vendor or just a box pusher.
At first glance, it makes sense. Technology can hardly be deployed in silos anymore these days. The PC is pretty much a useless piece of metal without the necessary office productivity suite--whether proprietary or freeware--and a data center filled with servers won't run efficiently without the necessary virtualization or network management software.
Intel CEO Paul Otellini said in a statement: "In the past, energy-efficient performance and connectivity have defined computing requirements. Looking forward, security will join those as a third pillar of what people demand from all computing experiences."
Senior analyst Technology Business Research, Allan B. Krans, said in a note that McAfee had enjoyed differentiation from market leader Symantec by being the largest pureplay security vendor focused on expanding its presence in the security space. Now "a pureplay no more", Krans said McAfee joins Symantec in providing security as part of a much broader product set and will nestle in the benefits of joining a much larger organization including access to greater financial resources and increased product cross-selling and integration.
So does that mean diehard pureplays like SAP, Trend Micro and Intel's archrival AMD can no longer compete against these jigsawed companies? Not really, because there will always be demand for tech specialists that are focused on perfecting their chosen art instead of being a jack of all trades, but master of none.
It takes a tremendous amount of resources and effort to manage an organization with multiple product categories, especially when these are inherited via acquisitions and not developed organically. Product integration will be tedious and resources will be stretched because the company needs to distribute sufficient attention to every technology line.
In Intel's case, the McAfee buy suggests much potential because the company can now build security more closely into its chips, effectively providing a bare metal architecture optimized for computing power as well as security. But should Intel decide to buy up companies every time it feels some other technology can be embedded into its products, it then runs the risk of burgeoning into a mishmash of disparate business units that lack a cohesive focus.
And there's always the question of how big a company should be allowed to become.
Graham Titterington, principal analyst with Ovum, said in a statement: "We can assume that Intel's objective is to incorporate more security features into its chips. For users, and for businesses, this will be welcome, but clearly there is a risk of monopolistic concerns damaging the market. The situation brings echoes of what we saw in 2002 when Microsoft, in conjunction with Intel, proposed a secure computing platform under the auspices of the Trusted Computing Platform Alliance and Microsoft's Palladium project."
The McAfee acquisition also puts into question Intel's partnership with EMC, announced earlier this year, to build a framework encompassing security and compliance for cloud computing. Having itself acquired RSA Security in 2006, EMC is now effectively an Intel competitor.
Cross-market unions make sense on paper because such acquisitions will allow the parent company to provide a broader and more comprehensive product portfolio for enterprise customers. But, the execution of such mega marriages to achieve the desired seamless integration is usually riddled with much uncertainty.
For pureplay companies then to stay competitive amid the likes of Oracle-Sun and Intel-McAfee, the need to embrace coopetition has never been more relevant.
The technology world is increasingly all-encompassing, where there are frequent overlaps between the various components and product segments. No single piece of technology can work in isolation, and the enterprise environment can't function efficiently if one piece of technology doesn't integrate well with another.
If a market player doesn't want to have deal with the uncertainty brought about by mergers and acquisitions, in order to be able to provide a more complete solution for its customers, alliances and partnerships may just be the way to go.