EMC targets BMC

Storage giant EMC has been secretly courting enterprise software company BMC Software with intentions to merge the two companies into one, according to a source familiar with EMC's plans.

"EMC is doing active due diligence with BMC in discussing a merger so EMC can become a full datacenter play," said an industry source who requested anonymity.

EMC representatives were unable to comment on any potential bid for BMC, based in Houston.

Coupling EMC, one of the world's most successful enterprise storage companies, with BMC, one of the world's largest independent software companies, would make EMC a significant player in the datacenter and application management market, according to industry observers.

BMC's Patrol software framework is the jewel EMC is in pursuit of in its merger talks with BMC, the source said.

Over the last six months, the Hopkinton, Mass.-based storage hardware vendors has been essentially re-inventing itself as enterprise storage software management company, as evidenced by its AutoIS initiative. Adding BMC's technology to extend EMC's software management reach into the application and database layers is a next logical step, said the source.

"This is a growth sector for EMC. The whole Patrol framework is a good framework for systems management. EMC wants that software that tracks everything in the datacenter, from application servers, and all the way down," said the source.

With technology hardware margins shrinking and becoming less able to support revenues, EMC knows it must expand its software and IT service offerings going forward. EMC is not alone here. A recent wave of partnerships and software news from competitors including Hitachi and Fujitsu show an ever-increasing desire by large technology companies to mimic the success of IBM's Global Services.

"EMC is absolutely hell-bent on becoming a major software player in the industry. You can see it from their action and from the way they have been talking. Everything we've seen over the last three or four months is very heavily centered on software. So would it surprise me if they go through some major acquisition in the marketplace? Absolutely not," explained Arun Taneja, a senior analyst at Enterprise Storage Group, in Milford, Mass.

But like Hitachi and Fujitsu, EMC faces an uphill climb in its attempt to one day challenge IBM's leadership in software and IT services, the source said.

"The challenge is, if you are a hardware manufacturer, I can't think of anybody who's gone from hardware to being a great software producer," the source said. "IBM built Global Services organically. It is very hard in services to buy your way to catch up to IBM. You are essentially buying people and your best assets go home everyday, so you get stuck in this mode where you need to do something transformative. It's very hard to roll up services companies."

But the Enterprise Storage Group's Taneja said that an acquisition of BMC by EMC would put the storage company on the fastest track to getting what it wants.

"BMC is known for its application centricity. So if EMC got a big jump by getting an application specific software like BMC and building up from that, it certainly could make sense, and it's a quick way to get there," said Taneja.

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