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Protect your IT investment during turbulent times

Businesses need to be ready in case their virtualization vendor is quickly acquired, reconfigured or goes out of business.

Chaos reigns now in the IT vendor landscape. Your primary virtualization management vendor may be doing fine today but soon be acquired or go out of business -- a problem that is expected to get worse in the coming months. Consequently, businesses need to protect themselves so that an alteration to a supplier's business plan does not mean a rewriting of their own IT investment plans.

Technologies, like virtualization, cloud and system automation, are quickly advancing and sparking dramatic market transformations. Established vendors are seeing their dominance erode, and fledgling newbies are frantically trying to wedge their way into snug markets. The result is dramatic upheaval. By 2020, 30% of today's tech suppliers will not exist as we know them today -- having been acquired, failed or dramatically altered -- according to market research firm IDC.

The most noteworthy recent example is Dell's pending purchase of EMC and VMware, a move that has placed customers in limbo as the parties slog through the complex legal approval process. While Dell has been gaining mass, Hewlett-Packard Inc. has lost it, splitting the firm into Hewlett Packard Enterprise, which offers servers, storage, networking, converged systems, and software, and HP Inc., which sells personal computers and printing solutions.

Markets in flux

Smaller vendors have been caught up in the maelstrom as well. Founded in 1997, Parallels, Inc. has been at the forefront of the container movement with its Virtuozzo product, but struggled finding its market niche.

"Parallels has not done a great job of making the overall market aware of their existence much less their position in the markets they serve," said Dan Kusnetzky, founder of Kusnetzky Group LLC, and IT industry research firm.

In December, Parallels Holdings Limited sold its Odin brand, which was created in March 2015, and virtualization automation solutions, which are geared to service providers, to Ingram Micro Inc.

Such purchases have become quite common. During the last five years, Microsoft has bought close to 50 vendors and VMware acquired about 25. With vendor metamorphoses gaining traction, many questions arise. What signs illustrate that a supplier may be poised for a transition? What impact do the changes have on customers? How can corporations protect their IT investment from market volatility?

An obvious way to determine if change may be coming is to ask.

"We have our clients take a close look at their potential vendor's financials and evaluate their business plans," said January Paulk, senior ERP consultant Panorama Consulting Solutions.

Creating a ripple effect

Corporate realignments dramatically impact a vendor's employees, and a ripple effect is felt among customers. When an organization is stable, workers turn their attention to the clients. A potential restructuring significantly impacts the mood, morale and focus of the rank and file. They start asking, "How will the changes impact me?"

In certain cases, the change is welcome news and euphoria prevails. Startups often aspire to be acquired by larger entities, and employees look forward to cashing in on their stock options. The newfound wealth may change their lifestyle, such as moving to a bigger house or perhaps founding their own company.

In other cases, gloom arises. Mergers lead to restructurings, which often means workforce reductions or redeployments. The emphasis becomes whether they will stay on with the new company and if they will be let go.

Do not be left behind

Vendors have tried to learn from previous purchases and do the best they can to mitigate collateral damage, but human beings are involved and problems arise. Employees worry about their careers, wonder where they will fit into the evolving organization, and become distracted. As a result, the service level often drops, and the customer has to fill in gaps themselves.

Another issue is dead ending products. Whenever companies merge, some products are left behind. Contracts typically include a maintenance period during which the vendor will be required to provide support and ideally updates. But the supplier may try an end run around such agreements.

"The vendor may change the name of the product, which impacts the contract terms," said Liz Herbert vice president at Forrester Research.

Companies need to include language in their contracts that guards against such ruses to protect their IT investment.

Challenges in the migration process

The bigger challenge becomes eventually moving away from the system to another product. The challenge is converting information from one format to another. A couple of approaches can ease that transition.

The client may select vendors relying on open interfaces and open source models. If the commercial entity fails, the customer can still count on the community to move the product forward.

Sometimes, moving to another vendor becomes inevitable.

"Customers need to keep communications channels with other suppliers open" said Joe Galuszka, vice president at Forrester.

The customer should develop and maintain relationships with multiple vendors; putting all of the business' eggs in a single basket is risky nowadays. If a change eventually does take place, the client has to train the vendor in areas like understanding its payment terms and service expectations. Doing some of the work before entering an agreement smooths out and speeds up the process.

Virtualization managers have a lot on their plate just in trying to keep up with ever changing product features. Recently, their work has been extended as the IT marketplace undergoes dramatic realignment. Being proactive eases the stress level when -- more probable than if, in many cases -- a customer will need to sift through the ramifications of changes to a key vendor's business plan.

Next Steps

How the Dell-EMC merger could affect VMware

Docker's aggressive acquisition roadmap

Virtuozzo containers and OS virtualization

This was last published in January 2016

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