EMC Bets Acquisition Will Spur ILM Adoption

Updated: By acquiring Internosis, EMC gains Microsoft application infrastructure and development specialists who it hopes will drive adoption of its information lifecycle management model.

EMC Corp. acquired privately held Internosis Inc. Monday, giving the storage behemoths professional services arm a battle-tested collective of Microsoft application infrastructure and development specialists to help drive adoption of EMCs information lifecycle management model.

Details of the transaction have not been released.

A Microsoft Gold Certified Partner and seven-time Microsoft partner of the year, Internosis will exist as the new Microsoft Practice within EMC Technology Solutions, EMCs professional services organization, according to officials of Hopkinton, Mass.-based EMC.

Industry analysts say the move, coupled with last weeks acquisition by EMC of grid provider Acxiom Corp. for $365 million, is consistent with EMCs stated ILM strategy to move its technology up the software stack and build an in-house services delivery view beyond traditional storage services.

In fact, EMC may be on the lookout to acquire companies very similar to Internosis, but with application infrastructure expertise for Oracle Corp. or SAP, said Doug Chandler, program director for Framingham, Mass.-based IDC.

EMC plans to lay off 1,000 employees in 2006. Click here to read more.

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"You can surmise [EMC is] probably looking at Oracle and SAP as other areas of software platforms they want to deliver services around," said Chandler.

"They seem to have gone after a specific kind of company with a specific kind of expertise [in Internosis]. Undoubtedly there are other companies like this out there, so it wouldnt be totally surprising to make future acquisitions like this."

Todd Pavone, vice-president of Global Solutions, EMC Technology Solutions, said that EMC chose Internosis from a list of 13,000 potential acquisition candidates as part of a selection process that began last October.

He said EMC realized it couldnt grow fast enough to have the necessary skill sets for customers in 14 key technology areas—including areas covered by Microsoft and Oracle—and thus will look at purchases to fill those holes.

"Microsoft has been a CIO-based application, and theres always a quite a bit of change, migrations and upgrades," said Pavone.

"Infrastructure has become much more relevant to Microsoft applications then they have been in the past. [Through Internosis] we can come in and help customers at an earlier stage. This allows us to have this services-led approach and be able to position our products better to the customer."

Pavone would not put a timetable on the next services-oriented acquisition to compliment EMCs new Microsoft Practice with future practice areas.

However, he did confirm the company was "actively looking" in key areas such as Oracle, SAP, compliance and content management.

Internosis employs approximately 250 services professionals who assist customers with Microsoft-centric issues within enterprise environments. That expertise is in areas such as the integration and migration of Microsoft and related technologies, increasing productivity surrounding directory services, collaboration capabilities and knowledge management.

The EMC Microsoft Practice will involve four areas: Microsoft strategy, application infrastructure, application development and application managed services. Within those four areas EMC will bundle in its ILM technology and storage subsystems where applicable to squeeze better performance from customers Microsoft deployments.

According to Charles King, principal analyst for Pund-IT, Inc., Internosis Microsoft expertise is poised to directly benefit EMCs Clariion NAS (network-attached storage) and Centera CAS (content addressed storage) offerings, in particular as they are used within Microsoft Exchange and SQL Server database environments.

Due to Microsofts deep penetration in the small and midsize business space, Chandler said that long-term, Internosis should bring EMC opportunities in that largely untapped market.

Click here to read about how EMC is targeting smaller businesses with an e-mail management tool.

However, he said the acquisition by EMC leaves possibly unanswered questions on how the move will play out for EMC channel partners who may have their own designs on similar Microsoft services.

Partner reaction was taken into consideration by EMC, but is not seen as a stumbling block, noted Pavone.

"We were definitely concerned about that. We did not want to disturb that network. We were very open and candid with a lot of the partners [prior to the acquisition]. The good news is theres enough business to go around ... were concerned about it but we think we can manage through it."

The Internosis acquisition is not expected to have a material impact on EMCs earnings per share for 2006.

Editors Note: This story was updated to include information and comments from analysts and an EMC executive.

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