EMC looks to software and services for turnaround

EMC wants to "take a little bit of a page from IBM's book" and position itself as an end-to-end provider of hardware, software and services to meet all of its customers' storage needs, CEO Joe Tucci told analysts at EMC's annual strategy briefing.

EMC wants to "take a little bit of a page from IBM's book" and position itself as an end-to-end provider of hardware, software and services to meet all of its customers' storage needs, CEO Joe Tucci told analysts at EMC's annual strategy briefing Wednesday.

Through internal development and acquisitions such as its $1.3 billion in-progress buyout of software maker Legato, EMC is expanding its product portfolio, services capabilities and partnerships. It is also cutting operational costs and speeding its product cycles, Tucci said, as the company prepares for what he sees as a transition in the storage industry toward providing "information lifecycle management," or ILM.

EMC's ILM strategy is about expanding the storage market by offering customers new technologies for optimizing their data backup, recovery and manipulation operations, executives said. In line with that vision, EMC is adding low-end products and rebuilding its software strategy to offer customers access to a complete portfolio.

The company is looking to enter the Veritas and IBM-dominated tape backup market, possibly through a partnership, according to Dave Donatelli, EMC's executive vice president of storage platform operations. While EMC focuses on faster, more expensive disk-based storage systems, it recognizes that tape isn't going away, he said.

A full line of storage software is key to EMC's end-to-end vision, and it has in the past year filled in significant functionality gaps, said Mark Lewis, EMC's executive vice president of software. By the end of 2004, EMC will have its software set completed, adding pieces such as automatic provisioning and replication technology throughout its entire product lineup, he said.

With more than 200 storage software tools available in the market from a variety of vendors, most of the technical challenges facing customers have been solved, according to Lewis. That obstacle that remains is integrating those pieces to ease management burdens - and EMC is confident that its software portfolio will fill that market void, he said.

"The problem is really more about complexity," Lewis said. "What we need to do take the pieces and try for simplicity."

As EMC expands its product set, it also aims to extend its customer base, revamping sales tactics to reach new markets.

The EMC of several years ago was a direct-sales-oriented company that essentially offered just one product, its high-end Symmetrix systems, and targeted one customer segment, large global enterprises, said marketing and business development head David Goulden. Now, it has added a direct sales force to target midsize businesses and is building a network of channel partners to overlap in the midsize market and exclusively target smaller businesses.

Those non-enterprise market segments represent up to 50% of the storage market, Goulden estimated. So far this year, EMC has signed 1,000 new small and midsize customers, he said.

After posting losses in every quarter last year, EMC pledged to be profitable throughout 2003. It met that goal in the first two quarters of the year and expects to do so in the next two, CFO Bill Teuber said. Over the past two years, the company has cut several thousand jobs and shaved $500 million off its quarterly break-even cost, bringing that figure down to $1.26 billion in its most-recent quarter, he said.

A consolidation of EMC's design groups intended to lower costs is also helping quicken its development process, executives said. By overhauling its product testing process and conducting in parallel trials that used to be run serially, EMC has cut days and in some case weeks off product cycles: the high-end DMX2000 storage array EMC introduced earlier this year took 14 days to test, down from the 30 days of testing needed for its previous top Symmetrix product.

That shortened product cycle will help EMC as it continues with the most ambitious product rollout plans in the company's history, Tucci said.

"I honestly believe the storage market will change more in the next three years than it has in the previous 10 or 12," he said.


Copyright © 2003 IDG Communications, Inc.

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