07:40 AM

EMC Wants Your Data

Information-life-cycle management is at the heart of the powerhouse storage vendor's new strategy. Now comes the hard part: keeping buyers satisfied.

The end of the old EMC Corp.--the one clinging to its core business of providing proprietary, large-scale, and costly storage systems--might not have happened if Joe Tucci hadn't been willing to eat his own children. In September, CEO Tucci predicted that 2004 would be the first year that software and services would account for more than half the leading storage vendor's revenue. He was right: Software and services last year made up 53% of the company's $8.2 billion in revenue, up from 46% the year before, while hardware and systems sales made up 47%, down from 54% the previous year.

"Transformation is never done," EMC CEO Tucci says.

"Transformation is never done," EMC CEO Tucci says.

Photo by Zack Seckler/Bloomberg News
"In 2002, we realized that no company ever became great just saving itself," Tucci says. And thus began a rejuvenation strategy that hinged on both record research-and-development investments in software--nearly 15% of its $5.4 billion revenue in 2002--and a $4.3 billion buying spree of 25 assets and companies, including content-management vendor Documentum, backup-and-recovery provider Legato Systems, and virtualization specialist VMware.

But in many ways, the work of leveraging these investments is just beginning. "Transformation is never done, because customers always want more, and the competition just gets better," Tucci says. "The moment you think you're done, you are done."

The plan ahead for EMC revolves around building out its information-life-cycle-management strategy, which involves automatically managing documents across storage tiers from creation all the way to deletion. That's critical in an era when companies must track files and unstructured data in order to satisfy regulatory-compliance mandates or quickly meet government demands for information. The Documentum software provides the platform for managing those files, Legato offers the hierarchical storage-management framework, and VMware could play a part by helping companies get more efficiencies out of existing servers. Key to the strategy is that customers can have access to all these capabilities, regardless of what vendor's storage hardware they use.

Customers using such offerings will generally require services to get the most value from them, Tucci says. "It's like M&M's --you don't go out and buy only M's," he says. "Our services will be totally focused around ILM."

Information-life-cycle-management services introduced in the last year range from analysis and design to ongoing storage management. Customers' ILM strategies, EMC says, must be business-centric, tied closely to key business processes, applications, and initiatives, and must provide an integrated view into all information assets. So EMC's services identify business service-level requirements, develop a service catalog and supporting tiered-storage architecture, and align applications to storage tiers for cost optimization. Additional services include developing policies to manage and automate the movement of data to meet business requirements. For instance, EMC ILM Acceleration Services helps organizations define storage tiers and data policies, align applications, and improve their storage operations. The result is 20% to 40% cost savings within 12 months, along with higher service levels, EMC says.

DeWalt heads up EMC's growing software group.

DeWalt heads up EMC's growing software group.
"We want to own information-infrastructure protection, versioning, and collaborating," says Dave DeWalt, the former Documentum CEO who's now executive VP of EMC's 4,000-person software group. "We'll help customers manage the storage around the information objects, and we'll help customers with compliance." The software group's revenue was $410 million in the fourth quarter of 2004, up 23% on a year-over-year basis, when all software acquisitions for both years are included. The group is responsible for product lines such as EMC ControlCenter for managing EMC and non-EMC storage environments, as well as software-license and service revenue from its Legato and Documentum products, among others.

The new technologies and services EMC has added make it clear the vendor is laying the foundation to meet the demands of next-generation data centers, which "will be about utility computing, policy and service-level management, and workflow," says Stephanie Balaouras, an analyst at the Yankee Group. "This new EMC is doing a good job bundling systems, software, and services" to meet those requirements.

"EMC has evolved into a total solution provider," concurs Ed Smart, VP of systems support at MasterCard International Inc. A customer of EMC storage hardware for six years, MasterCard wants to develop an ILM strategy to deal with, among other things, a flood of E-mail that takes up 20% of total physical disk space across its 450-terabyte architecture. As part of its nascent strategy, MasterCard has switched from tape storage for aging documents to low-cost disk storage from EMC, saving $66,400 annually.

But it's the other things that EMC now brings to the table that really get Smart's attention. MasterCard didn't seriously consider Legato as part of its strategy until EMC's purchase of the vendor, he says. A lot of vendors talk about data management, but EMC is one of the few to have the technology and foresight to provide it, he says. EMC can give MasterCard the information-life-cycle-management tools it needs to help deal with regulatory and other compliance requirements, Smart says.

And it has the services, too, says Howard Elias, EMC's executive VP of corporate marketing, office technology, and new business development, who reports directly to Tucci. Elias joined EMC in October 2003 after years at Digital Equipment Corp., Compaq, and Hewlett-Packard, and he wasn't looking to join another hardware-centric company. But he could see that the mentality had changed at EMC. "We had to go from 'build it and they will come' to understanding customers' needs and behavior," he says. "And we needed a change from entitlement of customer business to knowing we have to win it every day."

That's what happened at Christus Health System, which includes more than 40 hospitals and facilities in six states and Mexico. Christus, which uses EMC hardware for a 10-terabyte medical application and 50 Mbytes of medical-imaging data and off-site replication, had used EMC's plan-and-build services previously with success. Yet it was reluctant at first to have the company that it knew as a storage-hardware provider also provide it with consulting services around information-life-cycle management. "Two years ago, they were selling gear and more concerned about pushing gear than solving a business problem," says Mark Middleton, system director of data centers and infrastructure at Christus Health. But after having an executive briefing with EMC about its ILM services, the picture changed for Middleton. EMC's services staff is less focused on pushing its hardware as part of the sale, he says. In contract negotiations, EMC's bid, compared with another service provider's, "was more comprehensive, and we got better service for the money," he says. So EMC is helping Christus get its backup and recovery in order, in preparation for beginning its ILM process.

While most of EMC's services have so far been in the build-and-support arena, it's seeing growth with ILM services; assessment services to analyze a customer's application environment, recoverability strategy, operations, and infrastructure; and storage-infrastructure-management services, Elias says. From the end of 2002 to the end of last year, EMC's services head count grew in excess of 20% to more than 7,000 employees worldwide. The senior execs for EMC Technology Solutions, its customer- and professional-services division, are drawn from within EMC and from the services industry to add specific subject-matter expertise. For example, Derrell James, VP of EMC Technology Solutions, joined EMC from Perot Systems in 2002.

We needed a change from entitlement of customer business to knowing we have to win it every day, Elias says.

"We needed a change from entitlement of customer business to knowing we have to win it every day," Elias says.

Photo by Mark Ostow
The company is close to completing the transition from being "focused on hardware sales and supporting software to information management," says John Webster, analyst and founder at Data Mobility Group. But that transition raises questions the vendor can't ignore, he says. "EMC is making a lot of marketing noise about fixing the backup problem," he says. "But there are many other services organizations focused on the same thing."

Veritas Software Corp., a longtime EMC competitor in backup-and-recovery software, says EMC has conflicted interests that a pure software company doesn't bring to its services plays. "A lot is around [the software] you sell and how you service the customer," says Jeremy Burton, executive VP of data management at Veritas. "It'll be hard for EMC to compete in a market where the strategy is to ultimately buy less disk."

And IBM, of course, isn't ceding storage-related services to EMC. "We're a solutions provider, and it's all about providing software virtualization and storage management with consulting on the front end to hosted business recovery at the back end," says Andy Monshaw, general manager of storage at IBM.

Analyst Webster also questions how EMC will co-exist with service-provider partners that it may wind up competing with. "Partners could end up stepping on Joe's toes, and I don't think EMC would take that sitting down," he says. And he predicts that "if they really want to go after services, their next acquisition will be in the services space."

Tucci admits the company sees some interesting possibilities in regional services companies to help with its information-life-cycle-management strategy. But he also says he doesn't see problems ahead in EMC's relationship with some of the bigger services providers, such as Accenture and EDS. "I don't want to compete with them," he says, but rather to partner with them on projects in order to be involved in services such as hosting recovery.

Last year EDS tapped EMC as one of a number of technology partners whose equipment and software will form a standard backbone on which EDS wants to run the bulk of its customers' IT operations. And this spring EMC and EDS plan to launch a managed E-mail-archiving service. "EMC's services people have greater depth in certain industries, when companies are more interested in data," says Robb Rasmussen, VP Global Alliances at EDS. "EMC keeps up with business expertise around the data, building up business experts in the ILM service."

Storage vendor EMC last year for the first time saw software and service revenue account for more than half its total annual revenue.

The growth in those businesses provides a revealing insight into the new EMC. Today, the vendor's business isn't as much about storage as it is about information management.

Following its acquisitions of companies in content and hierarchical-storage management, among others, EMC introduced a slew of information-life-cycle-management services. Customers are starting to buy into the company as a total solutions provider.

While EMC's services business is turning 90% of its attention to information-life-cycle management, there also are future possibilities in providing network-management services, Tucci says. The vendor got a head start on the software end of the equation this month, when it acquired network-management vendor Smarts in expectation of the convergence of data and storage networks. Elias believes that's still years away, because resolution has to occur around dueling interfaces and standards, such as iSCSI and Fibre Channel over IP. But Yankee Group analyst Balaouras thinks it will be just a couple of years before customers begin demanding a single management interface across multiple tiers of servers and storage.

So far, the change in EMC seems to be resonating with customers. Countrywide Financial Corp. has used EMC storage for three years, but the vendor wasn't "an integral part of our daily lives," says Omer Simeon, executive VP of strategic initiatives. That changed when EMC acquired Documentum, which Countrywide was using. "When EMC picked up Documentum, it confirmed that a content philosophy was strategic and put more weight behind the Countrywide commitment," Simeon says. Before the acquisition, Countrywide didn't even think about EMC for data backup and recovery. "Now EMC provides the repository for all our critical data," including replication between data centers, making it the force behind the company's ability to process loans, key to running its business.

That's what Tucci likes to hear. "Software is what it's all about," he says. "Software always needs customization to get maximum benefit." That's where services come in and where EMC hopes to make its case.

Continue to the sidebar: Hardware Roots: EMC Still Has A Stake In Systems

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