New Tactics

EMC has slashed prices, formed alliances, and embraced standards. What a change.
EMC Corp. was riding high in the late '90s. Its costly, proprietary Symmetrix boxes dominated the market for high-end storage systems, and the company was rolling in money. Then things turned. Tech spending collapsed. Competitors introduced storage products that were cheaper and easier to operate. The growth of storage networking let businesses make better use of existing resources, reducing the need to buy additional storage. And the price of storage dropped from more than 50 cents per megabyte to 5 cents. It's no surprise that EMC saw sales decline and profits turn to losses.

Today, EMC has changed as much as the storage market it serves. The company squeezed out $35 million in profit in its latest quarter. As storage becomes a commodity, EMC is on its way to being a full-service storage provider with many standards-based products that are--get this--competitively priced. It's forming partnerships with leading vendors in other tech sectors: Last week, EMC revealed that it's adopting Microsoft's Windows network-attached storage operating system for some low-end storage products and said Cisco Systems will integrate some of EMC's storage-management technology into its networking hardware. In June, the company plans to introduce a low-cost NAS device running Oracle 9i database, along with consulting services. Perhaps most surprising is that EMC is committed to developing high-end storage-management software that works not only on its own systems, but also with those of its fiercest competitors.

It's all a big change from the past, and customers have noticed. "EMC always had the Mercedes-Benz of storage, but it came with that kind of price tag," says Jeff Cohen, VP and CIO at JetBlue Airways Corp. That's no longer true. When JetBlue recently sought bids for storage systems, EMC came in cheaper than the competition, he says.

Another longtime customer also has seen changes. "We've seen the company become more flexible," says Doug Bourgeois, CIO at the U.S. Patent and Trademark Office. The office has more than a half million pending patents on file, each made up of 2 to 4 inches of paper, which it wants to digitize and make available online by October 2004. It's been relying on a Symmetrix system for years and is now bringing in EMC's Clariion midrange storage system and its Celerra NAS systems.


EMC will engineer storage-management APIs with Microsoft, says Tucci (right), with Ballmer.
"EMC helps me recognize problems before they become real, and they bring me solutions," Bourgeois says. EMC also has helped him develop better approaches to disaster recovery and data backup.

For EMC president and CEO Joe Tucci, who's been running the company since January 2001, such comments show that the company is making progress. "Three years ago, EMC was high-end Symmetrix storage only, with software products around that," Tucci says. But EMC still has a way to go to get beyond its reputation as a provider of storage products for the world's largest companies and highest-end needs. "We'll go after the low and middle ends with great fervor," he says.

The partnership with Microsoft, which Tucci and Microsoft CEO Steve Ballmer disclosed last week at an EMC event in Las Vegas, is one step in that direction. EMC offers products that start at $20,000 and extend into millions of dollars, but the NetWin 200 storage product running the Windows NAS operating system will start at $50,000 and top out at $130,000 when it's introduced this summer.

EMC joins Dell Computer, Hewlett-Packard, and IBM in licensing the Windows NAS operating system. "It's a big win for Windows, becoming the industry-standard storage platform," says David Freund, an analyst at Illuminata. "It furthers the concept of the commodity storage platform." EMC will continue to sell its Celerra NAS product, which starts at $135,000, to high-end customers who will use it as a gateway into Symmetrix-based storage area networks, among other things. But the product hasn't gained much market share in the small and midsize market.

EMC expects to gain an edge in the commodity storage market by incorporating Microsoft's storage-management application programming interfaces into its ControlCenter management framework to provide tighter control of its forthcoming Windows-based NAS systems and by working jointly with Microsoft on sales and services deals. In addition, "we'll jointly engineer the future development of storage-management APIs with Microsoft," Tucci says. "Windows will be the premier operating system for storage networks."

That could put pressure on Network Appliance Inc., a leading NAS vendor, which uses a proprietary operating system in its products. But the vendor, which works with Microsoft to make sure its NAS appliances support Windows, maintains that its storage products have the advantage of simplicity. "Windows at its core is still an app server operating system. It does a lot of things," says Phil Williams, VP of strategic marketing and alliances at Network Appliance. Williams notes that EMC will have to maintain four different operating systems across its product lines. A competitor of EMC's at the high end of the market predicts channel confusion ahead. "Who's going to sell it?" asks Scott Genereux, VP of global marketing and business development at Hitachi Data Systems. "EMC sells to the high end, uses Dell to sell to small and midsize businesses, and Dell has its own Windows-based NAS. I'm not sure how it's meaningful to the customer."

EMC says many of its partnerships bring added value to customers through services. For instance, it will work closely with Oracle to analyze customer needs and design, configure, and install the 9i database on its NAS devices. That's uncharted territory for many companies, as most databases run on servers, not NAS devices. The joint implementation services will sell for less than $50,000, but the database on EMC's NS600 will cost extra.

JetBlue's Cohen says he has yet to be disappointed by EMC's services. "I've brought EMC people in project by project, when my own people would be wandering around in the dark," he says. One other thing he likes: "EMC doesn't stay for nine years like other consulting companies."

Meanwhile, the deal EMC struck last week with Cisco is similar to an arrangement it has with networking vendor Brocade Communications Systems Inc. Like that one, the Cisco deal has the potential to lower the cost of storage by moving some management functions to other devices. EMC and Cisco will work on integrating EMC's APIs for backup and recovery and storage-resource management into the networking vendor's multiprotocol MDS 9000 line of switches and directors. Moving those tasks to the switch will free up servers and storage arrays, letting them perform better. Cisco and EMC say they plan to submit their APIs to the Storage Networking Industry Association on the way to establishing a standard for moving server and storage applications to the network.

EMC has even more ambitious plans for its storage-management software, adding capabilities known as volume management that let businesses ensure data integrity across complex storage networks, automatically anticipate and recognize volume growth, and import point-in-time copies of data without shutting down systems. Most important, EMC promises that by year's end PowerPath 4.0 will manage storage systems from HDS, HP, and IBM.

"EMC is a better infrastructure player now because it'll run its software across anybody's system," says Meta Group analyst Carl Greiner. "It'll be up against HP, IBM, and Veritas, but EMC is slightly in the forefront at this point in time."

That draws a scoff from market-leader Veritas. "We built Volume Manager 12 years ago," says Jeremy Burton, chief marketing officer at Veritas. "Sun's got one and HP's got one. Welcome to the party, EMC. It's rocking, and we've got 70% share."

Still, EMC's changed attitude is having an impact. "It works more as a partner now," says Laura Fucci, chief technology officer at MGM-Mirage, a $4.8 billion-a-year operator of casinos and resorts. Fucci has been soliciting quotes from EMC since 1998, but she didn't buy Symmetrix storage until prices came down about a year ago and EMC enhanced its replication software, making it easier to use to meet her disaster-recovery requirements. MGM-Mirage now has two Symmetrix systems and is planning for a third. "They're in here understanding our business problems and trying to solve them with technology. They look at our long-term strategy, not the next sale."

EMC is the second company Tucci has turned around. Before joining the storage vendor, he helped to transform Wang Computer Systems from a fading hardware vendor into a profitable workflow-services company, which was eventually sold. It's clear Tucci is making good progress in his latest role, but he isn't willing to say EMC has turned the corner just yet. "We'll stay on edge because I'm not a bow taker," he says. "I'm never satisfied."

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