It's all change as EMC goes beyond storage heritage to aim for the cloud
silicon.com profiles storage giant EMC and takes a look at its technology, strategy and acquisitions.
Where EMC was once all about enterprise storage, today the company has mutated into a very different kind of beast.
At its core the company still revolves around selling the drives that hold the colossal data footprints of some of the world's biggest businesses, but EMC now also provides storage to small to medium-sized outfits, and even to consumers.
However, EMC has moved beyond simply supplying storage: after years of acquisitions that have seen the company swallow up hardware, software and services firms, its offerings have expanded into the fields of virtualisation and data security too.
With its broader portfolio and partnerships with the likes of Cisco and Microsoft under its belt, EMC is now staking a large part of its future growth on the coveted cloud computing market, hoping to persuade companies to transform their IT estates into what EMC calls private clouds.
If there is one man that can be credited with overseeing the transformation of a 31-year-old storage company into a diverse IT operation then it's Joe Tucci, EMC's CEO for the past nine years.
In Tucci's first year in charge, EMC's revenues fell 20 per cent as the dot-com bubble burst and the enterprise customers EMC was heavily reliant upon for its takings slashed their IT spending.
EMC CEO Joe Tucci
(Photo credit: EMC)
Tucci's response was to restructure the company and to broaden its horizons beyond its traditional focus of enterprise storage, reducing its vulnerability to slumps in demand for any one product or belt-tightening in any one sector.
EMC began to more aggressively target the SME storage market with its Clariion and Centerra network storage array products, while at the same time embarking on a period of voracious acquisitions.
Since 2002 EMC has spent billions of dollars acquiring more than 40 software, hardware and IT services companies, some of which have taken the company in new directions - such as its purchase of RSA Security in 2006, its 80 per cent stake in virtualisation vendor VMware in 2003 and its $2.1bn acquisition of data de-duplication company Data Domain last year.
EMC looks unlikely to lose its appetite for acquisitions anytime soon: the firm has a $10bn-pot of cash set aside for buying up companies and Tucci has said he expects the company will spend a couple of billion dollars on new purchases in 2010.
Acquisition is not the only expense for EMC: R&D has swallowed up about...
...12 per cent of its revenue over the past five years and has led to the development of key products including the Vplex technology at the heart of its private cloud push.
In parallel, the company has embarked on a cost-cutting programme - generating more than $450m of savings last year - and seen its entire senior management team persuaded to accept a temporary reduction in pay.
High-end storage for major corporate datacentres remains at the core of what EMC does, with its flagship enterprise storage array product Symmetrix being the company's biggest earner last year.
Over time, EMC has developed Symmetrix to include features such as built-in data protection, high-speed automated raid back-up, intelligent data caching, support for virtualised servers and software capable of automatically tiering data so that information that is accessed frequently is stored on faster, more expensive storage such as flash drives and that little-used information is stored on lower cost, higher capacity Sata drives.
One of the product lines in EMC's Symmetrix series
(Photo credit: EMC)
EMC also offers its Clariion and Celerra network storage. Aimed at small to medium-sized businesses, the products share some of the advanced storage features found on Symmetrix, such as automated storage tiering and the ability to work in virtualised IT environments.
Today EMC is about more than just selling kit, however - its acquisition of data deduplication firm Data Domain, following a bidding war with EMC rival NetApp, provided the company with the final piece of the back-up and data recovery jigsaw.
Data deduplication has become a big deal for EMC's bottom line, with revenues from its deduplication products predicted to hit $1bn this year, according to the company's first-quarter financial results for 2010.
"That Data Domain acquisition has blown away the financial goals we set for it when we acquired it," Pat Gelsinger, EMC president and chief operating officer of information infrastructure products, told silicon.com.
Meanwhile products such as back-up software NetWorker, which hails from another acquisition, are aimed at organisations wanting to replace tape-based back-up libraries, which could previously take weeks to restore systems from, with hard disk libraries, from which data can be recovered within minutes.
EMC has also moved into selling software that makes it easier to capture and to find information on corporate systems, snapping up enterprise content management company Documentum in 2003 and just this month picking up data analytics company Greenplum.
EMC also has a presence in the...
...consumer market, thanks to its 2007 purchase of cloud backup service Mozy, and its 2008 acquisition of Iomega Corporation, which makes storage drives and network security for homes and small businesses.
Services vs products
Although traditionally a product company, today EMC brings in more than $1bn in revenue annually from its services division, which offers a range of services from IT assessment to data migration services.
However, according to Gelsinger, the division's main function is to make it easier for organisations to use EMC's products and technology inside their IT estate.
"We are a product and technology company, period. We do services solely to assist our customers in taking our products and technology," he said.
The company does not intend to try to compete with the IBMs and HPs in providing a fully managed outsourced IT service.
"We put that in stark contrast to the verticalisation we see going on from Oracle, HP and IBM. They are trying to do everything from silicon up to services and build their fully integrated stack from top to bottom," Gelsinger added.
It is an approach, he said, which can occasionally lead to lost business, as their services-orientated competitors throw in storage as a free added extra.
EMC's reluctance to enter the IT services business was demonstrated this month when it announced it would no longer be offering its cloud storage service Atmos Online, with a note on EMC's Atmos Online website recommending that users of the service migrate data or workloads hosted on the service to one of EMC's partners who offer Atmos-based services.
EMC's headquarters in Hopkinton, Massachusetts
(Photo credit: EMC)
The journey to the private cloud
In spite of EMC's dominance of the data storage market and the cash flow generated by its Symmetrix products, Gelsinger admits that the well-established network storage market is slow growing - a fact that could explain EMC's new focus on capturing a slice of cloud-computing cash.
The company set out its stall at this year's EMC World - the company's annual conference - which came with the tagline "The Journey to the Private Cloud".
EMC's plan is to sell its virtualisation technologies, such as its storage product Atmos, to organisations wanting to simplify the mess of incompatible legacy tech platforms that make up many modern IT estates, and to get more bang for their buck out of their existing kit.
As well as partnering with its sister company VMware to offer server and network virtualisation products, EMC has developed its own Vplex technology to allow organisations to combine storage within their datacentres into a single virtualised storage pool.
One of the first releases of Vplex, Vplex Local, allows a single virtual storage pool to be created from arrays in two datacentres located up to 100km apart but future releases of the Vplex are planned to enable virtual storage pools to be created using arrays in datacentres thousands of miles apart.
EMC's claim is that Vplex will eventually, when combined with server virtualisation, allow a company to...
...pool the computing power and storage of its entire IT estate, increasing efficiency and allowing processing power and data to be diverted to wherever it is needed in the organisation.
Gelsinger believes Vplex and the private cloud model will be "critical long term" for EMC's future strategy.
"We expect this category to be transformational and we are quite optimistic about the revenue profile of the Vplex offering," he said.
"This year it's a category creation so we have very modest expectations in the near term.
"But in 2011/12 we expect this to grow to be a meaningful product line for us. We're looking forward to a good revenue stream out of this product line next year."
Despite Gelsinger's enthusiasm, independent storage analyst Claus Egge feels EMC may have overestimated how eager organisations will be to move onto the private cloud.
"From my conversations with IT storage professionals there is no desire to do that right now," he told silicon.com recently.
"I am not saying that it will not happen eventually but vendors are way ahead of the market right now."
As well as storing and organising a company's information, EMC products are also geared towards protecting data through its security arm RSA - which offers products and services ranging from encryption to data-loss prevention.
And in keeping with EMC's shift towards offering cloud-based storage, RSA is also offering security services for cloud-held data via its authentication, access control and more recently performance dashboards.
In pushing companies to adopt the private cloud model EMC will be hoping to benefit twice, with revenue from additional sales of its own Vplex and Atmos virtualised storage products on the one hand, and on the other hand increased returns from RSA's data-loss prevention product that protects information on its journey from the cloud to the desktop.
"All of this is complementary and we are integrating our technologies like never before," RSA president Art Coviello told silicon.com recently.
RSA's Anti-Fraud Command Centre in Herzelia, Israel
(Photo credit: Nick Heath/silicon.com)
Life after Joe Tucci
The big question facing EMC today is what it will do when Tucci's contract as CEO is up in 2012.
As the man who transformed EMC from a enterprise storage pure-play into a diversified company focused on selling to organisations wanting to make the leap into cloud computing, EMC's Gelsinger thinks it's a shame that Tucci could miss the pay off.
"Joe has certainly put his fingerprints on EMC. I've told Joe, with this whole private cloud thing, I think that things are going to get really exciting when his contract runs out in 2012," Gelsinger said.
"I think he better think about extending it because the best is yet to come."