The rebirth of Quantum

Manoeuvring through the labyrinth of storage solutions is a tortuous road but Rick Belluzzo is determined to overcome all odds.After all, Quantum's chairman and CEO is used to being in the hot seat.

Manoeuvring through the labyrinth of storage solutions is a tortuous road but Rick Belluzzo is determined to overcome all odds.

After all, Quantum's chairman and CEO is used to being in the hot seat.

He's well remembered for walking away from Hewlett-Packard -- where he spent about 23 years in numerous profiles -- despite being tipped as a future successor. His subsequent tenure at Silicon Graphics lasted less than two years before Microsoft came knocking in September 1999.

He held various high-level positions at the software behemoth, including president and chief operating officer, but his stint at the company came to an abrupt end three years later. The official word is the parting was amicable but insiders in Redmond believe those closest to Microsoft Chairman Bill Gates felt threatened by Belluzzo, and they acted on their insecurities.

Recently, he made headlines again when his name was linked to the top job at HP, a void created after Carly Fiorina stepped down as chairman and CEO.

Although Belluzzo declined to say much about the purported job offer, it's clear he intends to put more "zest" into Quantum.

Last quarter, it reported a 12 percent increase in revenue to US$201 million compared with the previous quarter. In October, the creator of DLTtape technology paid US$60 million in cash to acquire rival tape technology developer Certance.

On a recent trip to Sydney, Belluzzo told ZDNet Australia&nbsp he wants Quantum to be seen as dynamic and innovative, and not a sluggish, boring storage vendor.

Q: You were one of the few tipped to replace Carly Fiorina, according to some reports. Did HP make an offer?
Belluzzo: [Laughs] I can't comment on that.

Throughout this entire process I've consistently said we [Quantum] have a three-year transition period to go through ... we need to focus on that. I've really felt that it's been my priority.

It's very hard to go back ... to go back to that life. It was seven, eight years ago since I was in HP. I have a lot of friends and a lot of relationships including some people who are on the board [at HP], which I think some of the chatter came from.

I made a big change when I came to Quantum ... from a big company [Microsoft] to a small company but I did that for a reason. I enjoy getting my arms around things. I enjoy having an influence over things in a deep and significant way. That has only been reinforced during my two and a half years here as I've watched the change we've started to make and I get a lot of satisfaction from that change but my satisfaction is not fully developed because the job's not finished. And that's what I want to put my time into.

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You once said that at the end Quantum's three-year transition period, you hope to "stabilise the business". What's the end result?
Belluzzo: Well, I'm not going to predict our future stock price [laughs].

Early on when I came onboard we did say it was a three-year transition process but they've been a lot of forces along the way ... some internal, some external.

We think we're two-thirds of the way through that [process]. Last quarter we delivered the best results that we've delivered in three years. So the remaining time will be left to new products. We think we've built a good infrastructure, the company is making money ... not enough money but we're making money.

Cash is positive so all those things that we've done have been very helpful but to meet our shareholder goals and our own goals, we need to be a vibrant company moving forward. We not only want to make money but we want to have growth potential and innovation so the market will view Quantum as a good, solid, profitable company and also one that is on the move ... a company that's doing new things.

This year is a critical year to fulfil both of those -- one is to get new products out, to improve profitability, and secondly to have a perspective of growth and innovation around the product categories that make us an interesting and exciting company. That's what delivers a good stock price -- profit and future.

We think this is really a big year for us ... it's really about making tape better. We believe that making fundamental advancement in this area involves new technology which includes disk-based products and other components, and we started a couple of years ago investing there and really pioneered disk-based backup with our DX product line.

Research by the Enterprise Strategy Group recently revealed that 18 percent of respondents had replaced tape libraries with disk systems, and an additional 58 percent had the switch under consideration. The study concluded that users were replacing their tape libraries with disk-based alternatives and will continue to do so. Do you agree?
Belluzzo: Well, we're absolutely convinced that the world of information lifecycle management will include the combination of primary storage disk, secondary storage disk, tape, and software -- a variety of components that help customers deal with a set of complexities.

Not all data is created equal so you need to store data in different places, at different times and for different purposes.

We believe that tape remains a fundamental solution. In fact, the survey is very typical to our customer experiences. When you ask a customer what their plans are, they'll say it's disk all the way but when we start working with them, and they start to evaluate performance [of the storage media], reality strikes and all these other issues surface. This includes total cost of ownership, archiving capabilities ... but in the end, customers end up with a variety of technologies because that's the only natural way.

Disk is not a good archiving solution because how do you archive data on disk? Do you keep spinning up disk drives in a remote facility? You know it can't compete with a tape cartridge.

Everybody assumes that disk is fast ... it's not always fast.

That's the perception, though, isn't it?
Belluzzo: It is the perception. That's why it fits into the strategy I described [extremely complex]. We're going to make tape better and we're going to embrace disk and other solutions so we can create a set of opportunities that can help customers deliver the overall price-performance situation that works best for them.

At the same time, the survey totally reinforces why we're focused on this business. It's complicated and customers want change ... there is dissatisfaction with customers and that creates opportunity ... that's what tech companies bank their future on -- change.

Just like the mainframe was supposed to have "died" a long time ago, some camps still believe tape is dead, or dying at least. How do you respond to them?
Belluzzo: The storage architects at our customers' site tend not to say those things because they live in the real world. They're the ones who have to deal with service level agreements, cost, budgets, reliability and all those things.

We just try to address these broad statements with facts and with real solutions to our customers' problems.

I was with a customer in London a couple of weeks ago -- a big financial institution which is a large user of both our tape and disk products. These are the kind of people we relate to and they won't tell you tape is going away. But they'll say they're embracing disk more.

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Aside from developing and launching new products, do you think Quantum can do more in terms of marketing?
Belluzzo: Sure. Absolutely. The segment that we're dealing with is very complex. How do you solve that complexity? How do you make [storage] simple and make your value proposition really well known? You do that with marketing and so we clearly have to continue to refine that process.

We have to take the confidence that we have about the value proposition in the work we do and turn that into something our customers can make a decision on.

Must be a bigger challenge than your days at Microsoft, even HP? Printers were a much easier sell?
Belluzzo: I don't know if that were necessarily true in the early days. Then, every other survey said people were going to buy laser printers. But where is the market today? It's mostly inkjet and no one believed that we could've done with inkjet technology what has been done today.

But it's exciting and fun because every person I meet there's the opportunity to tell our story and to make a difference.

Do you see a time, perhaps 10 years down the road, when the no.1 data storage provider will be Google? Where the type of media won't matter since everything is done online?
Belluzzo: No ... but actually I've never been asked this question [laughs].

Since you joined the company in 2002, what are the most striking changes you've seen in the storage marketplace?
Belluzzo: The market in general has been surprisingly slow. When I came onboard, I was given the pitch about how IT spend was on the up again and here we are two years plus later, the story's still kind of the same ... it's still an environment where companies are spending money to save money. And that has put new sets of pressure on storage and the IT industry in general.

Every quarter you're looking at how the business [Quantum] is doing ... there's just not a level of robustness about it. Which makes the challenge of redefining the company much more difficult.

So why aren't companies really spending on technology?
Belluzzo: The best example I'd give is to contrast the consumer IT and the business IT environments.

In the consumer tech environment, people have been spending. They've been buying iPods, new TVs, putting wireless networks in their homes but what we need in the business market is more excitement about new applications because these require more storage, more data and so data growth will accelerate as more applications become available but that's really not how people are thinking today.

Instead, there are lots of acquisitions in the market. The M & A activities are increasing and people have their minds and psyche around competing through cost reduction rather than competing through growth and innovation. And I think that filters into the IT market.

Have corporations improved much in terms of their approach to backup and recovery post-9/11?
Belluzzo: It depends on the market segment. Clearly, the large companies -- financial institutions and others -- definitely get it. But there's still a bit of a surprise element to it in that you never really know until you test it. I think often complacency sets in but people in large enterprises understand the need to deal with these issues.

But having said that, when there're budget trade-offs and people are trying to save money, they say 'well, let's delay that disaster recovery project because it doesn't provide any immediate value'. It's like buying insurance.

You paid US$60 million in cash to acquire rival tape technology developer Certance. Any money left to buy StorageTek?
Belluzzo: For us to buy StorageTek? They're a little bigger than us [laughs].

Well, you never know ....
Belluzzo: I would say the bigger question here is where the industry is going in terms of consolidation. And a lot of people believe that the industry is prying for more consolidation so this is something we should watch this year.

If we look at the merger of security company Symantec and storage software firm Veritas, some critics say it's a case of diversification for the sake of survival. Is Quantum in a similar situation?
Belluzzo: No, I don't think the Symantec-Veritas merger is about that. Think about the way a lot of the industry is going -- there's increasing commoditisation of hardware and people are using software to manage data, to manage security, to ensure quality of service, to provision capacity and all of those things. So you can argue that Symantec and Veritas makes sense ... security and data protection. I don't think that's that divergence, as you've described.

We would also look at acquisitions in the same way [as Symantec]. We've had the most acquisitions around consolidating the tape industry. We want to move into more non-tape areas -- and those could involve acquisitions as well -- but we won't look at companies outside the storage industry.

On what's driving growth, have you seen a dramatic increase in business due to regulatory compliance laws like Sarbanes-Oxley?
Belluzzo: I know where you're going with that [laughs]. Everyone thinks there should be but I don't know if I could point to [say] 15 [specific] opportunities that would reinforce that.

There should be some higher degree of interest or business [you'd think ] but it's still inconsistent. It's mostly anecdotal. And we'll see if that develops over time but right now, I'd say it's not totally clear except that there's a lot discussion about SOX.