VCE CEO Praveen Akkiraju: Five key takeaways
VCE, the joint converged infrastructure venture of EMC and Cisco, is on a bit of a roll of late. The company revamped its product lineup and is on a $1 billion annual run rate.
We caught up with VCE CEO Praveen Akkiraju to talk a little bit of shop following the venture's product launch last week. Here are five key points from the conversation.
1. VCE's financials. If you look at the SEC filings of both Cisco and EMC you find that both companies have "lost" more than $755 million on VCE since inception. However, there's a bit of nuance to consider. VCE expenses are reported as losses, but revenue funnels into Cisco and EMC lines of business (networking gear, storage etc). As a result, VCE's financial picture is fuzzy at best because sales go elsewhere. Rivals engage in FUDslinging and why not? Technically, Cisco and EMC have poured a lot of dough into VCE, but there's a vacuum of sales data. We asked Akkiraju about the accounting treatment of VCE and he noted:
VCE is a private entity and doesn't give results. We have defined business and financial objectives and have consistently met or exceeded those goals every year of our existence. Margins and profits go to EMC and Cisco's earnings and they don't break them out.
Fair enough, but at some point VCE is going to have to address the accounting treatment. My fix would be something like this:
- Keep the expense lines as they are in the quarterly filings.
- Have VCE disclose revenue in an annual statement like many private companies do.
- Outline profitability assuming VCE were an independent entity. It's not like companies don't know how to whip up pro forma figures.
The financial drill today for VCE is frankly absurd. Yes, EMC and Cisco can blame accounting rules, but ultimately Wall Street will want more visibility on how VCE is doing---especially if expense lines keep inflating due to revenue growth.
2. VCE support. The interesting part of VCE from an IT buying perspective is that it has its own support. You don't have to call Cisco and EMC separately to figure out the VCE components. In other words, VCE is a consortium of Cisco, EMC and VMware integration but acts as one entity. Akkiraju said 70 percent or more of VCE support calls are handled by VCE (others have to loop in Cisco or EMC experts). The goal is to get to 85 percent plus of calls handled by VCE. "At some point it will be 100 percent and we'll be capable of providing and handling all technical support issues," said Akkiraju. Version updates and access to internal servers are complex items that often need to loop in EMC or Cisco, he said. From a customer perspective, best of breed with one throat to choke can be appealing.
3. Growing the VCE footprint. VCE's Vblock systems are usually acquired for specialized use cases. In other words, the typical customer buys one or two Vblocks. Once VCE is in the door though more Vblocks are acquired. "We've gone from two Vblocks to 30 and there are various instances of that," said Akkiraju. Service providers often follow that route.
4. Integration. VCE has hundreds of engineers focused on software development and systems integration work. Although VCE's gear is comprised of many standardized parts the secret sauce is the integration work and software development.
5. The use cases. Data center consolidation continues to be a big win for Vblock purchases from VCE. "Companies need to cut size of their data center footprint by a third and do it rapidly," said Akkiraju. SAP deployments are also a key use case. VCE was an early supporter of SAP Hana and is winning bigger chunks of that analytics stack.