EMC on the prowl

BOSTON – After spending US$4.5 billion in acquisitions over the past three years, EMC’s unyielding appetite continues for companies that will add to its expanding portfolio of information storage and management products, services and solutions.

Although all company executives remained tight-lipped during EMC World here last month, EMC’s chairman, president and CEO Joe Tucci told reporters that there will be further acquisitions of smaller, regional-based companies “to help build out professional services.”

During his keynote address, Tucci told more than 4,000 attendees that EMC will make information lifecycle management (ILM) its core strategy, for the third consecutive year.

“We’re in phase three (of the strategy),” he said, with the focus now on unifying ILM across all applications. “We’re making it real and beneficial for your business.”

To facilitate the company’s growth in this market, Tucci added, substantial investments are being made in two key technologies: virtualization and model-based data management.

The second technology centres on the Smarts acquisition and its expertise in model-based systems and resource management. According to Tucci, it offers a great improvement to the current framework-based standard.

“This is where the market is headed,” he said.

“Both virtualization and model-based data management are game changing technologies that will make ILM even better and open up new markets for EMC as well.”

But in order to build its ILM stack, Tucci acknowledged that in addition to internal research and development, EMC will look to its “acquisition hit list” to gain enhancements in this area.

“To make this reality is expensive,” he said. “Our R&D budget for technology this year is $1.2 billion.”

And that, according to Tucci, is what gives EMC more wins over its major competitor, IBM.

“They spend five per cent of revenue on R&D, we’re spending 11 per cent. Ours goes 100 per cent to EMC’s focus area (information infrastructure) whereas IBM’s has to be spread across its chips, servers, storage, software and operating system technologies.”

Fifty-three per cent of EMC’s US$51 billion revenue in 2005 came from software and services. And according to Howard Elias, the company’s executive vice-president of global marketing and corporate development, 90 per cent of revenue this year is expected to come from ILM.

“The vast majority of customers have created two and, in many cases three tiers of storage and a good percentage have implemented ILM for specific applications and are in the early stages of applying unified ILM services across the enterprise,” he said.

Channel reach
“We are convinced that over the next three years most of our customers’ IT infrastructures will be virtualized at every level: server, network and storage.”

With the launch of its Insignia line of entry level software and hardware products for the small and mid-size market early this year, EMC introduced the Velocity SMB channel program.

Fewer technical requirements allow interested partners to be certified for Insignia products only, instead of investing in EMC’s full line of solutions and services.

But penetrating the SMB space through channel partners hasn’t been easy, according to David Goulden, EMC’s executive vice-president of customer operations.

“We face two challenges,” said Goulden. “EMC is not well known in the SMB space. So brand development and recruiting channels will take time and investment.”

He added that EMC is looking for technically sophisticated SMB resellers who “have their own application expertise and are dealing with customers in various verticals.”

Although there is opportunity for the Canadian channel, said

IDC analyst David Senf, when it comes to brand recognition in the mid-market (100-499 employees), IBM beats EMC.

“IBM is a key competitor to EMC in the high-end, but increasingly they’re going to duke it out in the mid-market as well,” said Senf.

But in addition to market share, the two companies will also “be duking it out for available channel partners that are out there. So yes it’s a brand issue but it’s how much of the channel you’re actually able to accumulate under your logo.”

Senf added that from a sales and marketing perspective EMC also needs to better address the opportunities that will help partners improve net margins.

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Jim Love, Chief Content Officer, IT World Canada

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