In the last couple of weeks I came across some news saying that EMC was looking to merger. Names like Dell, HP (and others) popped up as usual but it looks like all the talks came to a stall for different reasons.
Today, EMC is by far the leader of the data storage market but, at the same time, its future holds a lot of potential threats for investors and end users. I think EMC has good reason to look around, now that it’s a wealthy company, TO find an exit strategy before its too late.
The helmsman is leaving soon
Joe Tucci, the man who forged the so called “EMC federation”, has always shown indisputable leadership qualities and charisma. Finding a substitute won’t be an easy task. The risk is that the next CEO might not have the same leadership quality which could result in an internal competition between different execs and teams. It may not happen immediately and business wouldn’t be hurt in the short term… but I’m sure of the contrary in the mid/long term.
Overlaps and internal product competition
The company has managed to survive the competition also thanks to the acquisitions of the right startups at the right time: this is a sign of lucidity and foresight of the management team… if these teams are compromised I’m not sure they’ll be able to repeat the string of successes we’ve seen in the last 15 years.
On the other hand, the drawback of all these acquisitions is a complete lack of integration (for example, look at Isilon, and Atmos they both do object storage now… and I haven’t mentioned Vipr which is capable of doing the same)
If you look at the EMC product line, it’s astonishingly easy to find a lot of product overlaps. As a consequence of what I wrote above, if the company doesn’t maintain the right course, there will be much more space for competition to win over EMC customers.
Furthermore, current EMC strategy on some products is not 100% clear today (and the same can be said for many big vendors…), but at the moment it is not a real problem because the company is totally focused on customers and revenue (the best overall strategy you could ever ask for, indeed!): they have a “good enough” solutions for almost all kinds of customer needs and they don’t need more. Again, the future organization of the company must prove that it will be able to maintain such a strategy and focus.
Legacy products and new technologies
Looking again at the product line, you can easily find some very old products which are still making money… but it won’t last for long.
Moreover, moving quickly to the All Flash Array business is not that easy. Sometimes products don’t look mature enough and competition is fierce, to say the least. Technology evolves at an impressive pace and
Flash Memory, as we know it today, is only at the beginning of its potential. And other questions arise: new products, like XtremIO, have a great potential and they could replace traditional arrays very easily but will EMC be able to properly develop the product and maintain its relevance? Does its product show a huge difference when compared to others? (short answer to second question: no it doesn’t)
“Software is eating hardware”
A few weeks ago I presented and displayed this slide at Next Gen Storage Summit. The value of storage systems has moved from hardware and basic functionalities to the software side (this is nothing new, even if good exceptions exist!). Startups like DataGravity are only the first examples of what we can expect tomorrow and this is only a small part of the big picture.
EMC is a hardware company and, although it’s true that it has a big software catalogue, it’s almost entirely focused on management and data protection (I’m talking only about storage here leaving out RSA stuff).
System and stored-data analytics is only the tip of the iceberg though, more in general the software-defined approach of most startups is what will definitely kill hardware businesses (this holds true for everyone, not just for EMC).
Look, for example, at VMware’s EVO:RAIL, the value of the hardware vendor giving you the solution is almost nil: the software elegantly hides it… and it’s not much different for software-defined storage: you now buy the software and its features on top off-the-shelf hardware.
Another example comes from Hyper-convergence, it makes external primary storage a secondary option in most of the cases.
Suppliers are the new competitors
HGST, Seagate (and Intel) have been very aggressive lately. They want to become more relevant and visibile in the market and they are going directly to big ISPs and large customers. They want to show their technology and make more money bypassing traditional storage vendors… and, indeed, they have nothing to lose (EMC-like vendors won’t be building their own hard disks any time soon 😉 )
HDD vendors are putting money on various startups, building new storage products and supporting everything software-defined. Intel is financing everything with an Intel CPU inside (I’m thinking about Hadoop or object storage, for example).
All new exponentially growing market segments where the relevance of EMC doesn’t have the same consistency that we usually see in the enterprise (I tried to be fair here).
VMware (and RSA)
The EMC Golden goose. No one at EMC wants to sell it (of course!) and I don’t want to throw a bomb in the pond… but what will happen if the company hits hard times in the future?
In any case, in this post I would like to look at EMC alone, leaving out VMware and RSA (which are separate business units/companies and do are not part of EMC core business).
Why it is important
I’m sure we could write a similar post for at least one other storage company at the moment. Being a hardware company in a software world is not easy.
Storage, as we know it, is drastically changing: software-defined, Flash/Memory, hyper-convergence, cloud/object storage. These new technologies are redesigning the landscape from the ground up and end users are thinking about totally different architectures to solve new (and old) problems. Vendors like EMC are simply experiencing what is described in “the innovator’s dilemma” book.
I’m sure that at EMC it’s a very well known issue and they are seriously looking at viable solutions for the future… But Joe Tucci’s retirement won’t help for sure.