EMC displays its new colours

Information Age (London, UK), August 10, 2005

There have been many remarkable changes at storage giant EMC since Joe Tucci took the helm in 2001. The fact that Tucci has overseen a turnaround in financial performance - moving from a $500 million loss in fiscal 2001 to a $871 million profit for its most recent full-year results in 2004 - will not be lost on the company's shareholders.

But at the heart of this transformation is the metamorphosis from a hardware vendor into what EMC executives like to tout as an information lifecycle management (ILM) company. And while it is tempting to dismiss this re-branding as mere marketing spin, a look at EMC's recent revenues reveals a different story. Tellingly, software and services combined now account for 54% of revenues, up from around 40% three years ago.

Much of that increase has resulted from EMC's hunger for acquisitions. Since 2003, the company has spent over $4 billion adding 'complementary' businesses, almost exclusively on the software side; Documentum, VMware, Smartz, Dantz and Legato are now part of EMC. Such a collection of software purchases would challenge any vendor, but EMC's executives suggest the integration plans are going well. They point to the fact that all five major purchases grew their revenues during 2004.

However, that is just the first phase. If EMC is to prove the wisdom of its rapid expansion into software, it must demonstrate there is real cohesion between the different product lines it has acquired. In some cases, that is simply not there. For example, the company has already decided that VMware, its virtualisation software acquisition, will remain a separate business unit.

Elsewhere, though, the integration effort is gaining pace. In June 2005 the company revealed that it was combining the services organisations from its acquisitions (VMware excluded) under the banner of EMC Consulting.

This is important for EMC, and for end users, says Tony Prigmore, senior analyst at market watcher the Enterprise Strategy Group. Currently, the majority of businesses have made little progress towards embracing ILM beyond adopting storage, he says, and to do so they will need to tap into the consulting skills of vendors. "Phase one of ILM is basically getting stuff into the correct bucket," says Prigmore. "Phase two is about ensuring that you can extract information from the buckets in a way that will deliver the most business value. That requires deep technology and industry expertise."

It is this combination of hardware, software and services that will enable the ILM vision and deliver real benefits to its customers, says Joe Tucci, CEO of EMC. "Generally people aren't looking for an ILM solution, they're after solving business problems. So financial services companies might have an email storage issue: we help solve the problem with hardware, software, professional services. It [just] turns out that we've given them an ILM solution."

By pooling its consulting skill sets, EMC has been able to create a unit with a solid focus on ILM consulting and implementation. But it remains mindful of the risk of adding such higher value elements to its traditional 'break-fix' services. It needs to ensure that it does not stray into the territory occupied by its large consulting partners such as Accenture and EDS.

Whether or not these large consulting partners are receptive to such plans remains to be seen. But for both them and EMC, the rush to grab ILM mindshare, and market share, is well underway.