EMC Looks To Generate Channel Velocity

EMC CEO Joe Tucci and Software Group Executive Vice President David DeWalt shed some light on the company's new unified Velocity channel program, the impact of the Symantec-Veritas merger and other issues in an interview with Editor/News Steven Burke at the storage giant's first software conference this week in Las Vegas.

CRN: For 2005, what's EMC's vision for bringing together the software and hardware channel?

TUCCI: The theme of this conference is One. That is, "One EMC," because EMC is truly not a hardware company. It is truly not a software company. It is truly not a services company. We are focusing on storage information management. We call our strategy ILM [information life-cycle management]. Basically, we are going to have best-of-breed products, hardware and software. The strength comes when you package those products together and form solution sets with services around those packages.

The EMC of old, the EMC of the 1990s, they used to do all of that themselves. They really didn't use channel partners--not in a good sense of the way you use channel partners. Our strategy now is exactly the opposite, which is we are going to keep a strong direct sales force. I won't apologize to anybody about that. As long as I live and breathe and am heading this company, we will have a strong direct sales force, both on the software and hardware sides in regard to ILM. Our strategy is to really grow with partners. Every time I look at the results--and I won't give you the percentages because we don't make them public--the percentages keep ramping up in terms of partner involvement. It is just phenomenal how many times they show up. So it is one of the real pillars of our company.

CRN: What was the message to partners here at the show?

TUCCI: A lot of stories are being written now on the transformation of EMC. I shared it with the audience. In 2001, this company lost $508 million, and that was after making $1.8 billion. We were in the hole, and our revenue was declining. So we had to take some action. Of course, the first set of actions were all around cost-cutting and right-sizing ourselves. Anybody that is worth their salt understands that no company ever saved its way to greatness.

The real partner transformation, and the real story of the transformation, is what we were going to do. I talked to them about the several pillars we put in place. One pillar was we were still king of high-end storage, but midtier was getting bigger and growing much faster. So we wanted to move downmarket into midtier storage. Our revenue was 73 percent hardware. I wanted a better balance. One of the pillars was to make software and services more than 50 percent. Today, it's 53 percent, to be precise. So, obviously, to do that came down to growing software and focusing on acquiring software companies and building out--pretty much organically--the services around that. Another pillar was ILM. Another pillar was to execute with partners. I talked to them about the six major pillars we built our transformation upon, and they are one of the six. And the way we constructed this house is if you move any of those pillars, a major piece of the house is going to fall down. I tried to give them a sense that they are a critical piece of the EMC family, as I call them.

CRN: How important is the partner community as you go forward with the "One EMC" vision of hardware, software and services?

TUCCI: It is incredible. One of the things that I showed graphically is the staggering growth we are having in what we call our commercial business. We have just had incredible growth, hardware and software, in that commercial business, which is again one of the pillars. If you look at the percentages of channel partners in there, it is huge. Now we are coming down, and actually David DeWalt is heading the entire [software] effort for the company. Obviously, as we go downmarket, we want to package again and look at how we could use the channel to put more power in EMC. So maybe you sell an AX-100 with Retrospect from Dantz for backup and replication management software. Those are all good products for the SMB market.

CRN: How many EMC partners are selling software, hardware and services today, and how many will be selling that as a result of the "One EMC" effort?

DEWALT: A large percentage of existing EMC partners that are part of the Velocity program sell software, services and hardware. Typically, it is the multiplatform and platform storage base software today, not as you think of Documentum, and Legato sometimes, and VMWare and some of the others. The big theme we wanted to talk with partners about is "One," this overall, arching program we call Velocity. The market is moving toward vertical stacks and vendors who can provide complete infrastructure. It is hardware, software and services. A lot of our partners have asked us to be able to resell or get certified on other areas of our software and hardware platforms. So this overarching program is [designed] to allow them--if they were selling hardware and software from EMC--to start selling Legato, Documentum, or Documentum and Legato. It is really not about having Documentum and Legato anymore. It is all one group from EMC. We want the partners to feel that and allow them access to all of the EMC products. We have set up some very detailed certifications and levels.

TUCCI: It is different structure for different folks. We don't tell the partners what to do. You have to know your own business, where your value is and what your model is. So there is going to be a set of partners that really want only to do the software, and then they could team with another partner that could provide some of the hardware assets. We do see a lot of cross-fertilization [with] Legato and Documentum partners. Some of them are now picking up some of the hardware because it is easy to sell that solution set, especially as we brand it. And there are a number of hardware partners now all over software.

CRN: Do you think a lot more of the hardware guys will jump into the software space?

TUCCI: I think you'll see the hardware guys jump into the software space more. The software guys ... some will and some won't [move into hardware]. I think all of the software guys will do more services.

DEWALT: If you look at different market segments, you'll see a proclivity to do more hardware and software bundling. The more you get into SMB and commercial, the other part of the big theme is these Express solutions. The Express solutions are really a combination of all the products, packaged and bundled as a single SKU. So it is hardware and software, all as a single SKU. It is more germane in the SMB and commercial markets, where you can put together a turnkey solution for Exchange, an AX-100 bundled with some products for storage administration and configuration, bundled with some replication and backup. We can give you a full solution.

TUCCI: That is what the Velocity program is all about. You can pick and choose within that Velocity program, but you don't feel left out. You know why we did that? Our channels wanted it. This wasn't an EMC brainstorm. Maybe it should have been, but it wasn't. Basically, a number of channel partners really requested it, and obviously we listened.

CRN: What are we going to see in terms of the Express lineup this year?

DEWALT: We started with a couple. The big marketing campaign message is ILM for an application. So we have developed a number of proven solutions, which is an integration of all the products and layers together--hardware, software and services. We launched those at the beginning of the year. We have ILM for e-mail, SAP, imaging and PeopleSoft. Those are the ones we have begun rolling out this past year. Now what we have done is taken that and packaged it specifically as an Express solution designed for midmarket and down, perhaps. And a number of acquisitions we did in the back half of the year were really targeted there as well. One company was Dantz with the Retrospect product, which is a brilliant product. They have a number of wonderful partners. It is an exclusive partner model. Now we have a backup appliance for a particular application. So we are creating Exchange bundles for Express solutions. We are doing that for all of the Microsoft-type applications, like Office and other product areas. And then we are going to continue to do that application by application, much as we did in the enterprise. ILM for SAP is a much bigger one. But we are now bringing them downmarket, packaging them as a single SKU for partners to get certified on and resell.

CRN: Is the No. 1 priority Microsoft?

DEWALT: It is applications. It is horizontal.

TUCCI: Look at the mail offering. There are a ton of Notes seats out there. The answer is yes with Microsoft, but the answer is probably even more yes that one of our key target areas for Express would be mail. I don't want to limit that to Exchange.

CRN: What is the channel vision as you go forward with the ILM strategy?

TUCCI: Any company that is great--and Microsoft and Cisco have done it better than anybody--has realized that they are not a power only unto themselves and that if they can build an ecosystem of partners around them there is collective strength. So if our field force dedicated to selling Open Software is 1,300 people or so, and [if] you get partners, you can double or triple that. And the product cost is done, especially in software. The incremental margins are great, so there is enough margin there to share. Even in hardware, once I got all the factories going and put on the third shift and bang out more boxes, the incremental cost of those boxes goes down. To be able to double or triple the size of your sales force and market reach, the math is just incredibly compelling. I try to put it from a selfish point of view, because obviously if it is good for us, we are going to do it. But it is good for customers because they want solutions. They want technology to help them solve a business problem. Our channel partners have a tremendous amount of capability in that area.

CRN: How much will EMC's channel investment increase?

TUCCI: It is going up significantly. I don't want to throw out any new numbers.

DEWALT: The partner ecosystem is everything. One is to get this single, integrated sort of umbrella program and come out with products designed specifically for those types of partners but also to expand the types of partners we have. So it is how do we attract other types of partners? If you think about EMC from a storage hardware point of view, there a lot of resellers, distributors and value-added partners largely around storage. When you start to think about software, you start to think about OEM partners and developers. So you have a whole, new class of partners that begin to come into the infrastructure and ecosystem.

So part of the Velocity program is, let's talk to software companies that might embed our product to make their solution stronger. The idea is to get wider on types of partners. There are 12 types of partners that we have identified as routes to market for us and partners that we would like to work with. Some of them were traditionally in the Velocity program, and some are brand new. The software DNA brought it. The SMB/SOHO market brought a few new ones as well. Think about telemarketers. Think about big boxes. Think about some of the routes to market through some of the smaller channels. We want to start to get wider and wider with that ecosystem.

TUCCI: A couple of times today in my presentation I referred to partners as part of the EMC family. And part of [being] family is you've got to care about family members. So it is not really a numbers game, because we have to make sure the channel partners we have are successful. We have to understand their business plans because we can only be successful [in the] long term if they are successful. So we spend a lot of time trying to understand our partners' business models and how we can make sure they get the proper margin and the proper amount of leads. So it is not really a numbers game. [Having] thousands of partners is not necessarily better than having hundreds of partners. It is really how they fit into the EMC family and feel they are part of this family. CRN: Why isn't VMware included in the Velocity program?

TUCCI: VMware is an area where we have an opportunity to not only be successful but also to really help create a standard in the marketplace. If you are trying to do something like that you, really have to back off the big EMC, and you really have got to run this for kind of a special purpose. And some of their big channels are companies like IBM, which in the main is a competitor. Think of enterprise content management; they have a product. Think of storage management; they have Tivoli. Think of midtier; they have a midtier product line. Think of high-end storage; they have a high-end storage line. Pretty much everything that we do in ILM, IBM is a competitor.

VMware is the one area where we don't compete. So IBM ends up being a big channel partner for VMware. So I have assured [IBM CEO] Sam Palmisano that we are going to run this to the highest standards of openness. We are not going to leverage anything VMware does to benefit [only] EMC. We will use that software inside EMC to make some of our products better, but I will not alter the VMware software for the benefit of EMC. We are keeping it to strict open standards. [VMware] has their own channel and partner model and, obviously, by being part of the EMC family we introduce them [to our other partners]. There are many, many partners here--probably not the majority--that also sell VMware. But they are not part of the Velocity program. It is a different channel program. But that is the purpose, and it is a pretty lofty goal--one that I think can actually benefit the industry.

CRN: Have you assured Palmisano that IBM will get the same information as the EMC guys?

TUCCI: Yes. And [HP Chairman and CEO] Carly [Fiorina]. So our guys get the same access to the APIs as Sam Palmisano, which is not true anyplace else. Dave [DeWalt] can go into chapter and verse on how we are taking the [Documentum] content management repository and putting all kinds of storage policies inside the metadata. So you can see there is a lot of linking going on there. With VMware, we are not doing that. Now that doesn't mean we are not going to use VMware technology. What we are going to do is expand the same API interface that IBM is more than welcome to do, that HP is more than welcome to do and that Sun is more than welcome to do.

CRN: What is your take on Symantec's acquisition of Veritas Software, and do you have any plans to counter that?

TUCCI: First of all, you have to play your own game. You also have to know who you are playing and beef up some defenses and put in some special plays. But the great teams, they don't change the way they are going to play the game every time a new competitor rolls onto the court. We have our basic plays. We know the talent. We have to execute our game. I think if you really think of this, these are two pretty far apart companies. If you look at the heart, soul and profit pool of Symantec, it is the Norton antivirus stuff, which is pretty far away from the big enterprise stuff. So I can understand why it makes sense for them to try to get one from column A over to column B to make them stronger--not to say one thing negative about the idea. On our side, we know what we are doing. We have a plan in place. We just have to go out there and execute. I think it is healthy to be slightly paranoid. But I think it is unhealthy to not play offense.

CRN: So it doesn't sound like you are going to change anything in terms of how you integrate security into the software set.

TUCCI: No. We've got to play our game. We've got a really good game.

DEWALT: EMC and the EMC Software Group have a phenomenal security strategy already. A lot of the acquired companies that are part of this group have had a lot of strategies for secure information, encryption compression, virus protection, proxy server management. Those are all part of what we do today. We have a very open strategy to all of that security--Symantec being one of them, RSA being another, Netegrity being a third. We have kind of approached that security set as very open. Symantec can be a part of that. For us, having a lot of respect for what they are trying to do, I thought it was a very positive thing for EMC in a lot of ways, the reason being that our main competitor, Veritas, doesn't gain as much value in our humble opinion as Symantec did because Symantec wanted a direct-sales force to go to market. Veritas had a lot of direct sales to go to market. By using the Veritas direct-sales force to take Symantec product, it dilutes the storage software game that we are playing directly against them.

TUCCI: Mergers are easy. Integrations are tough. A lot of hard work. To get to where Dave [DeWalt] can get on the stage and talk about one, that is a lot of hard work. You are seeing the benefit of 15 to 16 months of work as we stand on the stage today. I know all of the work we had to do, and we are here. We just have to now go execute our game plan. [Symantec and Veritas] now have to do all of that hard work. This is the first round for both companies doing any acquisition of that size, and it is roughly an acquisition of equals in terms of size of company. This is going to be massive work for them. It was massive work for us, and we are now out the other side. We have to execute hard while they are doing the internal work.

CRN: How will EMC go after their customers and partners?

DEWALT: If you think about Velocity, we are doing the same thing with this program called Safe Switch. The idea is to create a complete, programmatic way of giving our customers and our competitive customers ways to switch to EMC products. We want to make that total cost of ownership easy for them to move. So we have targeted a couple of the key competitors. Joe's directive to me is to outgrow our competitors. We've got to take market share from them. You've got to take their customers from them. A lot of the strategy is to do that. We have had a lot of success in the past year in replacing Veritas and FileNet. We have been able to package that in consulting kinds of offerings with our partner ecosystem. Although we think there is lot of greenfield for us to go that is not replacing them, we continue to see them. Specifically, we are going after Net BackUp in the data center with NetWorker, with disk-to-disk types of solutions. We have a lot of ways we can usurp Veritas' position in the data center.

CRN: Are you also moving to switch Veritas partners to EMC?

DEWALT: We see attacking a specific partner ecosystem of the competitor as a part of the program. It is not just the customers. It is also the partners--the VARs of FileNet, the VARs of Veritas that we want to go after. It is those partners who are helping us with the scripts and the packaging. It is early and new for us, although this isn't new in the industry. We have actually seen a lot of very successful programs. Frankly, one of them that some of this is modeled after is Oracle. There was a lot of [Oracle] Safe Switch from Sybase, Ingres and Informix over the years. It takes years to occur. But it is a multiyear program and a way of taking market share from our competitors.

CRN: As you look forward in 2005, what is EMC's acquisition plan?

TUCCI: We already did one. We expect Smarts to join the EMC family in February. It is going through the regulatory approvals. I can't see any reason why we won't clear that. Do I think this will be our last of the year? No, I don't. Am I going to give any indications of how big, what, when, where, why? My normal stance is no.

CRN: In general, what are some of the holes you would like to fill through acquisition?

TUCCI: I have said for a long time I am more interested in the software and services side. I know that is a very broad area. But those are the kinds of areas that we will be looking into. I am not ruling out anything on the hardware side.

CRN: What is the biggest challenge in bringing together the 'One EMC' strategy of selling software and solutions, which is a lot different than selling a hardware box?

TUCCI: EMC has always been a little bit different. Even though I think EMC always had great hardware, I don't think EMC ever became great selling great hardware. What really differentiated EMC was SRDM and TimeFinder, PowerPath and Control Center. It was the software aspects for remote applications. EMC is basically more focused on storage, if you will, but it was always basically not only selling hardware but also value. You really never got into a bits-and-bytes, cost-per-byte selling mentality. We really had that advantage.

So working that into the strategy of today is not far-fetched. I have seen companies that really have hardware-selling models. Our model was always much more complex than that, which is good. There are a lot of moving pieces. It is like a kid when you are playing 'King of the Hill.' We are king of the hill in storage. How do I know that? I'll bet you dollars to doughnuts no matter what company you interview they will tell you how they are going to beat EMC. So when they all talk about us and how they are going to beat us, they are really saying this is the leader, this is the king, and I am going to go knock them off the hill. [Intel's] Andy Grove was right: You've got to be healthily paranoid. You've never heard me say bad things about the competition. I always take them seriously. On the other side, though, you really have to execute your own game. Being paranoid doesn't do anything for you if you don't execute your own game. I spend a lot of time on whether we are executing right, coming together right and bringing value right. If we do that, we are going to be just fine. But the real key is to get good people like Dave [DeWalt] to do it.

CRN: What is your message to partners who couldn't get to the EMC software conference?

TUCCI: It is the same message I gave here: We cannot meet our growth targets next year without them. You can go look it up, but the consensus estimate the last time I looked is $9.35 billion. That is a lot of growth off where the Street expects us to finish this year. I cannot accomplish that without taking [market] share, which we expect to do, and I cannot do that without partners. They are very welcome, and they will be very cared for as part of the EMC family.