Tucci Q&A: Software Will Be Big For EMC, Channel

VARBusiness

CMP: What metrics to you use to figure out the success of efforts to improve channel satisfaction?

TUCCI: What I don't want to do is get a numeric out there which says that by X date, X percent of my sales will be through channels, because that's not what it's all about. We have those targets internally. But if I share them, it gets convoluted.

CMP: Well, what about to [the last] point? What about just other metrics? Channel satisfaction? How do you measure satisfaction levels?

TUCCI: I think satisfaction comes in two ways. Are they making their business goals? I don't care what you say, measure of satisfaction is only one account's fate. Each one of our partners has a goal, and we ask them to share that with us for all our products. And most of them share it with us for the company for our products and how the products are doing relative to the benchmarks that we set up. When we review it, if it's not doing well, why is [that]? [Maybe] it's because of pricing. Do we have any quality issues? Is it because of services? Because we're competing with you? Is there channel conflict? We try to get to the root cause and see how we can solve it.

When you talk about the distribution side, there has to be a lot of concern there. Do we have good balance or are we stepping on each other? Do we have a lot of channel conflict or contention?

I tell you honestly, [an issue] a lot of you worry about, and I don't know if it came up [in an earlier meeting] or not, but I'll bet you dollars to doughnuts it did, is did Dell step on everybody else? Let me tell you, the issue is not as bad as some of you believe it would be. In other words, does Dell cause issues now and then? Absolutely. Are these issues taking up a lot of [our] time? The answer is no. So it's not as bad as all you would think it is.

CMP: It may not be as big an issue as we sometimes think it is, but it's important.

TUCCI: First of all, our partners are doing pretty good. Are every one of our business partners hitting the levels we want them to hit? No. Are the majority hitting them? Yes. When I sit in the reviews, do we spend a substantial amount [of time] talking, dwelling on Dell being the reason they're not successful? No, we don't.

Same thing with our own sales force. You have to believe those two big sales forces will clash once in a while. But again, in the total scheme of life, it's not that bad. And usually when you do find them, it's one-off.

CMP: Could you talk about your product strategy and where it will go next year?

TUCCI: You saw a pretty spectacular performance in the product front starting August and ending on Feb. 3, a total refresh of our products. Beyond that, a lot of new software in the April time frame.

This wasn't a one-time event. I got this company--you'll see us be fast cycling, coming out with new products in quicker cycles, with a lot more product introductions. . . . It's going to put pressure on us, but it's going to put a lot more pressure on the industry.

CMP: What are the proof points that EMC is in the channel for the long haul and not just because the market is down and you want to lower the cost of sales?

TUCCI: I would answer that the same. Look at the product portfolio we're building. Look at the way we comp our sales force. I need a channel to be successful now. Look at the way we're building our resources. . . . [Our general territory sales force] still works accounts, but the order goes through a channel partner. Those are all things that show tangible evidence that we really have changed our stripes, and not just temporarily.

I don't think the market's going to go back to 1998, 1999, 2000. That was a bubble. Not that there won't be another bubble someday. The world only goes insane once every 10 years, right?

CMP: How about your vision of how EMC is going to compete in the midmarket software segment vs. Veritas and Computer Associates?

TUCCI: What we're doing very different is we're coming out with a really lightened-up product family. On the top end, we use ControlCenter. On the next tier down, we're using PowerPath Light, Astrum, NaviSphere--we've got a set of products that are very specific to that market. I think it's going to bode well for us. Again, those products go out predominantly [via] our channel partners.

Our own direct-sales force is selling more Control Center, with PowerPath, with Automated Resource Management, with StorageScope, Array Manager, the big-end products. . . .

CMP: How big a revenue opportunity is there for the channel?

TUCCI: I don't believe we've broken it out, but it's huge. One of the surprises [was that] we thought the channel would do substantially less software revenue than our highly trained sales force. [But] it's not too many points apart, which is refreshing news to us. That tells me that [our people] are doing a really good job of training our partners. And our software's meeting that need.

We're very, very pleased with the way the channel sales, which at this juncture are primarily Clariion-based, are doing.

CMP: EMC executives have talked about selling the software separately from the hardware, and that's a huge transformation.

TUCCI: That's what we're doing on the direct side. We're building that out now. But scratch that word 'totally separately,' because that's a stupid thing. Why would [we] want to do that? [We have] the ability to do totally separately. But how many accounts do you think, in the world the big and medium-size accounts, we can get an appointment with the CIO by the end of the week? Thousands. And how many companies can do that? A handful maybe? Why would [we] want to give that up?

As we build the channel, I certainly want to make sure that this huge direct-sales force we have that has all these contacts is leveraging those contacts.

CMP: Will we be seeing EMC in 2006 as more of a storage software company than a box maker?

TUCCI: Right now, I hope we're not viewed as a storage box maker. I'll take over your term there--I think we're a storage solutions company.

First of all, right today, about 45 or 46 percent of our revenue is software and services. I said that by the end of 2004, software and services would be more than 50 percent. But again, we'll sell hardware, we'll sell software, we'll sell services. Sometimes together, sometimes not together. But again, we're gonna try to be the entity responsible for that piece of your IT infrastructure.

CMP: In terms of mergers and acquisitions, what holes do you see [in EMC] and what are you going to do to fill them?

TUCCI: I never comment on that, because if you think of an industry as only having two companies that count that I could possibly buy in any one area, so if I give you an area, you'll figure out the two companies. Then you'll drive up my price.

CMP: You've obviously made software acquisitions a continuing priority. . . .

Tucci: Software is definitely our highest priority. Software makes sense if you do it right. Obviously, where we are gunning, where we are hunting, is in software. There are other opportunities that might creep up, but that's not where we are purposely hunting.