EMC's Quantum Leap—Expanding Beyond Storage
You can learn a lot about a company's strategy by looking at the markets it is expanding into. In my last posting, I looked at NetApp's current "quantum leap" from storage systems (SAN, iSCSI, NAS) into capabilities like encryption that add value to storage from other vendors.
EMC is also taking a quantum leap, exemplified by the acquisition of VMware and SMARTS. This expansion goes completely beyond the storage market, which will have very interesting strategic implications, both for EMC and for others in the IT business. As in my NetApp analysis, I'll look back at EMC's earlier quantum leaps, and then return to the present.
EMC started in mainframe storage where they beat IBM DASD by building a very cost effective solution based on commodity SCSI disks. (A classic disruptive strategy—SCSI started as a low-end disk for workstations, and EMC took it into the enterprise.)
EMC's first quantum leap was to expand into open systems storage. Not only did they support UNIX and Windows with Symmetrix, but they also acquired CLARiiON to move down market and acquired CrosStor to enter the NAS market. (Before this expansion, EMC and NetApp competed little, but EMC's expansion combined with NetApp's entry into the SAN market put the two into head-to-head competition.)
EMC's next quantum leap was into storage software and ILM (Information Lifecycle Management). The acquisition of Legato exemplifies this expansion, and also BMC's storage management software.
Today EMC is expanding completely beyond storage, although they don't yet position themselves that way.
The first step was Documentum. EMC positions Documentum as part of ILM, but I don't buy it. EMC could equally well have bought Sybase and positioned it as ILM because a database creates and manages records. To me, Documentum is a step outside of ILM and storage—or at least a half-step.
EMC's more recent acquisitions of SMARTS and VMware make this trend even clearer. SMARTS takes EMC into data center management beyond storage, but VMware is where the storage link breaks down completely. VMware is not about storage, it is about owning the application environment.
I have a hunch that this explains IBM's increased aggression towards EMC. EMC has competed against IBM over storage for years, but now EMC is starting to compete for control of the application and server environment. For a computer company like IBM, that is much closer to home.
Microsoft also wants to own the application and server environment, and MS Virtual Server for Windows competes directly against VMware, so EMC's move could create tension here as well.
To be clear, I think that EMC's strategy is challenging, but I also think it may be the best strategy available to them. Because of their maturity in enterprise storage and data management, expanding beyond these areas may be their only hope of maintaining the growth rate that Wall Street demands.
In closing, let me take the opportunity to clarify NetApp's strategy by contrasting it with EMC's. NetApp is still small enough to double entirely within data management and storage, to double again, and still have room to grow more. Someday I would love to have EMC's problem, and be forced to expand beyond the data and storage. And I certainly admit that scale and breadth can bring some advantages. On the other hand, NetApp gets to stay focused on simplifying data management, and focus creates a variety of advantages for a company, for its partners, and for its customers.
In strategy, you always have to play the cards in your hand. Today, EMC and NetApp have very different hands.
EMC is also taking a quantum leap, exemplified by the acquisition of VMware and SMARTS. This expansion goes completely beyond the storage market, which will have very interesting strategic implications, both for EMC and for others in the IT business. As in my NetApp analysis, I'll look back at EMC's earlier quantum leaps, and then return to the present.
EMC started in mainframe storage where they beat IBM DASD by building a very cost effective solution based on commodity SCSI disks. (A classic disruptive strategy—SCSI started as a low-end disk for workstations, and EMC took it into the enterprise.)
EMC's first quantum leap was to expand into open systems storage. Not only did they support UNIX and Windows with Symmetrix, but they also acquired CLARiiON to move down market and acquired CrosStor to enter the NAS market. (Before this expansion, EMC and NetApp competed little, but EMC's expansion combined with NetApp's entry into the SAN market put the two into head-to-head competition.)
EMC's next quantum leap was into storage software and ILM (Information Lifecycle Management). The acquisition of Legato exemplifies this expansion, and also BMC's storage management software.
Today EMC is expanding completely beyond storage, although they don't yet position themselves that way.
The first step was Documentum. EMC positions Documentum as part of ILM, but I don't buy it. EMC could equally well have bought Sybase and positioned it as ILM because a database creates and manages records. To me, Documentum is a step outside of ILM and storage—or at least a half-step.
EMC's more recent acquisitions of SMARTS and VMware make this trend even clearer. SMARTS takes EMC into data center management beyond storage, but VMware is where the storage link breaks down completely. VMware is not about storage, it is about owning the application environment.
I have a hunch that this explains IBM's increased aggression towards EMC. EMC has competed against IBM over storage for years, but now EMC is starting to compete for control of the application and server environment. For a computer company like IBM, that is much closer to home.
Microsoft also wants to own the application and server environment, and MS Virtual Server for Windows competes directly against VMware, so EMC's move could create tension here as well.
To be clear, I think that EMC's strategy is challenging, but I also think it may be the best strategy available to them. Because of their maturity in enterprise storage and data management, expanding beyond these areas may be their only hope of maintaining the growth rate that Wall Street demands.
In closing, let me take the opportunity to clarify NetApp's strategy by contrasting it with EMC's. NetApp is still small enough to double entirely within data management and storage, to double again, and still have room to grow more. Someday I would love to have EMC's problem, and be forced to expand beyond the data and storage. And I certainly admit that scale and breadth can bring some advantages. On the other hand, NetApp gets to stay focused on simplifying data management, and focus creates a variety of advantages for a company, for its partners, and for its customers.
In strategy, you always have to play the cards in your hand. Today, EMC and NetApp have very different hands.
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