EMC WORKING ON GRAND STRATEGY

January 26, 2001

COMMERCIAL NEWS

The competition is ganging up on EMC, but the storage vendor already has a battle plan.

Executive chairman Mike Ruettgers says EMC is courting a new crop of solution providers to help the company reach a revenue target of $12 billion this year,up 41 percent from $8.5 billion last year.

The bottom line: EMC needs the channel to grow, Ruettgers says. “We have more opportunity than we can address right now, so we’re anxious to find more people to help us cover the marketplace.”

The strategy comes as other hardware vendors maneuver to cash in on the exploding storage market. This week, Compaq Computer, Hitachi Data Systems, and Dell Computer plan to introduce storage products aimed at midrange and enterprise storage clients, EMC’s core customer base. Hewlett-Packard, IBM, and Sun Microsystems (stock: SUNW) also are zeroing in on that market segment with new storage products and upgrades.

And more competition looms for EMC. For its part, Hitachi Data Systems claims to have wrested the lead from EMC in the storage service provider (SSP) space, a niche also coveted by Compaq.

At last week’s ENSAwork storage event, Compaq touted partnerships with seven SSPs, which in part are aimed at working with solution providers. Compaq already has teamed with IBM to ensure interoperability between their storage products and to resell each other’s high-end storage systems directly and via channel partners. The alliance directly targets EMC, says John Koury, vice president of marketing for Compaq’s Enterprise Storage Group.

EMC is under attack, says Larry Holzenthaler, executive vice president of sales and marketing at Total Tec Systems, an Edison, N.J., systems integrator whose Compaq SAN sales were up 25 percent last year. “We have come up against EMC in competitive situations five or six times over the last year, and we have been successful with every one of them,” he says.

Total Tec has been particularly successful in winning with Compaq solutions in new accounts. “We have not lost against EMC in a new installation,” Holzenthaler says. “If you look at their architecture, it works well in the mainframe environment, but it is not well-suited for and has a number of inherent bottlenecks if you are selling into the SAN open systems market.”

That said, Holzenthaler says it is not easy battling the EMC juggernaut. “They are a formidable competitor,” he says. “Most of the time they are there first, and they do a good job of selling high and pointing to their success in the marketplace. But if a customer takes a look at the technology in most applications, Compaq is going to have both a price and performance advantage and a future growth path that EMC can’t offer.”

Amid the escalating competition, EMC is focusing on how it can best reach its growth targets. After years of quietly developing a solution provider channel, the Hopkinton, Mass. vendor now is stepping forward to keep its aggressive direct-sales force at bay, and even turn it into the channel’s best friend.

“If we’re going to hit the growth that we need to, we have to rely on partners,” says Tom Heiser, EMC’s vice president of global channels and service providers.

“We have a lot of growth planned, and obviously you can’t do it all yourself,” says Ruettgers, who was named executive chairman last week. Joe Tucci, president and COO, assumed Ruettgers’ CEO title.

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