Joe Tucci: Why The Channel Is 'Absolutely Critical'10:00 AM EST Mon. May. 21, 2012
EMC is on a serious push to embrace the channel and eliminate the last vestiges of an intensely direct sales culture. That push is evident not only at the field level, but all the way to the top. CRN editors talked to Joe Tucci, EMC chairman and CEO, about the importance of the channel shortly after the company’s first fiscal quarter 2012 conference call. Following are excerpts.
Photos courtesy of Jason Grow Photography
TUCCI: My style is, even though it’s not in vogue, I don’t like to trash talk. I said [on the April financial report call], ‘Look guys, if you grow faster than somebody, you’re taking share.’ We grew our midtier, on an apples-to-apples basis—a lot of companies like to use published results, which is fine, because if you buy a company, you can change your results, right? So, by apples-to-apples, you put the company you just bought in both periods, which I think is fair, and then what’s your growth? That’s apples-to-apples growth.
But what happens if, if I buy a $200 million company, I didn’t have it last year, and I have it this year, you’re reporting higher growth. So I said, on an apples-to-apples basis—and of course we didn’t buy anything, so it’s all organic-based [growth]—we grew midtier 26 percent year-on-year. And I think that’s faster than any of the big guys are doing. I know it’s faster than any of the big guys are doing. And therefore, we’re taking share. From everybody. Now obviously a small company can grow faster because of their small base. The second thing I said was that the channel is heavily involved—heavily involved—in over two-thirds of our midtier storage product sales. Over two-thirds. So, is the channel important? Absolutely. Critical.
TUCCI: Well, the [overall sales] number’s growing like crazy. This is a 26 percent bigger number than it was last year. And you got a number that’s in the billions. ... And when you see the size of that growth, and more than two-thirds of it is being driven by and heavily influenced by the channel, what does that tell you? The channel is incredibly important to our future. We have changed our stripes.
As long as I’m living and breathing, we’re gonna have a strong direct sales force. It’s the power of “and,” not the power of “or.” It’s not, ‘Are you a direct sales organization or a channel organization?’ It’s, ‘Have you mastered how to do both?’ And then you have to be concerned about the profitability and the business success of your partners. If you’re going to call them a channel partner, I want them to be successful. And I want them to worry about our success. And I do believe we’re doing that well.
TUCCI: We have that. Would I share that publicly? No. ... We want partners to believe it’s the best deal with us. We’re going to give them the most competitive products. We’re going to give them the best support. We’re going to have them make good margins. Meet and exceed the business plans that we’re putting together that are very competitive. If we give them the best products, the best support, competitive margins, it’s a good formula.
TUCCI: I hate the numbers game because I don’t think the company with the most partners wins. You can get overdistributed. I don’t know what the right number is. But more is not better. It’s how do I get the right partnerships that are deep and mutually beneficial. Because if they, our partners, don’t care about our success, and if we don’t care about their success, then we don’t have a partnership. The only way you can possibly use the term ‘alliance’ or ‘partners’ is if we at EMC deeply and viscerally care about a partner’s success, and they care about our success.
TUCCI: They’re both massive opportunities. First of all, they’re both very much focused on the channel. The VCE is aimed for the middle and higher ends of the market. It’s totally baked, in a can. The VSPEX is aimed at the middle and down. And we are giving you proven, tested blueprints, if you will, a recipe where you can take EMC storage, take your pick of networking, take your pick of x86 server, and take your pick of hypervisor, even though VMware is part of the family.
You’ve heard me say this a number of times. This world really is all about, this wave of change is really all about efficiency, and better costs, a whole new way of controlling your IT, whether it’s in your data center, or a public data center, or hybrids. Substituting automation for old management tools, real true automation. A whole new level of choice. And this is where VSPEX lights the light on all of these.
TUCCI: No, we don’t. Look, we’re a technology company unlike, say, a Dell. We spend over 11.5 percent of revenue on R&D. That’s a big number. And what are we spending it on? This year’s forecast is $2.5 billion spent on R&D. That’s a lot of money. We’re very focused on virtualization and cloud. It’s on storage. It’s on information protection. It’s on information security, and information intelligence and analytics.
That is a vast subset of the things that the two companies you mentioned, Dell or HP, or IBM, are doing. But a much higher percentage of revenue. In HP’s case, more than twice. In Dell’s case, more than 10 times the percentage. And we’re going deep. And, of course, what we don’t have—servers—what we don’t have—networking—we partner. I don’t want to be all things to all people. I want to do the things I just mentioned extremely well, and have truly distinctive, best-of-breed products. Not good-enough products. Truly distinctive, best-of-breed products.
TUCCI: I would do something around big data. See, I'm convinced that, with the power that the scale-out x86 architecture is giving you at really good prices, and the agility that virtualization and cloud computing is bringing, you can mass enough computer power now to analyze huge amounts of information in real time. Real time. Not build a data warehouse of what happened last week, last month, last year. Real time, what’s happening now.
And to do that, you’ve got to amalgamate three sources of information. You have a tremendous amount in your database in structured format in a company or government agency. There’s massively more information that’s unstructured in your corporation. If you can amalgamate public sources of data, huge amounts of public data, huge amounts of unstructured data, less so amounts of structured data, and then you can use real time and predictive analytics, that is where businesses will get huge competitive advantages and governments will get huge amounts of efficiency, and constituencies of those governments will feel they are getting more services and more value.