Are VCE's Cultural Problems Killing It From Within?5:30 PM EST Mon. Oct. 15, 2012
Internally, VCE has what insiders describe as a challenging culture, still somewhat factionalized, given that many employees have deep ties to -- and the cultural patina of -- either Cisco or EMC. VCE also feels decentralized and siloed, some say, because the actual production of the Vblocks happens in regional VCE facilities in Franklin, Mass., and Cork, Ireland, while the company's headquarters is in Richardson, Texas.
"Dallas is a very talented, skilled technical market," VCE Executive Vice President Todd Pavone said when asked about the choice of VCE's headquarters location. "It's easy for us to go hire there. But we have a hub-and-spoke organizational model and we need to bring on talent pools very quickly."
Globally, VCE also has offices in London, Paris, Munich, Amsterdam, Singapore and Dubai.
Given the substantial executive changes and restructuring VCE has experienced since its 2009 inception, employees are also constantly concerned about layoffs. In October 2011, VCE's human resources department began to schedule rating interviews with VCE employees: a strange move, insiders said, because they were out of season -- annual reviews at VCE usually happen in the spring -- and also abruptly announced.
"Wouldn't that strike you as odd?" one insider asked. "Evaluate all the employees out of season? That usually means they're racking and stacking you to prepare for a layoff."
To hear current and former employees tell it, however, one of the biggest VCE wild cards of all is Michael Capellas, who was named Acadia CEO, in charge of what was then still named the VCE Coalition, in May 2010.
A 30-plus-year technology executive whose chief executive stints include WorldCom/MCI (2002-2006), Serena Software (2006-2007) and First Data Corp. (2007-2009), Capellas was best known to channel partners as the CEO of Compaq from 1999 to 2002, and he briefly served under HP CEO Carly Fiorina as president of HP following the contentious HP-Compaq merger. At the time of Capellas' exit, he was criticized by partners for favoring direct sales, and for not doing enough to improve Compaq's channel relations.
When he was named to lead Acadia, Capellas' most obvious connection to VCE was Cisco, on whose board Capellas has sat since 2006. After President Frank Hauck joined the company in April 2011 -- and VCE went through several reorganizations in the spring and summer months -- Capellas' role appeared to shift, with speculation rampant that he was no longer in charge of the company.
While Capellas didn't depart, his CEO title did disappear, and he is now listed as chairman of VCE and, according to the company, focuses on strategic vision while Hauck drives day-to-day operations. VCE did not have a CEO until the July 2012 appointment of Praveen Akkiraju, a former Cisco senior vice president.
Current and former employees of VCE view Capellas as disengaged. Some describe Capellas as more or less a presiding engineer who leaves much of VCE's day-to-day operation and execution to Hauck, Pavone and other lieutenants, and who makes high-level appearances at events like EMC World but seems to have little down-and-dirty involvement in the sales machinery of VCE. For example, Capellas -- who is based in Texas -- was not often part of the meetings Hauck, Pavone and other VCE leaders conducted with staffers in November, sources said.
"Capellas is a figurehead," said a VCE insider. "He's not part of the company meetings from what I've seen. We're usually told he's off appearing before Congress in Washington or meeting with investors or something like that."
"Capellas is more the visionary," said a former VCE employee, interviewed by CRN before the Akkiraju appointment. "Frank runs the day-to-day."
Many of VCE's marquee partners, however, have found Capellas accessible. Capellas attended last November's VCE partner meeting in Boston, and a few partners told CRN they're working with VCE to have Capellas appear at client events they're hosting.
"He's been very approachable," said Kent MacDonald, vice president of converged infrastructure at Long View Systems, a Calgary-based solution provider.
"VCE needed a big-name guy to get it off the ground. It was a good move. It's been a positive experience," said Jerry Pezzino, managing director at Denali Advanced Integration, a Redmond-Wash.-based solution provider.
Capellas himself sees VCE's benefit to partners and to customers as clearly defined.
"We develop end-to-end complete systems. We've had enormous success in underpenetrated accounts. Cisco and EMC are seeing us selling into new accounts for them. At a strategic level, we have been entering market spaces where our parent companies did not sell before. Cannibalization has been fairly low," he told CRN during a brief interview at EMC World in May.
VCE, said Capellas, has overachieved, despite what analysts might believe.
"There's pressure on us, just like there is on everyone else. We have an executive committee including [EMC Chairman and CEO] Joe Tucci and [Cisco Chairman and CEO] John Chambers. We have a board of directors including [Cisco President, Development and Sales] Rob Lloyd, [EMC Vice Chairman] Bill Teuber and [EMC President and Chief Operating Officer, EMC Information Infrastructure and Cloud Services] Howard Elias. We have our quotas, which we overachieve consistently. We operate like any company, with our budgets and quotas," Capellas said.
Capellas told CRN that Cisco and EMC had sought a tighter relationship years before the initial Acadia company was formed. Sources familiar with Capellas and his first months as CEO of VCE said that there was a lot of initial excitement over VCE, but when Cisco allied with NetApp for FlexPod, Capellas felt a lot of the wind had been taken out of his and VCE's sails.
"Capellas really had some grand ideas for what VCE could be," said a former Cisco executive who was part of Cisco's VCE launch team. "This was going to be a big deal thing where you had a highly visible CEO driving this bus with big companies behind him. He had a really grandiose view of that. And then he was really angry with Cisco's data center folks for supporting FlexPod. You had Capellas, who was head of VCE, and also on Cisco's board, hearing about what Cisco was planning to do outside of EMC. He really wasn't happy about that, and he thought Cisco was selling VCE short."
SALES REP VS. SALES REP
One particularly nagging problem with the VCE model, many observers say, is that there are simply too many stakeholders -- too many corporate masters placing too many demands on stressed-out, overtaxed sales representatives.
Channel partners see first-hand the conflict between Cisco sales reps and EMC sales reps, who want to make their own numbers and don't like to wait around for VCE sales reps, let alone collaborate with all the various reps and the solution providers involved with VCE deals. Things can get especially testy when the various reps are looking at how to address specific customer requirements, such as when VMware Enterprise License Agreements (ELAs) or other pieces of the puzzle are already in place.
"The Cisco guy says, 'I want to sell my UCS' or the VMware guy says, 'I already sold the ELAs, I don't need to sell anything new here,' " said Sudhir Verma, vice president of consulting services at Force 3, a Crofton, Md.-based solution provider. "But it's the nature of the business. This is the behavior they've been incented toward."
EMC's Tucci said he understands concerns about incenting reps toward better behavior, but "we wouldn't be doing two-thirds of our sales in the midtier through the channel if the compensation wasn't working. Because we still have a big direct sales force. If they didn't think it was good, that wouldn't be happening, and we wouldn't be getting the growth we've been getting."
EMC's compensation plan around VCE is a good one, Tucci said.
"I think we have good comp around VCE. And the cooperation and understanding gets better every day," he said. "Are we exactly where we want to be? No. Are we light-years ahead of where we were this time last year? Yeah."
In addition to conflict between the various reps, another common occurrence is the Cisco or EMC sales rep that begins to dismantle a Vblock deal as the end of a quarter approaches. That's natural behavior, solution providers said -- reps quaking under pressure to close business at the end of sales cycles and not wanting to wait around for slow-to-cohere Vblock deals that may or may not show up in their numbers.
"Cisco and EMC reps both hate VCE. Why? It slows down deals and it makes them miss quotas," said the CEO of another major East Coast solution provider and VCE partner. "With VCE you're not dealing with one company, you're really dealing with four."
A source with knowledge of Cisco's UCS and data center sales teams told CRN that that type of deal-dismantling does happen, although he stressed it's "pretty standard" for large, public IT organizations with aggressive sales forces under pressure to please Wall Street quarter after quarter.
"When you work in sales for a company like Cisco, the pressure to deliver your number is all-consuming," the source said. "Cisco sales reps do hear from [high levels] about working toward VCE goals and making it work for VCE, but as of now there aren't really specific incentives in place to do that. VCE is not the priority. Selling UCS is the priority."
Other Cisco reps agreed that the companies' sales teams are often at odds during Vblock deals.
"EMC is unbelievably old-school bureaucratic," said a former director-level Cisco employee. "That's fine, but it's a whole lot of, 'Here's the list of [stuff] you're going to do for me, and I'm not going to give you a lot of details.' A lot of Cisco guys are saying, 'We don't want VCE guys in the meetings with us,' and what that means is, 'We don't want EMC guys in the meetings with us.' Every single communication ends up in frustration."
A NEW LEADER
Stewardship of VCE now falls in large part to Akkiraju.
Akkiraju, a 19-year veteran of Cisco, was most recently the networking titan's senior vice president and general manager, Services Routing Technology Group, where he oversaw Cisco's wireless networking business unit, application delivery business unit and enterprise routing businesses. He was best known, however, for his role running Cisco's service provider businesses, including heavy involvement with Cisco's carrier-grade routing platforms and major releases from Cisco's 800 series up through its current CRS-3 Carrier Routing System.
In a brief interview with CRN in September, Akkiraju said all of VCE's stakeholders are more committed than ever.
"There is a tremendous amount of joint planning that happens between Cisco, EMC and VCE -- an established process where we meet on a regular cadence," he said. "I think we can still reduce the complexity of the engagement model. This is something I'm 100 percent committed to."
Akkiraju said Cisco, EMC and VCE conducted a rigorous interview process for the VCE CEO job. It wasn't clear exactly when it was decided VCE needed a CEO again, he said, but as VCE approaches $1 billion in revenue, it was communicated that it would make sense to have one.
"As I was talking to Michael, John and Joe, the objective was to take the good work we have done in the market so far and continue to build on that," he said.
VCE and Cisco insiders say that Akkiraju's appointment is curious, not only because VCE has once again filled the CEO job that Capellas had but that the CEO came from Cisco -- the first instance of a major Cisco executive taking a leadership role at VCE, which has been overwhelmingly controlled by EMC people.
"That is an interesting one," said the former Cisco executive and VCE launch team member. "There's nothing that would have pointed to him getting that job before, or any Cisco person, other than Cisco wants more oversight of what happens at VCE and wants a 'Cisco way' person there."
Akkiraju said VCE is aware of its go-to-market issues and continuing to fine-tune the model with channel partners.
"I acknowledge that we will need to listen carefully to our partners, and I'm 100 percent committed -- the partner strategy for me, is top priority," Akkiraju told CRN. "We are aligning very closely at the senior management level and making decisions to ensure we get past these challenges."
TOMORROW: MORE ON THE GROWING CISCO-EMC RIFT
PUBLISHED OCT. 16, 2012