One-on-One with Gary Bloom

VARBusiness

VB: Was there any real life experience after 9/11 that influenced Veritas' technology strategy going forward?
Bloom: Oh, absolutely. There was a phenomenal learning experience in the recoveries that we did after the Sept. 11 tragedy, Virtually every one of the recoveries that we did, over the 100 we serviced, every one was tape-backup related. We found out all kinds of things. Some [companies were backing up to devices that were no longer manufactured. So you need the capability to recover with the device change. Also, you need the capability to rebuild the baseline server. There is an enormous gap from the time of the disaster to the time we could start the recovery. [Customers had to get and load the machine. They had to load the operating system. They had to put all their software on it. They had to connect all the devices. Then the recovery could start. That led us to purchase the base metal restore technology. This was the Kernel Group that we acquired at the end of the year. So when a server is destroyed, it allows you to build the whole environment and recover the whole environment in a matter of minutes. The answer is: we learned a tremendous amount of lessons.

VB: There is a difference between companies that have an interest in disaster recovery and commitment to it. Since 9/11 how many customers have you seen that have crossed that line?
Bloom: The reaction in the market is exactly the way I anticipated it. The low end of the market, the SMB user and below, are throwing money at the problem. They are going to say, "I'm not prepared I will immediately go buy more product." We saw an immediate uptake in our Veritas Backup Exec product. That product goes broadly through the channel to small businesses. It's what I call panic buying. It's no different then when there is a virus, everybody runs out and buys new security software. At the high end of the market, the enterprise customers, they are not going to throw money at the problem. They know they can't fix the problem tomorrow. So they are going to architect and design a proper solution, and over a period of 12 to 18 months start to implement it. I think we are just getting into those implementations.

VB: What are some of Veritas' strengths going into this new age of storage management?
Bloom: The fact we have a broad set of technologies that runs on virtually every major platform out there from Linux to Windows 2000. It is a broad set of offerings from the storage management through the backup and disaster recovery technologies all the way into the high-availability requirements.

VB: What are some of Veritas' weaknesses at this point?
Bloom: The economy. The only thing holding us back right now a good economy. Last year we had great financial results with 24 percent revenue growth, which is by far stronger than any other technology company. Going forward what you need is sustained financial strength, which we have. We are in a great cash position. But in a better economy we could be even stronger.

VB: You don't think Veritas has any technology weaknesses?
Bloom: The weakness that might have been out there was we did not go far enough up the stack. We were application agnostic. We went up to database level but we stopped there. We didn't get to the application server and the applications themselves. We solved that problem. The other one would be, are we going to work quickly enough to put the intelligence of storage in the fabric of the network? And [at Veritas Visions 2002 we announced 19 different partners that we are doing that with. So we believe we are filling all the gaps and none of them were particularly significant to begin with.

VB: With all the new players jumping into storage software, who do you identify as your most formidable competitor?
Bloom: We think of competition as twofold. One is all the startups. There are literally hundreds of startups. Investment into storage software is very high. What is difficult to determine is which will succeed and which will fail. So, in a way, you have to partner and watch all of them. The question is not so much what [startups do independently but what those technology assets are worth if owned by someone else who wants to compete with us more heavily. The second would be EMC. Not so much because they have a software strategy but because of their market share. They have a footprint with their installed boxes in so many accounts. Just like we have an advantage in the backup market with a very high market share, they have an advantage in the installed base for hardware."

VB: In one of EMC's recent announcements for their software strategy, they listed some companies in support of WideSky. Veritas was absent. Why?
Bloom: We don't see any need to support WideSky. We are already an open independent software vendor that supports a broad range of hardware devices. If you really look and dissect their announcements for partners, they essentially don't have any storage suppliers partnering. They don't have Hitachi. They don't have Sun. They don't have IBM. They don't have HP. If you don't have the storage providers, how much industry momentum is there? I'll never say we won't support it. It is just right now there is not enough industry momentum behind WideSky that suggests we need to support it. The real question about WideSky is, will anybody else use it? Is Hitachi going to use it for their storage architecture? Is IBM going to use it? I don't believe they will.

VB: In a recent interview with VARBusiness, EMC CEO Joe Tucci said he intended to make WideSky a Java-like standard. Do you trust EMC to keep this promise?
Bloom: This is the first time I've heard that. I trust they will keep up the marketing rhetoric in their attempt to establish that promise. But I don't trust at all that they will actually deliver on it. What happened when Java was announced? There was massive industry support. All the application server providers, the database suppliers, there was very broad support for the Java interfaces. If you contrast that to EMC, they don't have that broad industry support for their announcement. So the uphill challenge they have is incredible.

VB: You are in an interesting position now. In the past, you were purely an ISV and your partners were selling hardware. It was a natural partnership. Now, these hardware vendors are coming up against you. How are you diplomatically going to handle this?
Bloom: Ultimately what all the vendors are trying to do is meet customer requirements and meet the demands placed on the vendors by the customers. So take Sun, for example. Sun for 8 to ten years has been shipping our file system, our volume management technology, they've been selling our clustering technology, until recently. What are they going to say to their customers? "No, don't buy that stuff. I was just kidding for the last 10 years. I really don't think it's any good." The same for EMC. They continue to sell our technology today. While all the marketing rhetoric is out there, the interesting fact is EMC only competes with us with one product: replication. They are virtually non-existent in the backup market they have share that does not register separately, it's in the "other" category. So we are a solution for EMC storage for backup. They don't have any clustering solution. Volume Management file system, a lot of that technology is still ours. So at the end of the day where do they compete? In replication. Their view of replication is to copy from one EMC box to another. My view is to copy from one EMC box to any other device maker.

VB: Can you assess the atmosphere surrounding IT budgets today?
Bloom: I think they are relatively constrained. I think in all cases IT managers are trying to do more with less. They are trying to get more out of their physical assets. They are trying to get more productivity out of their people. And they are trying to get more results from their existing capacity and their existing applications. I think one of the reasons why we had 24 percent revenue growth last year is because we allow customers to get better utilization out of their hardware and we allow their IT staffs to be more effective.

VB: Veritas has a reputation of being expensive, is that going to hurt your future growth?
Bloom: I can't possibly be the cost problem in a typical storage architecture because software represents well under 20 percent of the total costs in a typical storage architecture. Hardware is 80 percent of the costs of the environment. We are a very small piece of the overall cost equation for most storage implementations. Secondly, we have seen very little, if any, pressure to discount. And if you don't see pressure to discount in this kind of economy, that suggests your products are fairly priced.

VB: You have said that these economic times are the worst you have ever seen in your career. Specifically, what makes it the worst?
Bloom: It's budgets. If you really think about it, it is simple. IT budgets were graded based on the optimism in the markets and optimism for growth as it portrayed itself in September, October and November. There were not very many companies thinking very optimistically about the economy in September, October and November. So once we get into a full-fledged economic recovery, IT spending will scale back upwardly. What I can't guess is when does that economic recovery come. There is a lot of conflicting data out there. It's an up and down thing. Until we see a sustained recovery, we won't see a sustained increase in IT spending. I do believe once we see a sustained recovery, there will be a pent-up demand for IT spending because people have been constraining their consumption.

VB: Do you think storage could be the one area that can take us out of the IT slump?
Bloom: I don't think IT will remove the economic slump. I think IT will help improve the speed. As we get into economic recovery, I think IT spending will help sustain the recovery but it will not in itself create a recovery.

VB: But wasn't it technology that pulled us into that huge boom?
Bloom: The huge boom or the huge fall? Remember what you are dealing with is historical trend lines over the last two to three years that had a false bottom. You really don't know what the trend line really was because the trend was confused by irrational purchases and irrational equity evaluations of high technology companies. And that has gone away. If you do a trend line back and eliminate the last two years, what would the trend look like? We don't look at that weak relative to the margins of 1998. We look really weak relative to the market in 2000 and 1999--at the peak of the dot com era. If you factor out the irrational exuberance around the dot com era of technology and bring it back to normal, it looks like a more normal market you would see in any other industries. And the way customers are buying has changed, too. They are not buying as much forward capacity because they are not as optimistic about the future so they don't buy as much as far ahead as they used to. Gartner calls it just-in-time buying. And I agree with that, they buy it as they need it when they need it.

VB: What are some of the primary things you learned at Oracle that prepared you to be a CEO at Veritas?
Bloom: It's endless. Most of my professional career was at Oracle so I can attribute most of my leadership capabilities, most of my knowledge of different clients' business to my experience at Oracle. That is the key thing it gave me a breath of experience. I really had an interesting opportunity to be exposed to virtually every aspect of the software business. And I had that opportunity at an incredibly large scale. I managed somewhere around 16,000 to 18,000 people, which is three times the size of my whole company here.

VB: Do you miss working with Larry Ellison?
Bloom: I worked for Larry for 14 years. I worked directly with him the last five. I learned a lot from him so I'm not one of the industry pundits out there criticizing every move he makes. Everybody has their flaws. But he was an entertaining guy to work with. I would not say I miss it. I'm off running my own company. And there is nothing more inspiring that running your own enterprise.