Sources: EMC Planning Major Reorg, May Form New Cloud Business Unit

EMC is planning a major corporate re-organization that may include the creation of a new business unit dedicated to cloud computing, CRN has learned.

EMC, which reportedly broke off long-running merger talks with Hewlett-Packard recently, wants to establish a formal cloud business unit to match similar initiatives from rival vendors, sources familiar with the company's thinking told CRN this week.

While the details of the re-organization haven't yet been finalized, sources said EMC intends to move its Enterprise and Mid-Range Systems Division, which includes storage products like VMAX and VNX, into its Data Protection and Availability Division. That unit is led by Guy Churchward, president of core technologies at EMC.

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Brian Gallagher, president of EMC's Enterprise and Mid-Range Systems group, is seen internally as the most likely candidate to lead the new cloud business unit, sources told CRN.

Sources said the EMC re-organization will not include layoffs, though there might be some casualties at high levels resulting from the mergers of the groups.

EMC didn't respond to a request for comment.

As part of the re-organization, EMC will be moving people from different groups together so they can work more closely on the various technology solutions the vendor sells, the sources said.

This would be a welcome move because it could speed the process for getting deals done, one EMC partner told CRN.

"The problem right now is that to sell a comprehensive solution takes a lot of people across all these lines," said the partner, who spoke on condition of anonymity. "It's inefficient and sometimes causes friction due to internal politics and competition. I expect to see more consolidation, so that we have fewer specialists and less overlap."

EMC's plans for a new cloud business unit are still in flux and could change, according to the sources.

The original thinking was that Gallagher would lead the new cloud business unit, but many of his top people are now trying to get jobs in Churchward's division, sources with knowledge of the matter said.

EMC earlier this month acquired Cloudscaling, an OpenStack startup, in a deal Bloomberg reported to be in the $50 million range. Cloudscaling was supposed to be part of the new cloud business unit, but it's not clear if that's going to happen, sources told CRN.

"The thinking was, if EMC was serious about forming its own cloud business unit, and was making deals to fill it, that would show they're serious about forging their own cloud path and parting ways with VMware," said one source.

EMC, which owns 80 percent of VMware, is under pressure from activist investor Elliott Management to sell or spin off VMware, but EMC has said it has no intention of doing so.

EMC is holding a cloud event on Oct. 28 in Boston where it is expected to talk more about its cloud strategy and the Cloudscaling acquisition. But sources said EMC doesn't plan to talk about the re-organization or its plans for a cloud business unit at the event.

EMC partners told CRN forming a cloud business unit would help EMC establish some much-needed credibility in the cloud market and place the vendor on more equal footing with its rivals.

"If EMC is going to get serious about cloud it's going to have to have its own M&A and R&D, to get respect inside the company," one source told CRN.