Q&A: EMC CEO Joe Tucci Takes On Dell, NetApp, All-Comers With SMB Storage Blitz

EMC CEO Joe Tucci, who celebrates his 10th anniversary as CEO of the storage giant with this year, spoke with Everything Channel Vice President and Editorial Director Kelley Damore and CRN Editor/News Steven Burke about a wide range of issues, including his plan to make the storage giant number one in the SMB market with the VNXe/VNX line, EMC's relationship with Dell, and the bullying of VARs by competitors. Here are excerpts from the exclusive interview with the straight-talking, hard-driving CEO.

Talk about the new VNXe line and what it means to EMC?

This is the first time in our history we have had a significant lineup of really great products aimed at the SMB. I think the new things we are really going to bring to the table are the simplicity, ease of use and the affordability and value.

How much of EMCs business could this kind of volume business be three to five years from now?

The SMB is a very significant market. And without a doubt it has got the fastest growth rate. So to me those are the exciting two pieces. It is a huge market whether it is another 25 or 30 percent, something in that order, where we haven't been. When we enter a market we try to become number one. That would be significant for EMC.

Talk about the competition. Who is going to get hurt the hardest with EMC coming into the SMB and throwing your weight around?

There is no shortage of competitors there. Obviously we are going to make sure this is the simplest array to configure, to install, to use. We are going to make sure that our hallmarks are there: functionality, performance and reliability. And I think we will surprise, hopefully competitors and definitely our customers, with the price points that we will set.

The other thing, which I know your readers will be very interested in, is our reliance -- and I use the word very carefully -- is our reliance on the channel here. This is a channel product. Virtually all of the products we sell here will go through channels.

Talk about the move from the traditional mid-market space into the volume segment and what it is going to take to be successful?

In that end of the market, probably the most important things for customers are: Is this easy to use? Can it do my job? Is it reliable? And what is the cost? Partners need all of those metrics. And then the other thing to be fair is they want to make a margin that meets or exceeds their business model. So what I am going to tell partners is that they are going to hopefully be pleasantly surprised at the amount of money they can make by selling this product.

Let's talk about the impact of the product on certain competitors starting with HP?

Obviously this is a unified product. This is a product that does NAS, SAN, iSCSI or Fibre Channel. So it is a unified product which is important. The scalability, the breadth of the line are important.

Partners selling multivendors' solutions look at NetApp and Dell as simpler and easier to deal with than EMC and less channel conflict. What is your message to those partners?

I don't believe there is anything out there easier to use. So that is the real surprise. It is easy, easy to install, easy to use, easy to upgrade, add more drives. Then you talked about channel conflict. I just told you we are going to ship virtually all of these products through our channel. This is a channel product. And our sales force will be actually comp-incented to make sure it goes through the channel. We are going to remove those two obstacles versus those kind of competitors and we have a unified product which has a benefit.

Next: Tucci Talks About The Dell Partnership

How big is this announcement for the future of EMC?

It is very important. There is a huge portion of the storage marketplace that we don't play in. And it is the SMB market. We are in commercial. We are in enterprise. We are in global. We have a great position in each of those three. And that brings us down to the fastest growing area of storage.

Talk about the Dell partnership.

In this product line there is no Dell partnership. In any conversations we have had with Dell, Dell will not take up this partnership. They will not resell this product.

How big a change is that for partners?

I think it is a great opportunity for our partners. Obviously some channel partners -- maybe all channel partners -- would see Dell as a competitor. Here we are saying -- 'Don't worry about it -- Dell is not getting this product.' It sounds like I'm saying, 'You can't have it, Dell.' Basically it doesn't fit their strategy. It doesn't fit our strategy.

Talk about what percentage of sales is coming from that Dell relationship now and what you see it being three years from now in the SMB?

It is a fraction of what it was -- a small fraction. I think there will always be a relationship between the companies and there will be some products. But the core of the (EMC) family has got to be a competitor to Dell's storage products. Part of the (Dell) PowerVault plays there. Most of (Dell) EqualLogic plays there.

How does this announcement change the character of the company?

I don't know if it changes the character of the company. I think it basically takes our strategy and brings it to a big important market. It takes a strategy which we have had for a while. Let's face it, not too, too many years ago channel partners would have rated EMC very, very low. We are getting good ratings now. You guys rate us well. So obviously we have come a long way. And there is more we can do. We are not satisfied. So this product here is going to be a channel product, virtually all of it.

Where do you think the market is going and what are the opportunities for VARs in the next couple of years?

If you look at the heart of the products, basically more and more of it is using a lot of the technology that Intel is providing the market whether it be the server side or the storage side. And then of course you use different types of drives -- everything from SATA drives to Fibre Channel or SAS drives to solid state drives. So basically we are using standard industry components. So the real secret sauce and the way you create differentiation comes with the software.

How important is Unisphere 1.5 to this SMB effort?

It is hugely important. It gives you a way of managing unified storage whether it be iSCSI, Fibre Channel or NAS (Network Attached Storage) and different tiers of drives. You are automating a whole set of FAST (Fully Automated Storage Tiering) technology with Unisphere. It takes a lot of the complexity and masks it.

Next: Tucci Talks About The Cisco EMC Acadia Joint Venture

Talk about the sub-$75,000 committee you set up to make sure the whole company embraced this VNXe SMB effort. Did you have to use some of your weight to make sure it got done?

There was a great realization around the table without much cajoling at all that to be successful here was not only a product issue; was not only a go-to-market issue; was not only a marketing issue; was not only a services issue. It is all of those. You want to basically create a new experience for customers in that class where they don't have IT staff. You get up in a huge global account and they have got almost small departments that can do all of those things: people that focus on management, virtualization, management software, servers, storage, etc. You get in these little businesses, maybe half of one person, has got to do it all and therefore you have to got to make it a simpler experience for that person to bring this altogether and get the benefit for his or her company or small enterprise.

Are you happy with Acadia and how many deals have been done there?

Well, it is growing incredibly rapidly. The pipeline is huge. So are you happy? Incredibly happy with the progress. Obviously, our goals and our vision are big. So you are never satisfied. But I am incredibly happy with the progress we have made. There is a lot more we need to do whether it is (Cisco CEO) John Chambers, whether it is myself or (Acadia CEO) Michael Capellas. We have some big goals set out for VCE. We have both said publicly while we have not given out any numbers yet, we are saying that business is ahead of the plan that we set for it, which is pretty darn aggressive.

Will you look at doing a reference architecture similar to the NetApp FlexPod so partners have something to compete with NetApp there?

The analogy I use is a menu in a fine restaurant. On one side of the menu you have your prix fixe where it is perfectly matched with a set of appetizers with the main course, with the desert and with the wines. And then on the other side of the menu there are very good selections that we have also pre-tested. And you can put those things together. Obviously the storage is us. But pick your server. Pick your network. Here is your storage and here are the configurations we have tested. So, yes, we have both. And Cisco has both.

The major tenet of all things future is to give customers choice. So here we are giving customers two choices. Here is the prix fixe which is the VBlock. And then on the other side we are saying we are going to support you and here are a whole set of permutations and combinations which we have tested that we know work. FlexPod is just a word for that. It is a fancy word for the pre-integration and testing that this industry has been doing for a long time.

Are VBlocks limited to the Fortune 500 or Fortune 1000?

I think you'll see VBlocks come down. And customers are going to buy both ways. There is no doubt in my mind. There is no doubt in my mind. What is growing faster now by definition is the VBlock side which you would expect. But in terms of the volume, it is still mostly the ala carte side.

Next: Tucci's Plan To Be Number One In SMB

Have you set any restrictions on EMC employees going to Acadia?

In terms of going to VCE, (Acadia CEO) Michael Capellas has growth plans and hiring he wants to do. And most of that hiring because it is in the best interest of Cisco, EMC and Michael is to hire from outside, to bring other very good talent into the company. But obviously Michael is free to draft from EMC or to draft from Cisco. And obviously when that happens there has got to be a conversation and of course some individual choice plays there too. But the majority is planned to happen by hiring great people, talented people from the industry. But obviously 100 percent of it in the beginning was seeded pretty much by either EMC, VMware or Cisco. Now the vast majority is being hired (from outside those companies). And by the way it is having no problem attracting some tremendous talent. Of course that makes us stronger because you keep the great talent you have. So we did the right thing. We seeded it. There is still some flow. That makes it strong. And then of course you go get the best and brightest from the industry. And don't settle. Go get the best.

When you go into a market you want to be number one. Talk about that goal going into this SMB market with VNXe?

Absolutely. You can't do it day one. You can't do it year one. But just like we did when we entered mid-tier our goal is to be number one. It took us a couple of years to accomplish it. Two to three. I am not giving any time frames here. But that is going to be our goal. If we are going into a market we want to be the largest. It is a very fragmented market -- a very fragmented market.

What does that mean?

If you look at the players as you said Dell has got a piece. HP has got a piece. IBM has got a piece. Sun had a piece. NetApp has a piece. A lot of little players. That is where they kind of started. Dell now bought Compellent. A lot of Compellent was there. Dell bought EqualLogic. Virtually all of EqualLogic was there. HP bought LeftHand. That is where they were. And on and on and on and on. So it is a very fragmented market. There is nobody that has that massive leadership share. So it is the kind of market you can enter and reach that goal.

How big an investment are you making here?

We haven't given out any numbers, but it is big. It is very big. Two of the very big investments we are making in go-to-market next year are: VCE (Virtual Computing Environment) and the S-75 (Sub-$75,000 product assault with VNXe/VNX) as we call it internally. S-75 is the program. I have no doubt in my mind that you can have the best product and lose. You can have the best marketing and lose. You can have the best channel program and lose. You can have the best service model and lose. Where you win is have the best, best, best, best. Four bests. You with me? That is what S-75 does. It attacks it holistically. It attacks all those areas I talked about: sales, marketing, service, channels, encouraging our own direct sales force to sell through the channel.

Next: Tucci Talks About Proving The Skeptics Wrong

What do you say to the customer or partner who says EMC can't change its stripes and be competitive in the SMB market?

(Laughs) I always have this one belief in life: that over time you come to love skeptics. They are skeptical that EMC could do this. That is fine. He or she is that person from Missouri that is kind of 'I don't think so. Show me.' The cynics are the tough ones. I don't think there are a lot of cynics out there.I think there are lot of skeptics. Which is good. Which is really good. Because when you win over a skeptic you have really created a loyalty. And I love doing that.

By the way, studies have shown that almost when you do anything in life the vast majority of people are there as skeptics. There are a few cynics. A few loyalists. And then you have got these skeptics. And the secret in life for success is how many of those people from Missouri can you show? So that is OK with me.

When you look at the challenges and opportunities what keeps you up at night?

Is this where I'm supposed to say 'I sleep pretty good?' There is plenty of opportunity out there. The ball is in our hands and in our court. We have the ability to govern our own success.

Is there any goal on direct sales versus channel sales for the company as a whole in 2011 or 2012 as you look out into the future for EMC?

With this product set it is virtually all channel.

But EMC has never gone over 50 percent sales through the channel?

It depends how you count. There are a lot of assists. The higher up you go the more pulling we do. But it is very rare where we don’t have some kind of channel partner working with us. It could be an SI (systems integrator) or a solutions partner on a big enterprise account. Channel is a broad term. When you apply it religiously and look at the sub-$75,000 marketplace, almost all of it is channel.

Will more than 50 percent of the company's revenue be through the channel in 2011?

We might even be there today. I haven't looked at it that way. I would say in the majority of our sales there is some kind of partner involved. It might not be the classic channel the way you describe it. But it certainly is very heavily channel or partner assisted.

Has your channel philosophy changed since you started at EMC?

Absolutely. We used to do everything direct. I mean we were 100 percent direct.

Talk about your channel philosophy now and what is the future for partners who want to tie their business tightly to EMC?

If I had partners right here in the room I would tell them they are going to have a great experience! In other words we are going to make sure that we are a good partner. We are a loyal partner. We are going to make sure we give you products that are hyper-competitive in the market. And we are going to make sure that we understand your goals for margins. And we are going to make sure that we take your goals, our goal and make sure that you get the margin targets you need to be successful.

Next: Tucci Talks About The 2011 Economic Outlook

Talk about your mood going into 2011 with the economy?

Most of the forecasts that you read and the surveys that have been done by financial analysts and industry analysts show decent growth for next year. You are seeing positive GDP (Gross Domestic Product) growth globally. You are seeing IT growth in excess of GDP growth. So that is good. I think barring a horrific act from outside that is uncontrollable, an act of nature, an act of terrorism, I think we'll be okay.

Are you adding inside sales for this SMB push?

Yes. It is actually a very small investment on what you would call the classic direct sales side. For this program it (the investment) is much more in inside sales, marketing and things we will do as an off-shoot of marketing like lead generation and messaging. It is expanding our people calling on, supporting and servicing channels. We need a few more product experts out there. Those are where the investments are going. Where they don't go is to a direct territory quota (sales) rep. Now we are going to increase that also. But that is for the commercial, enterprise, global business.

You have been here 10 years. Is this the strongest product set you have ever had?

Absolutely. It is the strongest lineup we have ever had.

So when you look at the technology lineup what is next?

I do believe that private clouds, public clouds, and hybrid clouds are where it is going. So assets to make that (happen) are going to be big.

It is all about, 'How do I transform what you are doing today in your data center giving you some of the advantages that some of these big cloud providers get, and how do I create a whole set of service provider cloud capabilities using those exact same set of technologies.'

And, 'How do I give customers what I think customers will want,' which is a hybrid (cloud) where they can keep the applications they want to keep for a whole host of reasons with others outbound in the public cloud. The company that can do that the best is going to be a big winner.

Do you see EMC doing hosting?

No. Never. Obviously we do some of it because we do PC backup with Mozy. But we are going to work with service providers. This is the key message that you can get to your readers. You have to decide what you are going to do in life and what you are not going to do in life. And you need partners. Any company that thinks they are strong enough to do it alone is probably a good (stock) short. You need partners. And we believe that service providers are core partners. Therefore, if I believe that, I shouldn't go compete with them. And these channel partners by the way -- all channel partners -- are key and I don't want to compete with them. I want to make sure that our model (assures) that we can do well and they can do well.

Next: Tucci Talks About What Separates EMC From The Rest Of The Channel Pack

What differentiates EMC's channel philosophy from the competition?

First of all it's that visceral belief in what I just told you. But underpinning that is you have got to make sure that they can make a buck. That they can make their profit goals, their margin goals. You have got to help them. You have got to give them products that their customers want. Make their selling job easier which is where the ease of use comes in and the functionality and the performance.

There is a trend toward companies pushing for exclusivity, pressuring VARs to sell a single vendor stack. What do you think about that?

A hallmark of this next wave of IT -- whether it is big, medium or small, is choice. I just can't say that word and then say take choice away. So I think this bullying of VARs and channel partners is just yesterday's newspaper. And they are not going to stand for it. And they don't have to stand for it with vendors saying if you take on that vendor you are going to be cut-off. It is just not the way the world is built. It is just ultimately a losing strategy.

What is amazing is how many companies are doing just that. What is your pledge to partners with regard to this issue of choice?

I promise I am not going to cut off their choice. I am going to try to win a bigger share of their business. How do you do that? You make sure you help them make margin that pays their rents and people, and gives them a profit. You have got to make sure the products are ones customers want. That is where ease of use and installation comes in. You have got to be easy to deal with. Do you pay them on time? Is doing configurations with you a nightmare or easy? There are a whole set of things. It's all about being easy and fair to do business with.

What is your advice to partners having trouble monetizing the cloud?

It is a journey. My advice would be: don't forget it is a journey. How different is 2011 going to look versus 2010? It will progress, but still most customers will buy the exact same way they bought last year. Maybe they will try one or two (cloud) applications. It is a journey to the cloud. You have got to understand and feel it and approach it in phases and meet customer's needs every step of the way. Customers are not going to say I will be there tomorrow. It is a multi-year journey.

Next: Tucci Talks About IT Automation

What do you see from customers in terms of how they buy IT versus a capital expenditure or operating expenditure?

Obviously there is a lot going on there. But at the end of the day I think the bigger potential savings in IT as a service is around automation.

More and more you are going to describe what you want done and you are going to actually let the system do it rather than having to manage every element of a system that you manage today. So it is basically how do you go from a highly managed environment to a highly automated environment. That will save you much more money in op-ex than it will cap-ex. But you will save in both. Your infrastructure costs will go down. Your operating expenses, which is where most of the money is, will go down even faster. And that automation by the way is almost a separate conversation from do I take it as a capital expense or an operating expense?

What is your vision today versus when you came to EMC?

It's vastly different. When I came into the company we were high end storage. That is still a great market and something we are still proud to have leadership in.

Basically if you take it from the top it is, 'How do we provide the virtualization and data center OS?' whether it be a small data center or big data center, to take this journey to IT as a service and automation saving both cap-ex and op-ex.

How do we make sure that information is stored properly, protected properly and secured properly. So we are in information storage, information protection, information security and then the newer thing is how do we help people get value and intelligence out of that information which is what we do with our content management business and Greenplum on the data analytics side. It has kind of got a front end and a middle so to speak. And then to make it complete you need partners. You need solution partners. You need channel partners. You need service partners.

So ten years out what is this company going to look like?

It will have somebody else running it. If we do it right, this IT-as-a-service wave, which is called cloud computing, like any other wave, will have winners and losers. What has happened in these other waves is companies have tended to win big and lose big. It is my job to make sure I position it for my successors to continue on this wave. Not that I am going away soon. But sometime in the next three to five years that will have to happen. I think if we ride this wave well I think hopefully we could be one of the most important companies associated with success in this next wave.

Next: How Good Is The VNXe Technology?

If you look at VNXe there are a lot of moving parts and you had the sub-75 committee to make sure everyone was on the same page. Talk about that.

The S-75, more than a committee, was a working group of people from our product division who did the VNXe, the people from the go to market who had to sell it, the people from service and the people from marketing. And we looked at other things too like how do we make this whole thing simpler? How do we make sure that customers and our channel partners get a great experience with us.

What is the biggest moving part you are worried about in terms of execution here?

At this stage, having sat through a number of reviews, I think the people we had working on this did a phenomenal job.

You have bought a lot of technology over the years. How good is this technology?

You have got to remember our model. Right now we are spending about $2 billion a year developing technology. And then our model is we have been spending on average about $2.5 billion a year buying technology. So you put that together it is a lot of spending on technology. With that kind of spend it is my view I have every right to demand that we have the best.

Why was this internally developed versus bought?

When you want unified it is incredibly tough (to buy). You have got to have the NAS, ISCSI and SAN working, any of those flavors, or all three flavors, at once. You have got to have unified management. There was no company out there that existed (that we could buy). So this is something we pretty much had to do internally.

How big a breakthrough is it for EMC to have a unified end-to-end storage story? That has always been a big criticism of the company.

We have what I would call semi-unified and arguably we have unified today because the missing piece was Unisphere. In the past you managed the storage element separately from the NAS elements. We might collect them on a screen for you but basically you could tell they were two different systems and you had to get expertise in both.

The storage we have today is truly unified. The piece we were missing is Unisphere. In a way what we were missing was the overall simplicity.

You have a lot of mid-range partners that still complain about channel conflict. What is your philosophy on channel conflict?

Is there any company out there that has absolutely, positively no channel conflict? Even companies that are all channel (have channel conflict). Companies that we have bought that are all channel have partners (that complain about channel conflict). My point is: where is it on a noise scale?

There are always things you need to do better. You need to always be listening. You need to never be satisfied that you are doing a good enough job for your channel. So where is it on a noise scale? Is it high? No good. Is it medium? No good. Is it low? If it is low and you are listening to it and paying attention to it, to me that is okay. None is a good goal but probably an unrealistic goal. Even when you are all channel you can get overdistributed. And then the channel conflict comes not with you but with each other. So I have been around a long time and I have never heard the perfect word said about anybody. So the question is: have you got it low and are you listening?

I think we have brought it down a lot. And I do firmly believe that this S-75 program will bring it down much lower. And I promise -- and hopefully you print this -- the channel partners that we will be listening. I will be listening. And the company will be listening. We don't have it perfect, but we will work with you.

Next: Tucci On EMC's Technology Acquisition Pace

How committed are you to these channel partners?

One hundred percent. It is 100 percent. We can't do it alone. There is no doubt in my mind.

Can you talk about when you first took the helm at EMC and reflect on that a little. What is the secret sauce that has driven the company to this point?

It is never being satisfied. It is getting great people. It is getting those great people to work together as a team and understanding that you can't possibly, possibly even come close to going it alone.

I took a lot of heat in 2001. Was that my fault? I mean the whole friggin industry collapsed. Obviously I was the new guy here so I got a lot of the blame. Man, I must have been really bad, right? You have got to have a lot of self confidence. I said, 'Well, they are going to write what they are going to write.' And it is probably fair the company was doing so well and all of a sudden it is not doing so well.

If it was only EMC then I should have been crushed. But obviously the board stood behind me because it wasn't only EMC it was virtually almost every big tech company, especially the ones that got over-inflated P/Es, which a set of them did. And then of course when things are going pretty good like they are going today I don't get too high. I don't get too impressed. You with me? You have got to provide that bounce in life. And people watch. And if you have that bounce then the company hopefully gets that bounce. If you continually get too low, too high, too low, too high, you kill the damm thing.

Technology Innovation is an EMC staple. Talk about that that.

Look, the one thing that I always say is we have got to have distinctive products. There is no substitution for that. None. And that is where it all starts. We are a product company. And I just told you how we get our great products: we innovate. That innovation can come from EMC through the $2 billion we invest in R&D. And that innovation can come from the great things we see out there that we acquire. That innovation can also come from companies we partner with. That is it. That is our innovation engine.

Will you slow down that technology innovation engine?

No.

Will you acquire companies at the same pace in 2011?

We have had years where we have not done that much. And this year was a big year. We have had years we spent almost $4 billion for acquisitions. And there were years we spent under $1 billion. I promise you there will be acquisitions. I promise you the pace won't change that much.