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17 pages

Overview

Industry analysts tend to avoid superlatives. However, Neuralytix believes that EMC’s messaging for 2014-2015 precisely pinpoints the contemporary needs of users, and represents the most relevant vision in the industry today.

This is perfectly represented by a slide delivered by Jeremy Burton, President of Products and Services for EMC Information Infrastructure during his Area 53 presentation during EMC World 2014. Unlike all other IT vendors, EMC has recognized that the contemporary enterprises is less focused on technology, and more focused on business (instantiated through the insightful use of information). EMC also recognizes that while cost efficiency is important, the only way for enterprises today to generate value and competitive advantage is through top line growth. (See Figure 1).

Area 53

Figure 1: Area 53 Presentation (EMC 2014)

These distinctions are critical. EMC’s vision parallels Neuralytix’s viewpoints of the market very closely. With IT spend representing 2-3% of revenues (across the board for all verticals, all geographies and all enterprise sizes), any change, material or otherwise to the IT budget is inconsequential.

Consider the following example: for an enterprise whose IT expenditure represents 2.5% of revenue, if its IT vendors were able to save that enterprise 20% in its overall IT costs, it would only change the portion of IT spend from 2.5% of revenue to 2.0% of revenue. Now, to a $1B enterprise, that would represent $5M, not exactly petty cash, but on the other hand, an insignificant change from an accounting perspective. On the other hand, if that same IT vendor were to help the same enterprise improve their topline growth by 20%, that change and benefit to the enterprise would be material and significant.

It is the latter approach that EMC has taken, and one that Neuralytix endorses without reservation. That is not to say that EMC is abandoning IT and cost efficiency. Operational efficiency and optimization is always critical in any part of any enterprise. But in today’s world, investors and venture capitalists look for sustainable growth, enterprise value and competitive advantage.

True to its roots, EMC has taken the approach that it will help organizations manage their data, and support the generation of new value and competitive advantage through an agile approach to data management and data enrichment.

Increasingly, what is evident is that EMC’s core data storage products are presuming the data protection component, and moving towards the provision of internal data-as-a-service (daaS). Additionally, Pivotal, one of the EMC federated companies, will help the same organizations enrich that data to a point where it can provide internal information-as-a-service (iaaS). What makes this interesting is that EMC intends to do this without the ownership of a server/compute and networking company. Instead, this is where VMware comes into play, to provide the “glue” between data, information, and ultimately insight.

daaS and iaaS are critical to any enterprise’s future. Every company can be a daaS provider. Whether it is through customer lists or preferences, whether the data is provided in an anonymized way or in its raw format. Any corporation’s customer data has value to another corporation – irrespective of competitive forces. But even more valuable is iaaS where data is already enriched (and to some extent, prepared) for the consumption by another enterprise. A good example of iaaS is Bloomberg. Outside of providing daaS, such as stock quotes and volumes, it enriches the data with opinion, history and context to deliver iaaS.

Independent of server architecture or brand, and networking infrastructure (which Cisco is capably providing), it comes down to some very simple principles. Collect and protect data; enrich data for improved decision support and insight; leverage insight for innovation. The combination of EMC Information Infrastructure and Pivotal more than adequately achieves this goal. Augment that with VMware, that essentially abstracts away the server/compute and networking layers, and it creates a “perfect storm” of making any enterprise into an information driven enterprise.

The EMC Federation

In this year’s EMC World, there was a huge emphasis on the EMC Federation – essentially legacy EMC (EMC Information Infrastructure), VMware and Pivotal. Although EMC does not wholly own VMware, its majority stake in the company essentially has enough leverage to steer VMware wherever it wants.

Calling the solutions to be delivered by the federated set of companies by their initials (EVP), EMC (the federation) is clearly setting its sights towards dominating the world of data and information. EMC Information Infrastructure (legacy EMC), it already owns roughly one-third of the storage market; VMware, over 70% of the hypervisor, virtualized infrastructure market; and Pivotal is considered a leading distributor of Hadoop and an early leader with Cloud Foundry for new application development.

(Given that no Hadoop distribution vendor is public, and revenue figures are guesstimates at best, it is not possible to suggest a leader or any form of market share in the Hadoop distribution market, outside of social media sentiment and marketing activity.)

Neuralytix interprets the promotion of the federation as EMC “flexing its muscle” to the industry that EMC does not intend to be a storage-only vendor; instead it wants to be a data or information vendor. The distinction is critical. As a storage-only vendor, EMC would have no impact on how the data is served or used. It would not influence over whether the data it were protecting was critical, necessary or just referential. This is a problem that storage hardware only vendors are already facing. Despite storage making up 60-80% of the cost of many projects, the influence of the storage vendor is minimal. Instead, the data management platform provider (e.g. Oracle, Microsoft or in some cases, the Hadoop distribution provider) has a commanding position in decisions made about information infrastructure.

So, as a data and information vendor, EMC has a much better commanding role in any overall IT decision, and can influence broad information and technology strategies for its customers.

ViPR has bite and endurance

For EMC, ViPR is key. As ViPR pervades an enterprise, with its out-of-data-path management of data storage resources and capacity, it essentially becomes the master gateway for all data; irrespective of the overlaying application.

ViPR would be able to influence the level of protection, the performance, the capacity and even the format in which the data would be delivered. The design of ViPR is amazingly clever as it does not disrupt or “reinterpret” every data package that comes down the wire, as many other software-defined storage platforms do.

At this year’s EMC World, ViPR 2.0 took center stage. Attendees (and analysts) were encouraged to experience ViPR 2.0’s capabilities, flexibility and simplicity first hand through a hands-on lab. Neuralytix believes that this will accelerate adoption of ViPR 2.0 in EMC’s existing accounts. EMC is also taking a very inclusive approach to the marketing and vision for ViPR 2.0 by acknowledging that many of its customers have existing investments to protect, and ViPR 2.0 is able to manage third-party storage systems from day one: another key driver for accelerated adoption.

Inclusiveness for any vendor in 2014 is absolutely critical. Nobody wants lock-in. Although the deployment of ViPR 2.0 could be considered lock in, it is even more important that existing investments not be locked-out. Since ViPR 2.0 operates on the control plane, it can be argued that its deployment not only improves the value of existing infrastructure, but as software, it could be replaced in the future by alternatives.

ViPR truly reflects Neuralytix industry-adopted definition of software-defined storage. It provides the core capabilities of:

  • Automation;
  • Management;
  • Monitoring;
  • Orchestration; and
  • Provisioning.

EMC ECS – an on-premise S3

At EMC World 2014, EMC demonstrated EMC elastic cloud storage (ECS). Breaking it down a simplistic description, EMC ECS (previously codenamed Nile), EMC ECS instantiates ViPR 2.0 with just-a-bunch-of-disks (JBOD) to demonstrate the elastic nature of how ViPR 2.0 can manage, provision, and protect data.

It also showcases how ViPR 2.0 is cost effective. Since, enterprises can deploy ECS and create an on-premise equivalent of Amazon AWS’ S3. Users can integrate an ECS with its existing in-cloud S3 instances or integrated with one of numerous Atmos cloud storage providers.

The inclusion of the S3 protocol is a clever move on the part of EMC. It parallels ViPR 2.0’s embracing of third-party storage systems. The inclusiveness of EMC in its vision will be key for many EMC customers and observers. Neuralytix believes that EMC’s ownership of VMware, and how VMware manages partners and competition have had a tremendous impact on EMC’s open view of “co-opetition”.

Pivotal is pivotal to relevance

By spinning out Pivotal and its various assets, including Cloud Foundry, made absolute sense, EMC still needs to convey to its prospective and existing customers, why its customers should develop on the Pivotal platform versus other platforms.

In the Hadoop distribution world, Neuralytix recognizes five distributions of note: Cloudera, Hortonworks, MapR, Intel’s Hadoop distribution and Pivotal.

Neuralytix does not believe that Pivotal necessarily needs to win the Hadoop distribution battle. The war is more about how EMC customers can benefit from the data it owns, the data it can access, and ultimately how the corpus of data can be managed and leveraged for competitive gains. But that is going to involve more contemporary and evolutionary thinking on the part of the development community.

While Pivotal provides a strong set of data/information platform products that include Spring (previously owned by VMware), the challenge is not to compete against other Hadoop distribution vendors, but to enable EMC customers to envisage their success around Pivotal’s data, analytics and Platform-as-a-Service (PaaS).

Many of EMC’s customers have standardized on the Oracle relational database. Many of them also leverage SAP. Both Oracle and SAP offer data, analytics and PaaS solutions. In particular, Oracle offers a very complete stack from data, storage, network, compute, database, middleware and applications.

EMC can actually take advantage of Oracle’s competence in relational database, and encourage its customers to consider that a vast majority (Neuralytix believes over 90%) of the data for enterprises is unstructured. While Oracle provides the de facto standard in terms of online transaction processing (OLTP), it only makes up less than 20% of most enterprises’ data and workloads.

Enterprise Data Warehouses (EDWs) are increasingly considered expensive and cumbersome, when compared to the flexibility of modern NoSQL platforms.

This is where Pivotal will shine. Along the lines of Oracle’s relatively closed architecture, Pivotal can provide an open-source approach to managing and leveraging data and information to create innovative enterprise value.

Flash in the pan?

Even before EMC made XtremIO generally available, its competitors began heavily scrutinizing it (mostly without merit). Since its announcement and launch, almost nine months later, XtremIO has to compete against emerging vendors including Pure Storage, Nimbus Data, Whiptail (acquired by Cisco), IBM (through its acquisition of Texas Memory Systems), Fusion-IO, Violin Memory, and many others.

Neuralytix believes that a leading challenge facing XtremIO (especially when compared to its competitors) is the incomplete data services offerings. XtremIO has proven itself to provide industry leading performance and industry-unique differentiations such as scale-out flash.

Over the last 18 months, Neuralytix has been conducting a series of informal conversations with users either interested or have invested in all-flash arrays. Our observations indicate that for now, a majority of the users with whom we have interviewed have not identified scale-out flash as a priority. In fact, our observations suggest that many users interested in deploying all-flash arrays find the idea of Tier 1 storage replacement as the main driver, thereby requiring an all-flash array to have an extensive array of data services.

On the other hand, Neuralytix believes that XtremIO will appeal to larger enterprises that actually find the idea of scale-out paramount to their long term strategy. In this context, Neuralytix expects EMC to maintain a distinct leadership over and above all its other competitors in the near to medium term.

Performance is a moving target. From quarter-to-quarter, month-to-month, week-to-week, participants in any given market are likely to leap-frog the incumbent leader. Scale-out is unique, but market relevance on this feature is still being debated.

Neuralytix believes that EMC XtremIO and emerging all-flash vendors (especially Pure Storage) address different parts of the market. EMC XtremIO will address the larger/largest enterprises that see EMC as a strategic partner, while emerging all-flash vendors will address the lower-to mid- mid-market customer who seek a replacement of their Tier 1 storage infrastructure. These are separate markets.

Neuralytix believes that between now and 2016, there is insufficient supply (of vendors) to address the various demands of the total addressable market (TAM) for flash. The variety of solutions offered are diverse enough that flash vendors should see aggressive growth in their flash business year-over-year for the next several years.

Conclusion

So, given the superlative appraisal of EMC’s strategy and vision, what are the challenges to EMC?

The simple answer is execution. EMC has laid out a very comprehensive and cohesive strategy. Whether it succeeds is an operational issue. There is absolutely no question that EMC will continue to rely on its infrastructure business consisting of all its storage platforms – VMAX, VNX, Isilon, Data Domain, Atmos, etc. – for the foreseeable future.

As long as the information infrastructure (read: storage systems) remains the majority of revenues, EMC cannot dilute this business. That said, EMC does not need to. The mainframe and linear tape markets shows us that IT evolution is glacial at best. Neuralytix predicts that EMC Information Infrastructure (EMCII or EMC legacy) will contribute the majority of revenues to EMC well beyond our forecast period and well into the middle of the 2020 decade. We also predict that EMC will increase its market share between now and 2020. Observers of EMC should not be surprised to see EMC’s market share increase to 40% of the overall market by revenue (market share of capacity is not likely to be as aggressive).

Despite “ankle-biting” startups, including, but not limited to, Nexenta, Neuralytix predicts EMC ViPR will pervade across enterprises rapidly. Although EMC’s competitors, including IBM, is working hard to displace EMC’s dominance, Neuralytix does not believe that any other storage (or storage-related) vendor will catch up to EMC within our 5 year forecast period.

So, who will challenge EMC? Neuralytix believes that in the short term, EMC’s main competitor will be IBM, Nexenta (in partnership with Dell), and Amazon. However, none of these companies have the breadth of offerings proffered by EMC.

EMC will need to continue to build new brand loyalty. Storage users have long memories. In recent interviews with storage users who manage competitive storage systems, many of these storage administrators have not had an opportunity to experience the improvements EMC has made in the areas of self-service, support, channel and the overall “more loveable” EMC of the 2010’s.

EMC will also need to provide a much more cohesive story between all its various business units, in particular, the Information Intelligence Group (IIG), which includes Documentum, and RSA. For 2015, Neuralytix advises EMC to look towards presenting a data/information platform strategy that encompasses all elements of EMCII.

Neuralytix believes that EMC will maintain its leadership in the areas of converged infrastructure (through VCE and VSPEX); traditional/hybrid storage systems; flash storage; security (through RSA); virtualized server and end-point infrastructure and datacenter management (through VMware). We also believe that EMC will continue to be a leading vendor of backup, archiving and storage software. We believe that EMC should invest heavily in its IIG to compete against Symantec, and emerging eDiscovery vendors. IIG, especially Syncplicity, has an opportunity to become a new de facto standard in data mobility.

Neuralytix is comfortable with the overlaps in the solutions that EMC currently offers. We expect over the next three years, that EMC will normalize its portfolio while satisfying and supporting its extensive installed base.

From a messaging and strategy perspective, Neuralytix finds it extremely hard to fault EMC. Ultimately, it will be up to execution. Presently, EMC dominates its markets, in part due to the failure of its competitors. The final assessment of EMC’s strategy will come by way of the Asia/Pacific geography, in particular the geography Asia Major as to whether EMC’s sophistication will triumph over a culturally cost conservative/evasive market and one that is prone to cultural pride towards organic development, and xenophobic tendencies towards non-local technology colonists. To that end, Neuralytix believes strongly, that EMC will be successful.

First-mover advantage will be one of the key drivers to EMC’s continued success. EMC continues to set the bar for its competitors, relegating its competitors to playing catchup. Market leadership can be lonely. Many who are left behind will argue that descent is the only direction after summiting. Only time will tell whether EMC has summited. In the short term, EMC should not consider itself as having summited.

 

 

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