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EMC is looking to the future as its storage revenues take a beating in the recession

In tough times, EMC – the self-styled information infrastructure market leader ­– is looking to the future rather than dwelling on the woeful present.

With an IT capital expenditure freeze at many of its traditional customers triggering a rapid fall in storage sales, the $15 billion company is focusing its attention on the ‘game-changing’ technologies and services coming down the pipeline, that it believes will underpin success in a post-recessionary world.

That concentration on the future is perhaps understandable given current levels of demand for new storage systems. Its latest financial figures show EMC is banking almost $110 million less a month in storage product revenue than it was a year ago.

But last month at EMC World, its annual gathering of customers and partners, that 17% erosion of revenue had the company looking to new horizons, with three technology areas in particular receiving high billing: solid state storage, cloud computing and fully automated storage tiering.

With solid state disks (SSD), EMC feels it is in a position to gain ‘first mover advantage’ (see feature, ‘Flash forward’). Having released its first enterprise class systems to feature SSD in early 2008, EMC executives are seeing the technology emerge as a new ultra high-end storage tier that will eventually rival traditional fibre channel disks.

Though significant momentum has yet to build behind enterprise-class SSD technology, EMC CEO Joe Tucci predicts that in the case of EMC’s top-of the range storage array systems, an SSD component “will be the norm” for customers by this time next year.

Much of that will be influenced by price. The cost per megabyte for SSDs may be eight times higher than fibre channel disks today, but given the downward trends in pricing, SSDs and high-end disk drives will be at parity within to three to four years, says Brian Gallagher, general manager of the EMC Symmetrix product group.

There are plenty of other hot areas of storage, argues Tucci: de-duplication, compression, unified storage and thin provisioning. But what is clear to customers, analysts observe, is that these are more about efficiency – using management technology to cut storage requirements and sustain the life of existing arrays.

Those could be seen as tactical compared to the real agenda setter: cloud computing, and its key enabling technology of virtualisation. EMC, like much of the rest of the IT industry, has started down the road to dynamic, on-demand, efficient, flexible computing.

For example, at EMC World, it augmented its capabilities in cloud storage with the launch of Atmos Online, an Internet management extension to its Atmos offering that provides the means of setting policies around the storage of data in the cloud. It also introduced the capability to federate data policy from internal to external clouds.
Supporting that move, IT and communications giant AT&T said that it would use Atmos to provide cloud storage services charged on a per-usage basis. AT&T’s Synaptic Storage as a Service lets businesses store, distribute and retrieve their data on demand, with each setting specific data storage criteria through the web-based portal.

That is just one of several initiatives EMC has underway for cloud storage. Perhaps more strategic, though, are its efforts to leverage a strong hand in virtualisation software.

VMware, which is majority-owned by EMC, is the clear market leader in virtualisation software. Its growth may have slowed ten-fold to just 7% its most recent quarter but the company now represents 15% of EMC’s total revenue.

And VMware CEO Paul Maritz believes his group – supported by a few other parts of EMC’s broad portfolio - is ideally positioned to “take today’s internal data centre and turn it into an internal cloud,” he says.

The goal is to be able to dynamically shift virtual applications, he says, in which “application, middleware and an operating system are bound together in a virtual container which can be dropped into a cloud, with all your service level agreements, policies and security.”

EMC may naturally be looking to VMware as a source of cloud computing revenue, but the underlying need for the core storage products that make up 75% of its revenue base are not going away. Because of efficiencies and the lower level of business activity, the build up of data within organisations may not be doubling every 18 months, as was the case in previous years, but according to Tucci, the predictions that information growth will slow to 40% a year still offers a massive scope for the company.

What is required, though, is that data resides in the appropriate place. In the fourth quarter, the company is promising to introduce Fully Automated Storage Tiering, which will enable logical units or volumes of data to be moved between different levels of storage – solid state, fast fibre channel drives, low-cost SATA units – based on how actively they is being used.  

It is unlikely that EMC will see any growth in its $8 billion storage products division this year, but the introduction of such technologies have signalled to customers that the company is now as much focused on storage efficiency as it has been historically on storage systems.