It looks like a good way for EMC to return to profit. Although the overall technology sector is still struggling in the face of a slowdown in tech spend, the storage management market is currently bucking the trend and avoiding a serious decline in the short term. EMC’s size gives it an advantage over many of its storage market rivals, in that it is much less likely to go under or quit the sector.
EMC has completed its restructuring to increase its focus on the storage software market.
Storage vendor EMC has completed a restructuring affirming its position in the software and services segment of the storage management market.
While the storage management market is not immune to the downturn, it has done better than much of the technology market. Two of the leading hardware vendors, Brocade and Emulex, both reported strong growth this year. Software companies such as Veritas, CA and Tivoli are also seeing storage management growth.
While EMC is not directly a storage management company, many of its software activities are part of this industry. Its decision to emphasize software suggests it believes this market segment can help overcome its recent losses. It is also aiming for cost savings of around $800 million, cutting headcount and shortening its testing cycle.
EMC is now structured as three primary business units – effectively, hardware, software and services. This is the first time the company has recognized software as a separate business unit, and should make it more aggressive in promoting software independently from hardware. While EMC has long claimed to be a software vendor more than a hardware vendor, this move improves the statement’s credibility. It is also spending 70% of its $800 million R&D budget for 2002 on software.
While September 11 has hit business, it has also boosted the business continuity market. The financial services firms based in the WTC generally had business continuity solutions in place, but the attacks have made other businesses aware of how important these investments can be. Since storage is a key part of any business continuity solution, the resulting increase in their deployment will benefit the storage industry.
The growth prospects in storage have led many companies to join the bandwagon, increasing competition. While no major consolidation between pure-play storage vendors has been seen yet, it is only a matter of time. From this point of view EMC’s size and exclusive focus on storage is one of its main strengths: customers can be confident it will still be in the business in 2003.