EMC Pushes Service Horizons

Unless you've been visiting other planets, you already know that EMC is making services a big priority.

Today, EMC cranked out two releases reminding us of this ongoing strategy. (See EMC Extends Services and American Express Picks EMC.) Mainly, the company enhanced its managed services with three new offerings:

EMC also revealed that American Express and Toyota Motorsport GmbH have signed on to let EMC manage their storage.

Either EMC is looking to increase its market share in services, or the Hopkinton gang is trying to distract people from wondering where it's 4-Gbit/s Clariions are.

EMC isn't exactly a newcomer to services. According to IDC's 2004 market figures -- its 2005 numbers aren't yet available -- EMC had the largest storage services revenue among pure-play storage companies. It trailed IBM, EDS, CSC, and Hewlett-Packard, but led StorageTek [now part of Sun], Veritas [now part of Symantec], Hitachi Data Systems, and Network Appliance.Now EMC is pushing out service horizons. The vendor also has invested in its ambition. Earlier this year, EMC acquired software technology from Acxiom Corp. that it will use for service offerings and bought Internosis for its Microsoft service expertise. (See EMC Unveils Grid Gameplan and EMC Buys Windows Expertise.)

"I would not underestimate EMC's seriousness about growing their services business," IDC analyst Doug Chandler says. "They're adding headcount, and they even made an acquisition around Microsoft Exchange, which is an interesting area for them to pursue but fits into [EMC's] larger ILM strategy.

When EMC acquired Internosis, Internosis customer Luke Marvin of Analog Devices said it looked like EMC was trying to grow up to be IBM as a service provider. But the vendor likely has another strategy in mind. While IBM and Hewlett-Packard build services around other vendors' products as well as their own, EMC and other pure-play storage vendors provide services around their own products.

By moving deeper into managed services, as opposed to maintenance and support services, EMC is attempting to use services that help sell products instead of providing services around products they've already sold.

"It's a defensive strategy against outsourcing," Gartner analyst Adam Couture says of EMC's managed services strategy. "Once an outsourcer enters the picture, they usually make the hardware decisions. If an EDS gets in there, that's probably OK for EMC because EDS is largely an EMC shop. But if IBM gets in there or CSC [a Hitachi Data Systems partner] gets in there, you're at risk for account control. These managed services help you maintain account control."It remains to be seen how well the strategy will pay off. Although services have picked up in recent years, there's still more growth in selling products. For instance, EMC's revenue for systems in the fourth quarter of 2005 grew 19 percent compared to 4 percent for services. And service revenue started from a smaller base.

Another analyst thinks EMC's move into managed services could backfire. Arun Taneja of the Taneja Group says EMC would do better to partner with managed service providers instead of competing with them.

"What's EMC's primary value prop in the market?" Taneja wonders. "They're a full-scale product supplier, so why wouldn't they use that to arm a whole lot of managed service providers?"

IDC's Chandler, though, notes that services have become the way of the storage world. "EMC has been expanding its professional services for three or four years. NetApp has largely been focused on customer support the last two years. Hitachi has been fairly slow out of the gate, but they have put a new emphasis on it. Services portfolios are beginning to look more alive than they did a few years ago."

Dave Raffo, Senior Editor, Byte and SwitchOrganizations mentioned in this article: