Industry leader keeps eggs in one basket

The world produces between 1bn and 2bn gigabytes of unique information per year, which is roughly 250 megabytes for every man, woman and child on earth. This is the finding of research conducted last year by the University of California at Berkeley on behalf of EMC.

"That means over a three-year period we create significantly more information than has been created since the beginning of time," says Joe Tucci, chief executive of the US storage company.

Ninety-three per cent of this information is digital from the outset, representing a massive amount of information to be managed. EMC is the world leader in systems that store, protect, move, manage and access this explosion of content.

Mr Tucci points out that we live in a mobile society in which business people can access that information from work, home or while travelling, through a desktop computer, laptop computer, personal digital assistant or mobile telephone, and new devices are coming on stream as technology progresses. People will need their information to be consistent, so information should reside centrally and be accessed through the network.

Traditionally, each application server had its own storage, so if users could not access the server they could not get their information. When data had to be shared between applications, it needed to be copied several times and then the different copies had to be kept in step as transactions were recorded.

Mr Tucci says it is better to have all corporate information on separate devices attached to the network in any number of different places. Any application can then access it across the network. "We are evolving network storage so that users can access information from anywhere in the world from any device," he says.

Current buzzwords in the storage industry are "network attached storage" (NAS), which is a single storage device, and "storage area networks" (SANs), which are high-speed sub networks of storage devices. However, Mr Tucci doesn't like to make a distinction between the two approaches.

"There was quite some dispute," he says. "We think that is ridiculous because there are a lot of applications or types of information that are better accessed through NAS and others are much better accessed through a SAN."

Disk storage is taking over from traditional tape. Mr Tucci explains that disk capacity is doubling every year, while tape doubles only every three. Although the economics are converging, disk has the advantage of instant access to information, whereas tapes have to be physically located and loaded. Mr Tucci sees tape rapidly losing its role in active storage to take on passive tasks, such as back-up.

Whereas EMC has been a clear market leader in the past, it now faces competition from companies such as Compaq, Hitachi and IBM, just as technology markets enter a period of sharp decline. In 2000 the storage market was worth more than $40bn and EMC's $8.9bn revenues gave it a market share of over 20 per cent.

Mr Tucci remains confident for the long term. Despite the current market decline and a 10 per cent cut in staff, EMC is still investing considerably more than its competitors. "Storage is all we do," he says. "We have more service resource, more sales resource, and more research and development resource than any other company."

In contrast, EMC's competitors are broader-based companies competing in areas such as personal computers, servers, hand-held appliances, projection cameras and even elevators. "They also make storage," he quips. "We are a lot more focused, which is why we are the leader."

Mr Tucci lived through the merger of Sperry and Burroughs that created Unisys, so he knows that mergers of equals are difficult. "Compaq and Hewlett-Packard have a lot of areas to focus on and storage is just one minor area," he says. "It takes a long time to get two diverse cultures settled. They have to worry about a host of issues that we don't, which gives us a great opportunity to take market share."

A critical part of networked information storage is the software to manage it. EMC's customers are building up trillions of bytes of information (terabytes) and some now have more than a petabyte of information, which is a billion billion bytes. This incredible amount of information is networked and spread around the world.

Customers constantly want to manage this data, such as creating remote copies for back up, temporary copies for testing, transferring transactional information to a data warehouse, dynamically assigning more storage to a growing file. All these copies have to be kept synchronised as new transactions are entered.

Three quarters of EMC's billion-dollar annual research and development budget goes into software. Part of this is to automate processes and allow them to be managed from a single central console. Mr Tucci points out that hardware usually represents only about 15 per cent of the total cost of storage, with staff representing the major cost.

The current state of the IT sector has forced EMC to cut its cost base, but the company is fortunate to have about $5bn in cash and no debt. It is still investing heavily in research and development, sales and service, although not quite as heavily as before.

Mr Tucci had previously led the recovery of Wang Global from insolvency, experience that has helped in these hard times. "Wang was very sick and I had to learn how to take cost out and continue to grow," has says. "Those lessons are helping in this tough economy, but you can't compare the two companies. With $5bn in cash I have a lot better hand this time."

The current market decline will encourage many organisations to harness the efficiencies of the web to lower their cost base and get better reach to their customers. "Smart companies will use the internet to get a better handle on customer needs, which will lower their cost even more and help revenue to grow even faster," says Mr Tucci. "We are still in the infancy of what the internet will bring us. Its growth will slow down, but one thing is for sure, that growth will continue over time."

He believes that companies that have good business models and exploit the web to better reach their customers, employees and supply chain will reshape the world. Only three things are really important to an organisation - people, brand and information. The business processes involved in enterprise resource planning and customer relationship management systems are incredibly information intensive.

"Good information means decisions can be made more quickly and more efficiently to save money and help generate more revenue," he concludes. "If you cut it down to the core, organisations should focus on their information, their brand and their people."