Joe Tucci -- Chairman and CEO of EMC -- thinks so.
Conventional IT industry wisdom presumes the ultimate vendor goal is to "own the stack": not only the key components your customer needs, but the key interfaces between them.
Alternatives are discouraged, increasingly more is bought from a smaller number of vendors, revenues and margins increase, competitors are at a disadvantage, and so on.
Large-scale industry examples are everywhere: IBM, Microsoft, HP, Oracle etc.
At yesterday's "Strategic Forum for Institutional Investors", we saw a veritable fireworks show of powerful ideas from Pat Gelsinger (CEO of VMware), David Goulden (COO of core EMC), and -- most interesting for the audience -- Paul Maritz who shared the rationale and structure of the new Pivotal initiative.
But I think Joe gets the prize for the most subtly controversial idea of the day: how does one become a disruptive stack vendor without the traditional model of "owning of the stack"?
I think his argument is pretty compelling.
How This Came About
It's a relatively open affair in that anyone can follow along on the webcast, download the keynote presentations, etc. -- all out there in the public domain for perusal and commentary.
At a high level, Joe shared that EMC is in the process of becoming three loosely-coupled businesses:
-- EMC II (information infrastructure) -- storage, security, content management, etc.
-- VMware (majority owned by EMC)
-- and the new Pivotal initiative, focused on next-gen big/fast data applications and the supporting stacks -- dataclouds, if you prefer.
Each presented a great view of their respective businesses, and a decent look-ahead of how they thought the industry was changing, and where they saw the opportunities for their respective businesses -- and what they were doing about it.
Although the presentations were geared to financial analysts (TAMs, CAGRs, etc.), there is plenty of decent tech detail for anyone who's interested. I enjoyed each and every presentation -- at least two dozen potential blog posts waiting for me down the road!
Joe's Model For EMC
Right now, we're organized as two distinct businesses (EMC II and VMware) with a third one being bootstrapped as we speak -- Pivotal.
You're probably familiar with the air-gap between EMC's core storage-plus businesses and VMware's business -- we mostly see ourselves as really good partners.
The two companies have completely separate engineering, marketing, sales, corporate support, facilities, etc.
The positive? Each company is free to pursue the opportunity and meet customer needs through their respective lenses. There's no explicit mandate to collaborate or share resources -- unless each party believes it is in their respective best interests.
The negative? Big customers of both would prefer to deal with one company vs. two (I hear this all the time). Ticking and tying the roadmap pieces from EMC with those from VMware takes a bit of effort at times. And, needless to say, funding completely separate corporate models can be viewed as wasteful and inefficient.
And here comes Pivotal: born with 1250 employees and an estimated $300m of revenue in 2013: 69% owned by EMC, 31% owned by VMware.
Joe's term for our rather innovative corporate structure is "a federation of businesses, focused and free to execute on their missions, strategically aligned".
And I think there's some powerful thinking at play here.
Ever Work In A Large Company?
Larger businesses have this habit of not being able to get out of their own way, which can be fatal in fast-moving industries, like IT.
Let's say some part of the business (e.g. Part A) has a great idea to meet a customer need. They make a case, and want to invest. It all looks great on paper, so let's go!
But there's a structural problem -- Part A's idea might unfavorably impact the goals of Parts B,C and D. Extensive discussions (essentially negotiations) are begun. The original idea is perhaps bent, twisted or otherwise mutilated to make it less offensive to the rest of the company.
Not all parts of the business have equal say: the big revenue-generators have undue influence over smaller, faster-growing parts of the business, leading to various forms of the Innovator's Dilemma. If the conflict can't get resolved peer-to-peer, so often it rises up the executive ranks -- more discussions, more negotiations, etc. Further bending and twisting of the original thought frequently occurs.
All of this take time and energy. It's not nearly as much fun as putting the actual idea into practice -- it's sort of a corporate innovation tax. When the tax burden becomes too large, there's inevitably less innovation and fewer ideas in play -- simply because everyone knows the trials that await the brave thinker with a new idea.
It gets worse. There are costs and resources associated with executing on any new idea. And there's a strong economic incentive to share and re-use existing resources and capabilities, whether or not they are remotely fit for purpose. More discovery, more discussions, more negotiations, more warping and disfiguration of the original idea. More time lost, more innovation taxes are paid by those who want to try new things.
Even less innovation.
You'll notice that smaller companies can often put their ideas into practice much faster than larger ones for this very reason. But, of course, they don't have the resources to make them scale quickly -- which is also critically important in fast-moving markets like IT.
So, how do you stay agile, bring massive resources to the table -- but stay strategically aligned?
Enter Joe's "federated businesses" model.
Strategy At Executive Level, Execution At Business Level
One thing you can take away from the different presentations: every business leader saw an identical picture of what was happening in the industry, and the likely implications.
But each saw themselves responsible for a different part of the puzzle: storage infrastructure+security, "cloud", and big data apps (broadly speaking).
Shared vision, team execution.
How Customers Benefit
As each business leader walked through their respective parts of the broader EMC strategy, one point was repeatedly made: this wasn't going to be a private party in the least.
David Goulden made it very clear that EMC II would invest in supporting non-VMware cloud stacks, as well as non-Pivotal big data stacks.
Pat Gelsinger also made it clear that he would invest in supporting -- as done in the past -- non-EMC infrastructure stacks as well as non-Pivotal big data stacks.
And, to make it a trifecta, Paul Maritz wanted to make sure that everyone knew the forthcoming "Pivotal Platform" would be completely cloud-agnostic as well as infrastructure-agnostic, including intended support for the popular Amazon services.
That's not lip service either. Each has a business plan that is targeted at maximizing the market opportunity in their respective segments, and that's exactly what they intend to do.
Why are they violently opening up their business models? Why not lock everything down between the layers as we see so frequently elsewhere in the industry?
Because it's what customers want.
Will there be good collaboration and integration between the various entities components? Certainly -- no shortage of customers who want all the pieces of EMC's technology portfolio to work as an integrated whole.
But the primary motivation is customer demand, not corporate edict.
Agility And Expertise Vs. Efficiency and Cohesion
I do admit -- at certain times -- I have asked myself, why don't we make it one, big, tightly integrated company, just as we see so many of our industry peers doing? One nice corporate portfolio, one standard way of doing things, proprietary interfaces everywhere, one big pool of shared resources, one sales rep, one support organization, etc. etc.
And -- yes -- I get asked that very same question so often by many of our customers.
It's turning out to be a serious strategic choice that we've made. By doing things this way, you get smaller business units who are free to innovate quickly around new customer requirements. You get deep pools of focused end-to-end expertise. You get more nimble entities that are more agile, and more responsive -- and much harder to compete with.
And you can't have it both ways.
When EMC acquired VMware way back in 2004, more than a few eyebrows were raised around Joe's rather controversial notion of keeping the two companies fairly separate. And both companies have enjoyed unquestionably phenomenal growth through 2012 and beyond.
But, as with any family, certain family members occasionally make decisions that aren't so popular with other family members. That's life -- they're doing what they think is best for them, and not you.
I think Joe is right -- horizontal wins -- especially in fast-moving markets like IT.
Like so many things EMC has done, I wonder if others follow before long?