EMC and Surviving and Prospering in the Third Wave in Computing

Rob Enderle
Slide Show

Executive Insights for Building Trust in the Cloud

If we think about computing in waves, we are on the third major wave of computing. We call it the cloud and if it is the last wave, the firms that are dominant now likely won’t be dominant by the time this wave completes.

The way I see it, the first computing wave was lead by dominant IBM, the old AT&T and Digital Equipment (who didn’t survive the cycle). The second wave was dominated by Sun, Microsoft and Intel and saw the introduction of strong companies like EMC. As wave three began, Sun pretty much died off and the clear dominant leaders became Amazon and Google. But this wave is far from over. It’s really just begun.

What I think is fascinating is that each wave was driven not by IT (it didn’t even exist before the first wave), but by users, and this is often forgotten during the transition. Users drive change, but IT tends to fight change. So far, though, users pretty much always win. If you look at the cloud-segment poster children Amazon and Google, their strength is with users—not IT. Remembering that will be critical to moving from wave to wave because we clearly won’t be stopping at wave three.

Some companies manage to transition well from one wave to the next. In fact, EMC emerged during wave two and has hung in there. The company is taking a unique path to ensure that it remains relevant throughout this current wave. I was at EMC World this week, and woven throughout the program was the message about how the firm is uniquely structured to survive the technology and services revolution going on right now in the tech market.

Some companies won’t be so fortunate, though. Let me explain why.

The Problem

Companies during one technology wave don’t remain dominant for one or more of three primary reasons. They are stuck in their own technology quagmire (i.e., they tend to want to use the tools they have in the new market and often these tools aren’t adequate), they are too focused on competitors, and/or they lose focus on the user/customer at scale.


In the transition from wave two to wave three, IBM’s initial response was to offer tools like Profs, and then it tried to get an Office-like product to run in a terminal. Both were horrid, largely because they were based on a platform that just wasn’t flexible enough. They helped create Windows but, inside IBM, executives were so torn between the legacy groups that had power and those that were emerging that they lost the PC market that they helped create. The leaders simply couldn’t focus on the new opportunity because too much of their focus was on the collapse of their primary revenue streams. Those in power didn’t want to pass it on to executives who were better positioned to ride this second wave. So IBM fell off—not because Microsoft beat it, but because IBM crippled itself.

Sun set up the third wave. I recall that their tag line was “We are the dot in dotcom.” The company even tried to transition, they just did it poorly. Sun was so focused on Microsoft becoming a software company that it missed the cloud wave entirely and its remaining parts were picked off by Oracle. Microsoft was so focused on AOL that it missed the Internet. It was so focused on Netscape it missed Google. And then it became so focused on Google that it missed Facebook.

Users drove the migration of Windows into business en masse during the Windows 95 movement. Then users drove Apple into the market during the iPhone/iPad revolution. Now, users are starting to drive Chromebooks into a variety of markets, much to the consternation of Apple and Microsoft. Users are also driving Amazon Web Services into a variety of markets, much to the consternation of all of the existing large-scale vendors. And worse, firms ranging from Google to Amazon are rolling much of their own software and hardware, rendering a variety of firms potentially obsolete.

Of course we forget that for every Amazon and Google, there are hundreds of failed startups that attempt but fail to create the next big wave. The last Darwinian period called “the dotcom years” was particularly bloody.

So a solution to this problem would need to set aside legacy platforms, largely ignore competitors, and instead focus on the future opportunity while embracing users. Of the firms I’ve covered, EMC is being the most creative at addressing these three areas.

EMC’s Interesting Tomorrow Strategy

EMC has created a set of relatively autonomous companies that are targeting this new opportunity. Pivotal and VMware highlight this set and neither carries much legacy baggage. In addition, EMC has created a unique structure in VCE to develop a product uniquely designed to provide competitive private cloud services at scale, which IT can use to defend against public cloud alternatives. The company has also started a process to create products that will provide cost-effective alternatives to the “build it yourself” offerings that the existing cloud service providers are creating.

EMC doesn’t focus that much on competitors. What is clearly keeping the company awake isn’t IBM, HP or Oracle (with whom they sometimes partner); it is how to get ahead of the change, which represents the bigger threat. This helps prevent it from being blind-sided and helps explain why this company is more interested in selling to Amazon than in competing with it.

But perhaps the biggest weapon EMC has in its quiver is its unique customer focus. EMC is the most aggressive user of analytics with respect to building customer advocacy. This customer focus makes the company very unique, but it is largely focused on IT customers and not end users. This is changing, though, because EMC recognizes that the users are the decision makers now, and if the company misunderstands them, it’ll likely miss the next wave. EMC is also restructuring marketing to better reach users to in order to ensure that these users know to ask or look for EMC solutions as they make their decisions. Direct sales can’t scale to users because it is more of a one-to-one tool, but marketing, being one-to-many, can scale if done right.

In the end, this strategy and the execution against it shows the best chance of allowing EMC to pivot through the third wave. The only other alternatives are massive restructuring (e.g., Apple) or going private (e.g., Dell), in order to reform the company around a new future.

Wrapping Up: Changes

Rigid structures don’t survive change. You have to be able to bend and one of the reasons firms fall during a technology wave is that the traditional corporate structure just isn’t flexible. As a race, we aren’t very flexible. We don’t like to retrain and we have a tendency to focus far too much on the tactical, like which competitor is taking share, and far too little on the strategic, like the end of the market model that sustains use. EMC’s unique structure, analytical focus on customers, and incredibly creative leadership may—and I say may because we won’t know until wave four hits—allow the firm to flourish while its peers struggle. I remain in awe of Joe Tucci, who has thought so far out of the box on his approach to the problem that I doubt he even sees the box anymore.

If this works, and it should, it may forever remove the rigidity that defines corporations today. This will be one for the textbooks.



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