EMC: The Magical Back Stories

Rob Enderle

This past week was the EMC World conference and one of the more interesting aspects of EMC isn't its big hardware announcements, it is its little-known divisions that secure airports and supply solutions to the small business and consumers, as well as the amazing work it does with regard to customer satisfaction. Earlier I contrasted EMC to Oracle, but, subsequently, I had one-on-one meetings with many of these key EMC components and learned a number of rather amazing things.

 

EMC Security

 

EMC has two security units - one is widely known and the other is far more secretive. RSA, the widely known subsidiary, had a major breach a few weeks back and it put all of EMC on a war footing. But, more than that, because RSA is tightly tied to government security, it helped jumpstart a massive government/industry effort to not only identify attacks more aggressively, but to bring the perpetrators to justice.

 

The most interesting part of EMC's security program is it is one of the few that offer comprehensive services from the capture of information through its analysis - in some cases pulling information from ground radar, offshore submarine monitors and video cameras to identify breaches before they actually occur and position resources to quickly catch the physical and virtual attackers. You would think it was this that defined EMC in security but evidently not. Because the company approaches the problem at a total solution level, it is actually able to deploy programs that are vastly more comprehensive than what normally exist today for a far lower price than less-adequate solutions. This is because most companies buy each component from the lowest bidder, which substantially inflates the integration and installation costs and makes the result far less capable.

 

Because the EMC solution is optimized as a system, one massive retailer found it could implement a complete comprehensive overhaul for far less than an update of the mess it currently had and immediately was able to eliminate much of the in-store fraud. EMC's security unit may be the most capable organization I've ever met that most have never heard of.


 

Iomega: Dominance on a Small Scale

 

We just saw Cisco buy Flip for $500 million and then write it off because it tried to integrate the company. (I thought the whole episode was insane.) Folks don't get that most failed mergers result when a firm tries to integrate a successful acquisition while clearly not recognizing that much of that success comes from the unique nature of the company that was there before it was acquired. In effect, Cisco inadvertently killed the value it bought. EMC often leaves its acquisitions separate, which allows it to benefit from EMC's resources while retaining what made it successful.

 

Iomega is a case in point with products that have turned out to be some of the most successful storage offerings in the small business and consumer markets. This contained firm may represent a great case study that Cisco should have studied before buying Flip, on how to preserve and enhance the value of a very different company. From small business storage to consumer storage, Iomega is generally number one or two in each market it plays in. Iomega's coming set-top box product line, called Iomega TV and based on Boxee, looks particularly interesting. In this firm there is a case on how to do acquisitions right.

 

Mozy: Teaching EMC the Public Cloud

 

Mozy showcases EMC's flexibility because that company is being integrated. Mozy provides public cloud-based storage services and it recognized early on that consumers aren't willing to pay for premium services, so it positioned its offering for the small business market instead. As a result, Mozy is able to charge more and provide higher-end capabilities while operating with much higher operating margins. But it is being integrated into EMC to help EMC understand the public cloud and the opportunity it represents. Typically companies learn new markets through experience in them and that is often the most expensive path. By acquiring people who know the market and then using these people to train the existing executives, EMC's path to competence should not only be faster, but there should be less customer pain as a result of the process - another best practice.

 

Customer Loyalty Science

 

I'm a huge fan of EMC's customer loyalty work. Every time I meet with Jim Bampos I get the sense that he is developing a unique science with regard to customer management. Most companies simply look at customers as a source of revenue. Relationships really depend on the individuals, but they usually aren't managed or monitored very well. We know that customer acquisition is one of the greatest costs for a firm and customer replacement is even higher. We know that customer loyalty is one of the greatest assets for a firm and a lot of customers cost a firm more than they are worth.

 

No company is trying to understand all of this and apply it to day-to-day decisions as aggressively as EMC. For instance, let's say a company had $2 million to spend. Wouldn't it be nice to know if the return on that investment would be better spent on a new feature or improving the customer support program? Or, if a reorganization was planned, wouldn't it be nice to know that a large number of customers would abandon you if you messed with their service or sales folks? I was at a company years ago that made a move like that and went from a $750 million annual income to under $250 million in a matter of months because it decided to cut the wrong costs.

 

What EMC is building is the capability to equip customers so that the relationship between EMC and those customers is maximized. I'm not talking maximum revenue, but maximum symbiosis where the result is a mutual relationship that is optimized for both and lock in, rather than being forced, exists because both sides want it to. In short, the customer isn't held against their will, they remain loyal because that is their will. This should, in theory, result in the largest sustained benefit for both EMC and the customer and a lower likelihood that either will trade a tactical benefit off against the strategic relationship. If EMC pulls this off I can imagine entire schools of business changing to better understand the result.

 

I doubt even EMC gets the magic here and this effort, at least to me, is fascinating.



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