EMC and Service Providers: A Strategic Overview

As we invest more in learning to understand the newer generation of IT service providers, we're getting far more crisp in our story and our approach.

Previously, I offered up a bottoms-up tour of relevant EMC technolgy and offerings.

This time, I'd like to take you through a more top-down business-level view of the discussion.

To Begin With

Considerable thought went into the title of this presentation.  

If you're an IT or application service provider, it's all about delivering services.  

We've honed our overall approach to help service providers deliver better services --plain and simple.

We're also introducing the notional category of "next generation service provider" -- one that uses cloud-type concepts to deliver some sort of IT service  -- infrastructure, software, etc.  -- as a service vs. a traditional consumption model.

The big Article Of Faith in this discussion is that EMC believes -- over time --more and more IT will be delivered as a service, and proportionally less will be consumed in a more traditional manner.

Hence figuring out how to work with this important new class of partner is a serious matter for us -- as it should be for most any IT vendor.

Making It Simple

So, rather than be mysterious, this slide summarizes our strategy.  This material is directly lifted from our internal strategy decks -- it's not manufactured for purpose.

To start with, we want to partner with SPs, and not compete with them.  That's a statement that bears some further discussion.  

Most of the larger IT vendors (IBM, HP, Oracle, Microsoft) intend to offer services directly to end users.  

Maybe they can figure out how to separate church and state, maybe they can't -- but working with a vendor who also intends to compete with you in some regards can make life, well, complicated.

To do this, we want to invest in technologies and solutions that help our SP partners do three important things.

The first is obvious -- use our technology prowess to SPs deliver better services: more powerful, more secure, more highly available, better managed, etc.  A service provider is only as good as their services, so that's got to be the primary focus.

The second is cost efficiency -- service providers are not only competing with in-house IT approaches, but frequently they're competing with each other.  There's got to be a disciplined and holistic approach to cost-efficient service delivery in any SP relationship.

That last bit -- differentiation -- is becoming vitally important very quickly.  So many new SP entrants, so many bread-and-butter offerings -- the market is getting crowded, and fast.  We want to be able to have our SP partners start differentiated and stay differentiated.

What do we bring to the table?  Resources and customer relationships.  

As one example, this year we'll spend about $2B on R+D across the whole of EMC -- and that's exclusive of M&A.  That's not including our solution engineering functions, our business development functions, support functions, etc.  

At EMC, we're fortunate to have access to big piles of resources, and more and more of them are being focused in this space.

Customer relationships?  We're fortunate enough to have a trusted adviser status with many of our customers and partners.  Many of them look to us for advice and opinions on a variety of topics -- and it's not just about storage ...

Our goal is clear -- we're aiming to be the #1 provider for service providers.

What You've Told Us

In hundreds of discussions, SPs have been pretty clear as to what they care about at a business level.

First, it's all about getting new customers, and expanding relationships with existing ones.  

I have yet to meet an SP that didn't want both more customers, and more revenue from existing ones.  

Indeed, as enterprise IT groups start getting more comfortable with using external providers, we see there's a bit of a land grab going on to scoop up these new customers.

Second, SPs -- especially the larger ones -- care greatly about operational agility and efficiency.  Costs to serve should decline with scale.  And process efficiency leads to better services delivery: more reliable and more responsive.

Note: I have been inside a few SP organizations that grew a bit too fast, and are now faced with a process and technology redesign to move ahead in their business plans.  I know hindsight is 20/20, but there's no reason why operational agility and efficiency can't be designed in from the beginning :-)

Finally, anything we can do to preserve and extend our SP's cash flow (and minimize associated financial risks) becomes important.  Cash is the lifeblood of many of these SP business models, and there's a lot we can potentially do -- as a vendor and a partner -- to help out in this regard.

So, What Is EMC Doing?

Glad you asked.

First, we're busy figuring out different ways we can help SPs acquire new customers, and grow existing ones.  

One of our strengths in this regard is our field coverage model: tens of thousands of customer-facing people who either work for EMC or one of our channel partners.

We're not in a position to announce a formal program quite yet ... but we see a number of ways that we can help SPs grow their business by "marketing with" and "selling with".  

We're trying a number of different things right now, seeing what works and what doesn't.

Second, we're finding a huge uptake in SPs who either want to improve their existing service delivery platform, or build a new one.  We bring not only great technology, but rare expertise in both process re-engineering and technology enablement.

A good example is the ever-popular Vblock: about half of these units are going to SPs who are using them to use new infrastructure and new process to deliver better services more efficiently and at a lower cost-to-serve.

We're also focusing on the skills and accreditation that SP IT professionals will need to be successful: not only new technologies, but the new processes and methodologies that go along with it.

On the financial risk mitigation side, we're taking many of the programs we've proven out in large enterprises, and adapting them to the needs of the service provider.  For example, EMC is already delivering a considerable amount of storage and related solutions as a utility service -- it's something we understand quite well.

More recently, we've built a newer capability to selectively enter into shared risk/shared reward ventures for unqiue opportunities that are attractive to both parties.  More needs to be done here, but we've started in earnest.

The Race Is On

We think speed matters here -- this market is taking shape very fast indeed, and there's a certain sense of urgency to everything we're doing in this space.

Most of the SP partners we're working with are evolving from a predecessor model: be it telco or cable-co oriented, hosting models, outsourcers, vertical solution providers, ISVs or some other form of specialization.

The markets these newer SP partners want to play in can span the gamut from raw infrastructure to sophisticated outsourcing schemes -- and with everything in between.  

Whatever part of the IT portfolio you want to consider, there's probably already someone already working on delivering it as a service.

At the same time, SPs are facing competition by vendors using distinctly different models.  In addition to the uber-cloud players like Google, Amazon and Microsoft, many of the traditional IT vendors are trying to figure out how they start to offer SP services directly to customers.

For us, the winners seem to have three defining attributes.

• First, they're usually quite agile -- they are moving quickly in to (and sometimes out of) different offerings as the market moves fast.  This is not a good time for 5 year strategic plans :-)
     
• Second, when we talk to their customers, there's a strong loyalty not only to the service, but to the service provider.  At the end of the day, it's all about keeping your customers happy -- that much hasn't changed!
     
•  Third, the strongest players are investing in differentiation: not only standing out from the crowd today, but investing in doing so into the future.

Bottom line: if you're an agile service provider who is loved by your customers, and investing in keeping your differentiated edge -- we really want to talk to you.

The Big Picture -- Private Clouds

From a strategic perspective, we're doing our part to help larger enterprise IT organizations be more amenable to consuming external IT services.

EMC, together with VMware and Cisco, is driving larger IT organizations to become as fully virtualized as possible.  

As virtualization progresses, operational processes change and mature, and IT starts offering a service catalog to their internal users.

These important shifts in how IT is built, operated and consumed makes these organizations far more interested in consuming various aspects of IT as a service -- in effect, increasing the available market opportunity for service providers.

Virtualized environments are far easier to move outside the firewall.  Mature operational processes (e.g. service delivery management, security and GRC, data protection, etc.) make it far easier to manage a mix of internally provided and externally provided IT services.  

And when IT starts thinking of themselves as an internal service provider, they start to realize that they don't have to do everything themselves :-)

From a pure technology perspective, we're also introducing technologies into the enterprise that SPs will inevitably benefit from.

One class of technologies focus on the dynamic movement of information across data centers.  We believe that enterprises will want this ability to easily move large amounts of information in order to fully embrace the full range of SP-oriented capabilities.

Another class of technologies provides for business level GRC (governance risk and compliance) management, regardless of whether the IT service is delivered internally or externally.  

We at EMC think that having these two capabilities widely available in most enterprises will make the move to external IT services that more attractive.

This Is Not Just Talk

The exciting part of this industry transition is that SP-oriented models are popping up literally everywhere.  

Sometimes they're free-standing businesses.  Sometimes they're embedded within a more traditional business.

We're getting much smarter at spotting SP business models -- wherever they might be -- and adjusting our approach to a business development relationship.

Not that we were doing that badly previously -- far from it -- but the newer approach is taking our relationships and opportunities to an entirely new level.

More work to do, obviously, but it's a good start.

What Makes Us Different

If you take a strategic view of the industry move to cloud, there are three distinct approaches out there.  Some are advantageous to service provider models, some not.

When most people think of "cloud", they tend to think of what we've come to refer to as "uber-clouds" -- large-scale cloud offerings with a limited set of service offerings.  

Characteristically, these models presume that all information, applications, control, etc.  rests with the cloud provider.

You can't ignore these offerings -- they're getting better over time -- but at present, they're not widely popular with most enterprise IT organizations.

Closer to home, there's what we call the "verticalization" stacks that are forming.  You've probably noticed that the larger IT vendors are in acquisition mode, attempting to build end-to-end stacks that keep their customers (and their partners!) in the proverbial fold.

IBM has been the classic example.  HP appears to be in pursuit, and Oracle is starting to make stronger moves in this direction.

Finally, EMC -- together with our partners VMware and Cisco -- are pursuing a third approach:  virtualization.  

Our goal here is to create an SP-grade virtualized cloud model that allows flexibility on the remainder of the stack: operating system, database, middleware, app, presentation, etc.  

Basically, if it runs on x86, it goes to the cloud.  Your cloud :-)

Why This Is Important To SPs

If you look at these three models from an SP perspective, you can understand why we think the virtualization model will be more attractive than the other two.

The uber-cloud model presents few opportunities for SPs to add value between these cloud services and the customers you're trying to reach.  Are there some niche opportunities?  

Certainly, but there's far less to work with.

The verticalization model has challenges as well: these vertical stacks don't easily accommodate SP differentiation -- not to mention that you'll be competing with each of these vendors as they progressively deliver more services directly to customers.

We think that the virtualization model is more appealing in several regards: ability to serve wider markets due to increased flexibility, opportunity to differentiate in a multitude of ways, and -- finally -- vendor partners who don't see SPs as inherently competitive.

Adding EMC Technology To The Mix

When we get into the product and technology discussion, it basically boils down to three categories of offerings.

First, we've got some extremely differentiated technology for specific SP use cases.  Of course, storage is one of our core competencies, but you'll find a lot more to like as well.

Second, many SPs are intrigued by the newer forms of converged platforms we're offering through VCE: the Vblock as an optimized platform to deliver a wide range of IT services using a model designed for SPs.  

Even SPs who've invested considerable resources in creating hand-crafted service delivery platforms are intrigued, to say the least :-)

Finally, we've got a range of "service delivery platform enhancers" that can make existing services more attractive, and even form the basis of new ones.  For example, portals that allow customers to monitor things like backup, replication -- even security and GRC.

And On To Services

Having a full range of specialized professional services makes sense in the enterprise IT market, and -- as it turns out -- in the emerging SP market as well.

Perhaps I'm proudest of EMC Consulting's growing ability to do business-level strategy discussions with SPs: sizing market, defining the offer, going to market, etc.

Behind that, there's a full range of design, implementation and management services.  We can help SPs stand up their new offerings very quickly, and help improve existing ones without a lot of fuss.

We're not only familiar with EMC, VMware and Cisco technology, but just about everything that's out there -- even competitors' products.  

It's a very broad and robust set of skills that's hard to match in the marketplace.

 

The Bottom Line

At EMC, we're very serious about the growing SP space.  

We bring a wide range of technologies to the table that can improve and differentiate most any SP offering.

We're working with our traditional IT customers to make them ready to consume more and more external SP offerings by transitioning them to a private cloud model.

We think we line up strategically against other cloud models: uber-cloud vs. verticalization vs. virtualization -- and create more opportunity for aligned SPs in the process.

And, finally, we want to be your business partner -- to help you find and grow ever more customers who depend on your services.

Give us a chance -- we'd love to chat.

Comments

[Toni Prince]

what can an EMC Velocity Solution ceneter partner offer a servcie provider in terms of a revenue sharing proposal for hosted storage and back up ? Does EMC provide some sort of financing for this model ?