Tough at the top

4 May 2006

In Boston last week, the view of tech CEOs as untouchables was irrevocably shattered when word filtered through the ranks of 110 international journalists attending EMC World that the former boss of one of the world’s biggest software companies had pleaded guilty to fraud.

CA’s Sanjay Kumar faces sentencing of up to 70 years in prison — the rest of his natural life — for US$2.2bn worth of fraud and could be swapping his Armani threads for a bright orange jumpsuit. News also emerged that one of the tech industry’s most charismatic leaders Scott McNealy of Sun Microsystems was stepping down, only to be greeted by sighs of relief on Wall Street. This leaves Oracle’s Larry Ellison and Apple’s Steve Jobs as the only flamboyant owner/founders of tech giants remaining at the helm of their respective firms.

It is a challenging time to be the chief executive of a tech firm. Despite the return of prosperity to the sector, regulatory scrutiny in the fallout of Enron and WorldCom means that they must play by the book, to the very letter.

It was therefore an interesting exercise to witness the CEO of EMC Joe Tucci (pictured) in action. Tucci appears to be an executive at the peak of his powers, on the one hand assuaging the demands of Wall Street while at the same time managing an aggressive acquisition and R&D strategy.

EMC is one of those rare US tech giants insofar as it wasn’t established on the west coast but remains very much at home 25 miles outside Boston. The company, which employs 1,400 people in Cork, began life in 1979 manufacturing data storage equipment in Hopkinton, Massachusetts, led by prominent Irish American Richard Egan.

Under Tucci’s tutelage, EMC has been steadily transforming itself away from being a hardware manufacturer to being a software and services firm. The company also has plans to be a network security leader, a move that will no doubt face EMC square against players like Symantec. Hardware now accounts for just 46pc of EMC’s business, software is 37pc and services are 17pc of the company’s business.

Tucci makes it clear that the company is positioning itself to take advantage of the storage dilemma businesses face. Quoting research from Berkeley University, he makes the point that only 20pc of information on corporate networks is structured, with the remaining 80pc of data sitting in the form of emails and content on websites building continually at a rate of 60pc a year.

This growing ‘information problem’ is out of control and in this he sees a major opportunity for EMC. To meet this goal, EMC has embarked on an aggressive acquisition and product creation strategy, which he says he intends to keep up. EMC grew its revenues by 17pc to US$9.6bn in 2005. During the year the company invested more than US$1bn on R&D to drive the most prolific rollout of new products in the company’s history. In the past three years EMC has spent over US$4.5bn acquiring more than 20 companies, including Documentum, VMWare and Legato.

Tucci forecast the company’s core area of business in the future will be centred on what he terms information life cycle management, a market that will be driven by the growing demands on firms to retain data for regulatory purposes. “This will include content management, archiving, data mobility, data protection and tiered storage. Fundamental to this will be information security management. At the highest level we are focusing on building intelligence into information management such as policies, classifying information and adding security.”

Tucci said two important trends are impacting the information storage market and he intends to be at the forefront of this change. “We term these two developments ‘game-changing technologies’. The first development is the trend towards virtualisation.”

Virtualisation lets a single server run several operating environments in compartments called virtual machines at one time. The acquisition of VMWare has given EMC access to vital virtualisation technologies.

Tucci’s strategy is to acquire companies but allow them to develop as separate entities, albeit EMC will cherry-pick technologies as it goes along. VMWare is a case in point as it has grown exponentially since EMC acquired it. “VMWare is a US$600m-a-year company and one of the most successful software companies ever. In the future all data centre infrastructure will be virtualised,” Tucci predicted.

“The second game-changing technology will be IP-based networking, which will enable full resource management to CIOs anywhere,” he continued. “Having these two technologies we believe will really change the face of technology over the next three years. Information should become better and easier to manage for CIOs.

“Acquisition and development are central to our strategic approach. There are more acquisitions on the way. We intend to grow both organically and through acquisition,” Tucci concluded.

They say necessity is the mother of all invention. Tucci’s strategy for EMC seems born of regulatory necessity that in some way reflects his own responsibilities as a CEO but also pose a lucrative opportunity for his company. Only time will tell if this strategy will bear fruit.

By John Kennedy