Sara Driscoll: What did the Storability buy give you that you couldn't get from partners?
Patrick Martin: I don't think Legato has anything close to the functionality that Storability has. Storability has the best Storage Resource Management product in the marketplace, and because we've sold the product now for two years we're very intimate in terms of what its future functionality is.
Forty of our largest customers have it, and the benefits they are getting from it are very impressive. We're delighted with the product and we have a pretty good understanding of where the road map is and where the company is going.
When I take a look at that product and compare it with those of Legato or AppIQ I think it's very strong.
Secondly, customers that have bought the product like it, but they are always worried about a start-up. If someone buys that start-up will they take it in a different strategic direction to the one it is taking at the moment? So a big part of our opt-in was continuity and the future road map of Storability.
Thirdly, it is basically the platform for our ILM [Information Lifecycle Management] strategy. It has our backup and recovery underneath it and our HSM [Hierarchical Storage Management], so it's a very good architecture for us to build our other solutions around.
EMC is a great company; it has made a lot of acquisitions over the past year. I think its strategy will be broad-based, and we are going to be focused in terms of what we offer. We will stick with storage and how to manage the storage infrastructure better.
SD: What will happen to Storability now?
PM: Storability will remain a separate entity. It has a focus, a mission and an objective, and we agree with these [strategies], so we won't change them. What we will do is make sure the field engagement model and the back-end work better, and add more value.
One of the criteria of buying the firm was that if we had to change their road map considerably then I would have been reluctant to consider the acquisition. But it is really in line with where we want to go, so we can just help them get to where they want to go more quickly.
We also made a little acquisition in Germany last year, and we're still looking both inside and outside the US.
SD: How did your relationship with Legato change after EMC's acquisition of the firm?
PM: Right after EMC's Legato acquisition I chatted to David [Wright, chief executive of Legato] and his team. Our intention was to continue doing business as usual, but when it became part of EMC a lot of Legato's priorities are potentially changing.
SD: The amount of revenue from your channel has dropped from 49 per cent to 42 per cent. What do you intend to do to realign this?
PM: This is more of an industry trend than a StorageTek trend. I see what is happening with ADIC and Mobile and Data and several other of our compatriots, and it seems the channel has been somewhat weak.
We have spent a lot of time with our channel to try to understand whether it is a product issue or a marketing issue. I think it is more of a market problem than anything else.
That said, we are continuing to invest in our channel. We've introduced dual registration, training and marketing programmes, and are making specific product packages for it. Resellers can then offer any packages to their customers and we continue to work with them to try and make them successful.
We said we want to be 50/50 between direct and indirect, and we're not turning away from the channel. We haven't taken any segments of our markets away from the channel. We are actually trying to encourage our channel to take a bigger portion of the market.
We don't think this has anything to do with the fact that we reduced the number of resellers last year. We had an awful lot of resellers that were doing only a tiny little bit of business with us and we consolidated this to partners who were doing a lot of business with us. We don't think this is the issue.
The information I have is that, especially in the storage area, there have been some struggles, due to whether it's the economy, or whatever. My channel performance outside North America is probably a lot steadier.
SD: Last year you said you wanted a significant part of your revenue to be coming from ILM. Is this happening?
PM: A very significant part of my R&D dollars have been spent in the ILM space, and we're just starting to see the fruits of this investment, so you see some of it here today. Over the next several quarters you will see a lot more ILM solutions coming out from the company. Then you will see a lot more growth.
Certainly much of it has been in the ILM space, but much of the opportunity in ILM is in front of us, and especially in the next three quarters.
SD: Is ILM still hype?
PM: A lot of companies are using ILM as a slogan, and I think that some companies have a problem, because if customers went to them and said they wanted ILM they would have a problem providing it. People are also redefining what ILM means.
ILM is all about managing your storage more effectively and putting it on the right devices and so more cost-effectively manage your storage environment. And I think here [at the Forum] we have very specific instances of ILM that people are buying now and have been buying for a while.
SD: But many people have always chosen storage by price. Do you see this still happening?
PM: Price is always a consideration when buying storage. In a major corporation you have the pressure, and certainly IT managers are going to go out and get the best deal they can. But if it doesn't meet their users needs at the end of the day that's the test of the criteria.
If price is the only criteria, quite frankly we would have had jbods [just a bunch of disks] taking over the tape industry, and this just hasn't happened.
Price is clearly a criterion, but data centre managers want something that will simplify, not something that will complicate management.
Outside the IT industry few firms recognise the value of IT. But when I talk to customers they recognise the need to manage storage better.
It becomes strategic when it becomes expensive.
At the moment a large percentage of the dollar is going to storage spending. When I explain to firms the level of efficiencies and inefficiencies they have in their storage environment, chief executives and chief financial officers become interested.
Storage spending is the biggest growing expenditure in their environment; people costs, software costs, facilities costs are all under control, but data isn't because it continues to grow. We aim to put executives in control of this environment.
SD: You mentioned that software and services will overtake hardware in the storage sector this year. Does this apply to StorageTek?
PM: Software and services have been growing steeply in the whole industry, but hardware has been growing much less steeply, so the lines will cross this year. Customers will spend more on software and services than on hardware in the storage industry. StorageTek will put a lot of R&D in software this year.
SD: How are you intending to expand your software unit?
PM: We are spending an awful lot of money on developing our technology through R&D, and we have a large and growing software organisation, so we'll be working on increasing that. Obviously we're looking to do this with companies such as Storability.
The big buying decision is kind of an interesting one. You want to buy a company that will accelerate your position, or that has better IT than you have.
If you take a look at the amount of software that has been bought by other companies in the industry, and I won't name names, they tend not to take full advantage of the software. What they tend to do is buy a bunch of software products, but there is no coherency between the products.
They end up with 10 different products through 10 different companies, which all have different architectures and different infrastructures and designs. To be able to integrate them in a coherent way is pretty difficult.
One of our parameters when we take a look at companies is the level of integration needed. If you don't ask that question first and you buy a lot of companies, just take a look over the past few years in terms of how many companies have been bought and how much of that really translates into revenue for the bigger company that bought them.
SD: Finally, what are your views on the current business climate?
PM: While other people have been very bullish about this market we still see it as pretty slow. We still see challenges in the marketplace, and certainly this came to roost in the second quarter.
I am optimistic, however, and I certainly see a lot of momentum in Europe. Quite frankly I've been very pleased with the progress we have made in Europe over the past several quarters.
We're starting to see some momentum picking up in North America, but by and large many of our customers are still pretty cautious. There is a lot of uncertainty about. Obviously the election is on peoples' minds, as well as the unrest in the Middle East.
If you take a look at the stock market this is probably just about where it was at the beginning of the year, which is indicative as to what is happening in the whole economy.
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