With the arrival of the new year, Veritas Software Corp. is facing much more intense competition from not only its long-time rival, EMC Corp., but also from its hardware partners as they awaken to the profitability of the storage software market. During his visit to Hong Kong to host a kick-off meeting with his Asia-Pacific staff, Veritas Chairman, President and CEO, Gary Bloom sat down with Computerworld Hong Kong Senior Reporter Winnie Lai to outline the storage software developer's new year's resolutions and how he sees the company can differentiate from its competition.
What are Veritas' focuses in the region this year?
For Veritas in the region, and in general, what we think of is growth. If you look at our company's results last year, we're a growing company. Part of that growth has been fuelled by our growth in the Asia-Pacific region and other virgin territories where many countries are still seeing 100-plus percent revenue growth. So for the Asia-Pacific region, it's really building our services and sales capacity, localizing and translating more products, coming into the region like many aggressive software companies did in the past.
Could you give us an update on Veritas' Asia-Pacific operations?
Our revenue in general is a 70:30 split -- 70 percent domestic and 30 percent international. Asia-Pacific makes up about nine percent of our total revenue. If you look at most enterprise software companies that are larger than we, at the time they were our size, they were already 40 or 45 percent international. So we have opportunities to dramatically expand our international business and Asia-Pacific is a key high growth market to let that happen. Technical requirements aren't any different in the region than the rest of the world. It's just a matter of sales and delivery capacity.
The expansion plan also involves an increase in headcount?
In the region, including Japan, we have some 800 people, that includes 400 developers in our lab in Pune, India. We will continue to grow our headcount more aggressively because our hope is growth at a minimum of about two [percentage] points for international revenue per year [in relation to our domestic revenue]. When we look at our plans around Asia-Pacific, you'll see a headcount increase of somewhere around 50 percent, in some cases, 100 percent for this coming year. In 2001, Veritas grew its headcount slightly under 50 percent globally.
EMC, traditionally a storage hardware player, has recently been shifting its focus to software and has grabbed about a quarter of the storage software market. How do you see the threat from them? Do you expect to see slower growth and lower margins as a result?
No, we see higher growth and higher margins. We don't see EMC as a real threat to our business. When you look at software revenue [for the storage sector], you have to be very careful and the financial community fell prey to this as well. EMC has their software business and they said it's independent from their hardware business. But the interesting thing is that in the last couple of quarters, last quarter in particular, EMC announced dramatically lower hardware revenue and their software revenue fell even more. So that's part of the conclusion we've drawn for a long time, that most of their software revenue is actually allocation deals.
When you buy a solution from EMC, they arbitrarily decide how much revenue they designate to hardware versus software. And if they have been truly selling software independently, their software business shouldn't have changed with their hardware business [because] software didn't commoditize, hardware is commoditizing. So why did their software revenue drop so much?
The vast majority of what EMC is selling is software for the EMC environment. The world has changed and has moved to a very heterogeneous storage model -- one that is supported by Hitachi, EMC, IBM, Sun, and a host of commodity storage players as well. In a heterogeneous world, you must have software, which we specialize in. EMC now saying the world of storage is controlled by software is actually validating the very position we have believed in for a long time -- that there's a value shift going from the hardware to the software.
About 40 percent of your revenue comes from the Solaris platform. Will the slowdown of Solaris sales impede Veritas?
It didn't have a dramatic impact on us. Part of the reason is that while we sell a lot of software on Solaris, a lot of them are actually controlling and managing data from a backup perspective that is designed for the platform. So customers in many cases have chosen to run our backup software on a Sun server while they're actually backing data up on an HP or IBM machine. We run our backup server independently of where you run your system. That's a choice many customers made partly for performance reasons. It really has little bearing because we're selling our backup technology based much more heavily on the systems being backed up. There's a lot of misunderstanding about that [area]. Just that it's sold on Sun doesn't mean that we're Sun-only storage. We're backing up all different vendors' storage.
Both your partners, HP and Sun, are making noise about pushing into storage software. How will that affect Veritas?
It's actually a double-edged sword. On the one hand, it gives more visibility to the storage software market as their moves are essentially validating what we've been doing over the years. On the other hand, there'll be more competition in the market. But we'll win because we're not proprietary. We're the only company out there that offers storage software that runs on multiple platforms.
Could you name three technology trends related to the storage industry for this coming year?
I'll say an even more heterogeneous environment, a more distributed model for storage like the SAN (storage area network) technology and disaster recovery due to the U.S. September 11 incident.
September 11 has aroused awareness of data protection and disaster recovery. How exactly has that helped you sell your products?
I can't really tell you the impact to our bottom line since we haven't announced our last quarter results. But as an indication, our technical seminars were usually attended by 70 to 100 people prior to September 11. Since then, we've had about 400 people attending our seminars.