Software acquisitions spawn EMC 2.0

EMC Corp. bought itself a US$3.6 billion extreme makeover last year. Beginning in July, the storage titan began an aggressive campaign of software company acquisitions that within six months saw it acquire backup vendor Legato Systems Inc., content management company Documentum Inc., and most recently virtualization software vendor VMware Inc.

Although analysts agree that the EMC of 2004 promises to be much more than just a storage hardware company, they also say that it's up to EMC to prove that not only can it assimilate these three different acquisitions, it can also transform them into an advantage over competitors such as IBM Corp. and Veritas Software Corp.

The Legato purchase fit neatly into EMC's traditional product offerings, and when EMC's announced its buyout of Documentum just three months later, it showed that the storage vendor was serious about extending its management software story into the content creation and archiving space -- a new area that EMC and its storage rivals such as Veritas and Hewlett-Packard are calling information life-cycle management.

But for some, EMC's December acquisition of VMware -- a company best known for making virtualization software that allows Intel-based computers to run more than one operating system simultaneously -- appeared to come from left field.

"From one perspective, this is absolutely a bold move outside of storage," observed Howard Elias, EMC's vice president of corporate marketing. "However, from another view, what we're really doing is providing more capability and value along what we call the information infrastructure. We've really begun to evolve into what we refer to as information and storage management."

EMC and VMware have been sketchy about how they intend to integrate VMware's line into EMC's ballooning portfolio of product offerings. VMware CEO Diane Greene would say only that "there is a layer of information management and infrastructure where EMC is going to make some major contributions."

This "new layer," however, will be built around the Virtual Center and VMotion software that VMware introduced last summer, not VMware's more traditional virtualization software, according to Gordon Haff, an analyst at Illuminata. "They're buying VMware really for VMware's future product plans rather than what VMware has been primarily selling to date," Haff explained.

VMotion, which is part of VMware's Virtual Center provisioning software offering, lets administrators move applications from one computer to another without any disruption of service and could, when integrated with EMC's other products, form the basis of a next generation of the company's virtualization software.

In addition to the products gained, the acquisition of all three companies also presents EMC with new opportunities, said Mike Kahn, a managing director at The Clipper Group, a technology acquisition consultancy. "Because VMware was an important partner to IBM and HP, now EMC has got a foot in the door in every IBM and HP site where VMware was purchased or might be purchased."

These new accounts may be the most important result of the storage vendor's 2003 buying binge, as far as EMC customers such as Paul Davis are concerned. "I want to make sure that the eggs that I put into a basket are put into solvent baskets," said Davis, an information technology manager at Houston Energy, a petroleum exploration company.

Houston Energy recently purchased a Celerra NS600 Network Attached Storage array from EMC to store approximately 5TB of seismic data used by the company's oil exploration software. Davis wants a vendor that will not only stick around, but also be able to maintain a high level of customer support.

If moving into the software business will help EMC achieve that end, Davis welcomes the lines of business.

"In the information technology industry, a company that wants to stay in the market better diversify," Davis added, "because you're not always going to make money selling a box."

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