New EMC Group Jabs Veritas

NEW YORK -- EMC Corp. (NYSE: EMC) unveiled a new software organization at its annual Analyst Day here today, then promptly turned it loose on rivals Veritas Software Corp. (Nasdaq: VRTS) and IBM Corp. (NYSE: IBM).

The newly formed EMC Software Group brings EMCs open software Legato and Documentum businesses together, forming an organization with 1,600 developers, 865 sales people, and a target of $1.5 billion in revenues this year. Former Documentum CEO Dave DeWalt and EMC vet Mark Lewis will hold EVP titles and head the group. Legato president Dave Wright remains with EMC as an EVP outside the software group. CEO Joe Tucci said Wright will work with large strategic accounts and partners.

The software leaders revealed immediate plans to go after Veritas’s storage software market share and long-range plans to battle IBM on the virtualization front. Up to now, Legato’s backup and recovery software has been EMC’s most direct competitor to Veritas, which dominates the backup market and also sells management and utility computing software.

Legato and Documentum had been run as separate divisions since EMC acquired them last year for a combined $3 billion (see EMC Cops Documentum and EMC Gobbles Legato). Tucci says the $1.5 billion revenue goal represents a 19 percent growth over 2003 using full-year sales of Legato and Documentum as comparison. The entities that now form the software group will share finance, legal, HR, and IT resources, and they will work together on development projects. VMWare, the third software company EMC acquired last year, remains a separate group (see EMC Gobbles VMware).

DeWalt calls the new combined software group “an independent pillar within EMC” and says its 2004 mission is to take share from the storage software leader.“We have to beat Veritas, and we will,” he says. “I’m already sticking pins in the [Veritas CEO] Gary Bloom doll. I’m sick and tired of seeing their ‘No hardware agenda’ ad. We have a software organization now!” DeWalt says Legato picked up 300 new customers in the first quarter of this year, partly owing to its becoming part of EMC.

For his part, Veritas's Bloom forecasts his company will hit $2 billion in revenue this year, and has played down Legato as a competitor, saying it has had little effect on Veritas’s market share (see Veritas Holds Steady).

Still, nobody at EMC expects to overtake Veritas as the backup recovery leader anytime soon. Instead, the idea is to gradually creep up on the competition. “To attack Veritas in the backup market as it exists is not our Plan A,” Tucci says. “What we’re telling everybody is, the backup market is going to change dramatically. You’re going to see a lot of replication software come down in price and be very disruptive.”

According to one EMC exec, the plan is to “circle the backup environment” by offering replication, snapshot, disk-based backup, content management, and other products.

One of EMC’s plans entails the virtualization product it revealed today, called the EMC Storage Router. The router’s software will work with intelligent switches under development from Brocade, Cisco, and McData. Lewis says he expects the product to go into beta in the third quarter and begin shipping in the first half of 2005.The storage router is EMC’s answer to the IBM SAN Volume Controller (see IBM Previews Virtualization Engine). Lewis admits EMC doesn’t usually discuss future products so early, but the company wants to show it has an answer to virtualization from IBM and others.

VMWare will continue to run as a separate subsidiary under president Diane Greene. The primary reason is VMWare's main customers for its server virtualization software are IBM and Hewlett-Packard, who, as Tucci says, "hate us in storage."

— Dave Raffo, Senior Editor, Byte and Switch