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Does EMC Corporation’s Software-Defined Storage Strategy Make Sense?

EMC (NYSE: EMC  ) has been touting its software-defined storage (SDS) strategy during its EMC World 2014 event. EMC also launched ViPR 2.0 software-defined storage during the event, to help it improve the management of customers' storage infrastructure, and provide them with a platform to roll out more big data analytics tools.

Last year, EMC bought out ScaleIO, a privately held server-side storage software developer for an undisclosed all-cash sum, ostensibly to strengthen its flash portfolio. EMC's SDS strategy looks a tad confusing, since there is a considerable degree of overlap in the functions that its acquisitions are supposed to accomplish.

EMC also showed that it's not ready to let go of its traditional storage equipment business after it announced the acquisition of DSSD, a private flash equipment manufacturer, also for an undisclosed amount of money (the company has an uncanny habit of not disclosing how much it pays for its acquisitions).

Meanwhile, EMC looks to benefit from its strong relationship with Microsoft (NASDAQ: MSFT  ) . The two companies are working hand in glove on the software giant's cloud. On the other hand, EMC's VCE joint venture with Cisco (NASDAQ: CSCO  ) , looks doomed after Cisco acquired WhipTail to provide it with UCS storage infrastructure instead of relying on EMC.

EMC's SDN strategy
EMC intends to integrate ScaleIO block storage capabilities into its ViPR software platforms. The company also recently launched VMware-based vSAN, or virtual SAN, in March this year. EMC is the majority owner of VMware.

EMC labels both vSAN and ScaleIO as software-defined storage. Both are block-based, distributed transactional software stacks that bear similar architectural models. And both are related to ViPR. ScaleIO and VMware are both capable of turning commodity hardware into shared storage.

Investors are immediately tempted to ask, "Why would EMC customers need ScaleIO and vSAN if they both share similar characteristics? Moreover, won't ScaleIO compete with vSAN?"

The company's executives openly admit that there are many similarities between the two platforms. But they also point out that ScaleIO scales much better and supports more varieties of servers than VMware-specific vSAN. ScaleIO and vSAN both provide hyperconverged storage. Customers looking for a VMware-only solution can opt for either platform. But customers specifically looking for heterogeneous (external) storage will find ScaleIO a better option than vSAN.

EMC's ScaleIO platform should therefore help the company to reach a wider market with its software-defined storage solutions.

EMC supporting Microsoft cloud
EMC has a flourishing cloud partnership with Microsoft. It is partnering with Microsoft in the Microsoft Cloud OS Accelerate Program, which is aimed at providing incentives for customers to accelerate the deployment of Windows Server 2012 R2 with Hyper-V virtualization using EMC's infrastructure. EMC and Microsoft are also working together on the integration of Microsoft Private Cloud using EMC's VNX storage.

Microsoft recently became the second-largest cloud-services provider, behind Amazon's (NASDAQ: AMZN  ) AWS, after its cloud recorded a blistering growth of 154% in the third-quarter of fiscal 2014 year. Microsoft's cloud is growing the fastest among the major cloud-services providers, at almost twice the rate of IBM's cloud, which grew 80% during the quarter. IBM is now the third-largest cloud services provider. AWS grew 67% over the same period.

That growth gave Microsoft's commercial cloud an annual run rate of $2.9 billion. At this rate, Microsoft's cloud could overtake AWS, in sheer size, in as little as 4-5 years. EMC will no doubt benefit immensely from being the chief storage and data protection infrastructure provider for the fastest growing cloud.

EMC has of late decided to go the Cisco route, and decided to build its own hybrid cloud instead of being contented with just being a cloud infrastructure provider. The storage equipment manufacturer vowed to build its own hybrid cloud solution in two days flat during its EMC World event in Las Vegas.

EMC's hybrid cloud will be based on a software-defined data center architecture comprising technologies from the company's storage and data protection technologies.

Marriage with Cisco on the rocks
While EMC has a robust working relationship with Microsoft, its marriage with Cisco appears to be on the rocks. Cisco's VCE, or Virtual Computing Environment, joint venture with VMware has been ongoing since 2009.The  VCE project is currently in grave danger of becoming a lead balloon. VMware will, perhaps, shoulder majority of the blame for the wrecked marriage since the relationship started developing cracks when it acquired Nicira, a SDN start-up, last year.

Cisco returned the favor by acquiring WhipTail, a storage memory and data systems manufacturer to shore up its UCS, or unified computing system, this year. EMC has traditionally been Cisco's provider of UCS storage components. Interestingly, Cisco also announced it plans to build a giant federated intercloud on the OpenStack platform, and not on VMware as many would have expected.

Foolish takeaway
It turns out that EMC's decision to acquire ScaleIO, whose features closely resemble those of VMware, was actually well thought out (unless the company paid too much for the acquisition). ScaleIO scales a lot better than VWare, and also supports a wider variety of servers. The company can, therefore, appeal to a wider market using the new platform.

Meanwhile, EMC's strong working relationship with Microsoft in the cloud could prove to be a major revenue boon for the storage equipment company since Microsoft's cloud is growing the fastest among all major cloud services providers.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 17, 2014, at 8:14 PM, mrberry9 wrote:

    There are many ways to compare EMC, IBM and other vendors. It seems like nearly every conversation starts with total cost of ownership (TCO) and capacity utilization. But you also need to understand how it's being measured.

    First, the total cost of ownership is much higher than many people expect. Second, even industry experts often don’t agree on how to measure costs. From a business perspective, both issues are problematic. Storage is a significant, and growing, part of most IT budgets, so costs need to be managed. But how do you assess efficiency, if everyone uses a different measuring stick?

    To help address this challenge, International Technology Group (ITG) applied their industry recognized "Cost Benefit analysis model" to data and storage management, critical elements for software defined storage] and efficient data center operations. ITG looked at storage deployments managed using EMC, VMware and IBM solutions.

    The ITG Cost Benefit Analysis of IBM and EMC storage management solutions studied deployments with between 1.5 to 4.3 petabytes of raw disk storage, across telecommunications, financial services and manufacturing industries. Based on user reports, ITG estimates IBM delivered 72% lower storage Total Cost of Ownership than EMC. The study concludes IBM can save up to $11 million per petabyte over 5 years. For a large enterprise with typical storage capacity and data growth rate, savings could add up to a cool $50 million. What could your organization do with millions in extra cash?

    ITG Management Report: Cost/Benefit Analysis of IBM Virtual Storage Center Compared to EMC Storage Virtualization Solutions -

    ITG Management Report: Cost/Benefit Analysis of IBM Virtual Storage Center Compared to VMware Tools for Storage Virtualization and Management -

  • Report this Comment On June 12, 2014, at 6:14 AM, Sudipta wrote:

    I will agree with mrberry9 here. When all the companies are offering software defined storage in some form, the real way to evaluate the performance of new capabilities are though the cost incurred by the company and the long term ROI.

    BTW, I would love to know the source for putting Amazon as the leader in cloud service provider. As much I know IBM is way ahead than Amazon, saw it in an IDC report too.

    IBM Ranked No.1 Cloud Computing Provider in US

    IDC survey puts IBM, Cisco and HP ahead of AWS, Google and Azure for IaaS

    Report: IBM Named #1 Preferred Provider of IaaS Cloud by Enterprises

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