Storage strategic inflection points

EMC vs S&P 500 Stock price chart
EMC vs S&P 500 Stock price chart - 20 yrs from Yahoo Finance

Both EMC and Spectra Logic celebrated their 30 years in business this month and it got me to thinking. Both companies started the same time but one is a ~$14B revenue (’09 projected) behemoth and the other a relatively successful, but relatively mid-size storage company (Spectra Logic is private and does not report revenues). What’s the big difference between these two. As far as I can tell both companies have been adequately run for some time now by very smart people. Why is one two or more orders of magnitude bigger than the other – recognizing strategic inflection points is key.

So what is a strategic inflection point? Andy Grove may have coined the term and calls a strategic inflection point a point “… where the old strategic picture dissolves and gives way to the new.” In my view EMC has been more successful at recognizing storage strategic inflection points than Spectra Logic and this explains a major part of their success.

EMC’s history in brief

In listening this week to Joe Tucci’s talk at EMC Analyst Days he talked about the rather humble beginnings of EMC. It started out selling furniture and memory for mainframes (I think) but Joe said it really took off in 1991, almost 12 years after it was founded. It seems they latched onto some DRAM based SSD like storage technology and converted it to use disk as a RAID storage device in the mainframe and later open systems arena. RAID killed off the big (14″ platter) disk devices that had dominated storage at that time and once started could not be stopped. Whether by luck or smarts EMC’s push into RAID storage made them what they are today – probably a little of both.

It was interesting to see how this played out in the storage market space. RAID used smaller disks, first 8″, then 5.25″ and now 3.5″. When first introduced, manufacturing costs for the RAID storage were so low that one couldn’t help but make a profit selling against big disk devices that held 14″ platters. The more successful RAID became, the more available and reliable the smaller disks became which led to a virtuous cycle culminating in the highly reliable 3.5″ disk devices available today. Not sure Joe was at EMC at the time but if he was he would probably have called that transition between big platter disks and RAID a “strategic inflection point” in the storage industry at the time.

Most of EMC’s competitors and customers would probably say that aggressive marketing also helped propel EMC to be the top of the storage heap. I am not sure which came first, the recognition of a strategic inflection like RAID or the EMC marketing machine but, together, they gave EMC a decided advantage that re-constructed the storage industry.

Spectra Logic’s history in brief

As far as I can tell Spectra Logic has been in the backup software for a long time and later started supporting tape technology where they are well known today. Spectra Logic has disk storage systems as well but they seem better known for their tape and backup technology.

The big changes in tape technology over the past 30 years have been tape cartridges and robotics. Although tape cartridges were introduced by IBM (for the IBM 3480 in 1985), the first true tape automation was introduced by Storage Technology Corp. (with the STK 4400 in 1987). Storage Technology rode the wave of the robotics revolution throughout the late 80’s into the mid 90’s and was very successful for a time. Spectra Logic’s entry into tape robotics was sometime later (1995) but by the time they got onboard it was a very successful and mature technology.

Nonetheless, the revolution in tape technology and operations brought on by these two advances, probably held off the decline in tape for a decade or two, and yet it could not ultimately stem the tide in tape use apparent today (see my post on Repositioning of tape). Spectra Logic has recently introduced a new tape library.

Another strategic inflection point that helped EMC

Proprietary “Open” Unix systems had started to emerge in the late 80’s and early 90’s and by the mid 90’s were beginning to host most new and sophisticated applications. The FC interface also emerged in the early to mid 90’s as a replacement to HPC-HPPI technology and for awhile battled it out against SSA technology from IBM but by 1997 emerged victorious. Once FC and the follow-on higher level protocols (resulting in SAN) were available, proprietary Unix systems had the IO architecture to support any application needed by the enterprise and they both took off feeding on each other. This was yet another strategic inflection point and I am not sure if EMC was the first entry into this market but they sure were the biggest and as such, quickly emerged to dominate it. In my mind EMC’s real accelerated growth can be tied to this timeframe.

EMC’s future bets today

Again, today, EMC seems to be in the fray for the next inflection. Their latest bets are on virtualization technology in VMware, NAND-SSD storage and cloud storage. They bet large on the VMware acquisition and it’s working well for them. They were the largest company and earliest to market with NAND-SSD technology in the broad market space and seem to enjoy a commanding lead. Atmos is not the first cloud storage service out there, but once again EMC was one of the largest companies to go after this market.

One can’t help but admire a company that swings for the bleachers every time they get a chance at bat. Not every one is going out of the park but when they get ahold of one, sometimes they can change whole industries.