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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

October 19, 2011 at 6:43 PM

EMC’s Tucci on Seattle jobs, IT spending and Steve Ballmer

Expect dramatic growth in Seattle from tech giant EMC.

The company on Wednesday reiterated plans to hire 200 people at flashy new offices that opened last month on the south edge of Pioneer Square, alongside the Alaskan Way Viaduct.

Already the company has about 700 employees in the region, mostly at Isilon, the data storage company started by a RealNetworks veteran that EMC acquired in December for $2.25 billion.

Seattle’s going to be EMC’s fastest-growing research and development center, outpacing the growth of centers in North Carolina and Silicon Valley and its headquarters in Hopkinton, Mass., near Boston.

Joe Tucci Headshot.jpg

“You take greater Seattle, this has the potential to grow into the thousands, for sure,” Chief Executive Joe Tucci (left) said in an interview Wednesday.

Isilon moved three weeks ago from Western Avenue offices to Pioneer Square, where it employs 430 but has room for 690, according to founder Sujal Patel. He said the 200 new jobs will be filled over the next 15 months.

“These are jobs that pay well and really add significantly to the local economy,” said Patel, (left, below) who is now an EMC president.

Seattle Mayor Mike McGinn also spoke at a press event Wednesday, praising the company for contributing to the vitality of Pioneer Square, which he described as “a work in progress.”

Sujal Patel Headshot.jpg

None of the dignitaries noted the irony of a Boston-area company choosing an office adjacent to Seattle’s Big Dig project, even though the windows looked out on a fleet of equipment ready to start replacing the viaduct with a tunnel.

Tucci expects EMC to grow through the turmoil in Seattle and the world economy.

EMC is one of the largest beneficiaries of the shift toward “cloud” computing, with companies and governments around the world using its storage hardware, virtualization software and security products to build their next generation of information-technology systems.

On Tuesday, the company announced in its quarterly report that sales grew 18 percent to $5 billion during the past quarter. Tucci said EMC should outpace the tech industry over the next year, when tech spending is likely to be slowed by economic concerns.

Even before acquiring Isilon, EMC was building up a presence in the Seattle area, in part by recruiting former Microsoft executives.

After buying data backup service Mozy, EMC moved the company headquarters to Seattle and hired Microsoft veterans to lead the business. Also located here is a satellite office of its VMware subsidiary, which is headed by former Microsoft executive Paul Maritz.

Another top EMC executive is Rick Devenuti, Microsoft’s former chief information officer and a Federal Way native, and its board of directors includes Mike Brown, a University of Washington graduate who was Microsoft’s chief financial officer in the mid-1990s.

Yet Tucci denied that he’s been targeting employees of his personal friend, Steve Ballmer.

Here are edited excerpts from the interview.

Q: You reported strong earnings this week yet talked about seeing hints of a slowdown in tech spending. What’s happening?

A: I think when the smoke clears this year IT growth will be in the 5 to 7 percent range, and I expect there again to be IT growth next year, that’s the good news. I said I expected that growth to be somewhat slower than the 5 to 7 percent.

Because there’s so much angst about next year I wanted to get those couple things out there. We believe that the markets that EMC focuses on will grow faster than the IT average and we expect EMC to grow faster than that in the markets we serve.

Q: Is tech spending slowing because the transition to the cloud has happened — and companies have already bought their new systems — or are we still early in the cycle?

A: No. We’re early in that cycle. Everything you’re seeing now – because of the budget issues that are faced in many parts of the world, whether it’s in Greece, Spain, Italy, Portugal, Ireland or the whether it’s the deficits that the U.S. is running – there’s angst building up around that, some psychological, some real.

I think it’s all around that. I don’t think it’s anything around IT. I think IT still will grow if an economy slows down a bit because there is a drive for productivity gain. There’s no way to get productivity gain in any industry I’m aware of without using information technology.

Q: I think of what you’re selling as “next generation” IT infrastructure …

A: Right, companies have to move to this more flexible IT infrastructure or they will not be competitive in the future. That’s why I believe that what we’re trying to do — this intersection of cloud and big data — is a good one.

Q: Is this still a Western phenomenon or are companies in developing countries — China and Brazil, for instance — also moving to this new infrastructure?

A: Absolutely. I’ll tell you why. It’s coming out of the Western countries, mostly the U.S., but the benefits are clear. [Developing countries] don’t have as much legacy to worry about in a lot of those developing economies so they can skip.

You go to Africa and look at some of those developing economies. They are skipping building out a wireline infrastructure for communications; they’re going right to cellular. Some countries are going right to 4G. These countries that don’t have as much legacy [IT] as we have will I think adopt some of these new technologies very quickly.

Q: Is your equipment powering services that consumers use and touch nowadays?

A: We don’t have much technology that touches the consumer directly. It’s kind of the Intel inside story, right?

When big medical companies build these big clouds to decode DNA, for instance, or get better management of healthcare – those big clouds and data centers will be our technology helping power them, as opposed to something a consumer might recognize themselves.

We have a few products. We own Iomega. We have the Fusion product, which VMware sells to Apple customers to run Windows. We have Mozy, which does consumer PC backup, but it’s a tiny percentage of our company. Our big R&D efforts are in the data center area, the infrastructure area.

Q: With Mozy, you started building a consumer business but changed course.

A: That’s exactly right. I’m a big believer in experimenting, running pilots. At the end of the day I didn’t think it was our core strength and kind of brought us back but we learned a lot and it was relatively a small amount of money. And that’s how you learn.

You can’t say “I’m so brilliant, every decision, everything I try is going to be a home run.” You’ve got to basically try some things.

But then you can’t be so proud that you say, “OK, I’m going to keep doing it.”

So what we’ve done is we have pulled back. The Mozy assets we’ve aimed toward SMB [small to mid-size businesses]. We’ve now aimed some of those assets to do a cloud foundry, which is a reachout to the development community to have a free place to come and develop using the fourth or fifth generation of tools and frameworks.

Q: Is that what the Mozy team in Seattle is working on?

A: They’re working either on the transition to SMB or using parts of that infrastructure as part of our cloud foundry. It’s a great asset — we have over 100 petabytes of storage there, managing lots of information — and we’re going to kind of repurpose it a little bit, move it toward areas that are important to us.

Q: Even before Isilon, you were in Seattle hiring a lot of Microsoft veterans. What’s going on there?

A: There’s no targeting. I’m a big fan of Microsoft. I’m a personal friend of Steve Ballmer’s. I think he’s a great guy and a good executive, so there’s certainly no targeting.

Maybe there’s some great people they took from us. I don’t have an example in my head; it’s just part of the overall way business works.

Q: I wonder if some of those Microsoft vets influenced your decision to create this R&D hub in Seattle?

A: Obviously I’ve made many trips out here myself — mostly Microsoft-related — so I wasn’t immune to the way this talent was growing out there. But what crystallized it was Isilon. It really was.

Having a big hub out here via Isilon, all of a sudden you pick up your head and say this is something special happening out here, we should be a bigger part of it.

Q: Will this be as big as your hubs in Boston or North Carolina?

A: They’ve been there a long time. Greater Boston, we have 9,000 people there. Is the potential there? Sure. You take greater Seattle, this has the potential to grow into the thousands for sure.

Q: Does the turmoil at Hewlett-Packard create opportunity for EMC?

A: I don’t worry about what HP is doing, I’ve just got to play our game.

Q: Are you selling head to head against Amazon Web Services and Microsoft Azure, or are they going after smaller projects than your stack of cloud offerings?

A: It’s interesting. If you look at the cloud I am convinced that you can take companies that have big data centers today, for all the good they can do, they can basically have a chance to consolidate them, use newer technology, build them out with x86 [PC] infrastructures, put a cloud OS on them and get tremendous benefit within their own data centers. We call that the private cloud – massive opportunity.

For things like bursting when you hit a peak, like a retailer hits between Columbus Day and early January, prototyping some test and development, some lower tier of important applications — Amazon is showing there are uses for those in the public cloud.

What we’re trying to do is have the same sets of technology used on the public and private side. So basically we’re having tremendous success selling to companies to put in private clouds. We’re working with service providers and telcos to put up a series of public clouds and give our companies, our customers, the ability to federate between the two. So that’s our model.

Q: How about Microsoft’s Azure?

A: I think what Microsoft really in their hearts want to do is say, “Ggive me your apps, I can run them better than you can and I’ll give you great economies.” So run your Office suite, run your SharePoint, run a whole set of their applications in their clouds.

But they will also try to use Azure and let customers use that in their private clouds, too. Microsoft’s strategy will be like ours, but they will come into it backwards from ours.

Q: Why are people so down on Ballmer?

A: I don’t know, I like Steve. I think he’s a first-rate CEO.

Q: But you’re competing head-to-head with him, right?

A: Look, I’m the kind of guy, when we’re on the field of battle, I am going to beat you. I’m going to try everything I can to beat you. I’ll play by the rules but I’m going to tackle you as hard as I can.

I can respect the competitor, and after that we can go have a beer together, OK? I don’t know why you have to take these things personal — it’s business.

I think Steve would say the same thing. Steve’s as competitive as anyone I’ve ever met. But I think Steve would say, “Yeah, but after the game, I respect Joe, I’ll have a beer with him.”

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