EMC Lowers Prices, Reins In Sales Force
Stiffer competition forces vendor to change its approach
Computerworld - Talk to any number of EMC Corp. customers and they will relate stories of a time not so long ago when the storage vendor's salespeople would walk into their office, write a price for a disk array or software package on a piece of paper and say, "Take it or leave it."
But those days are gone, said most of the 10 EMC users interviewed by Computerworld this month.
EMC's once arrogant and unbending sales force is quickly changing into one that will bargain with customers and even undercut major competitors such as IBM, Hewlett-Packard Co. and Hitachi Data Systems Corp., the users said.
"Today, if you get a better deal with IBM, HP or Hitachi, EMC will come back and say, 'Give us another shot,'" said Lev Gonick, CIO at Case Western Reserve University in Cleveland. The school recently added 5TB to its installation of EMC's Clariion midrange disk arrays, giving it a total storage capacity of 35TB.
Darko Dejanovic, chief technology officer at Chicago-based Tribune Co. and its Tribune Publishing Co. subsidiary, said that when he first met with EMC early last year to negotiate a purchase of several Clariion arrays, the storage vendor's salespeople were extremely unpleasant to deal with. But EMC went to great lengths on pricing to win the order from Tribune, which wasn't an existing customer.
"Hitachi squeezed them really bad," Dejanovic said. "We almost went with Hitachi storage. The reason we went with EMC is that they gave us some good discounts on their boxes. We were kind of virgin territory for them."
Dejanovic added that by the time he met with EMC again in December to buy three more Clariion arrays, its salespeople had progressed in attitude from a "zero" to a 70 out of 100 on his satisfaction scale.
Darko Dejanovic, CTO at Tribune Co. and Tribune Publishing
With storage hardware becoming more of a commodity and EMC no longer the clear leader in the disk array market from either a technology or sales standpoint, CEO Joe Tucci acknowledged that his company had no alternative but to become more competitive on pricing. Tucci also said he has "trimmed some of the extreme edges" off of EMC's sales force by firing workers who didn't get the message that they were expected to be less haughty with users (see interview, Quicklink 46358).
However, some users and analysts said EMC's acts of pricing contrition sometimes are less than meets the eye. EMC now uses lower hardware prices to win new customers or buy its way back into accounts, then tries to make the discounts back on software and services, said Gary Pilafas, a senior storage and systems architect at UAL Loyalty Services Inc., an Arlington Heights, Ill.-based unit of United Air Lines Inc.
"It's still theirs to do," Pilafas said, referring to the fee-based services that EMC offers for tasks such as configuring its Symmetrix Remote Data Facility software and other storage management applications instead of training users to do the work themselves.
On average, EMC still isn't the lowest-cost disk array vendor, said Gartner Inc. analyst Stanley Zaffos. He also noted that EMC has convinced users to pay more per gigabyte for the high-end Symmetrix DMX arrays it introduced last year than it was getting for older modelsa pricing uptick that rival vendors have emulated.
Falling Hardware Sales
But Nick Allen, another Gartner analyst, said EMC has become increasingly competitive on the hardware side over the past 18 months.
The company's hardware sales and market share have fallen along with its prices, according to Framingham, Mass.-based IDC. EMC sold $2.5 billion worth of disk storage systems last year, less than half of the $5.6 billion level it reached in 2000, IDC said, adding that it dropped behind HP in sales during 2003.
But thanks to its recent acquisitions of three major software vendors, EMC can now turn to an expanded software business and growing services revenue to supplement the hardware side. Earlier this month, EMC reported first-quarter revenue of $1.87 billion, up 35% from $1.38 billion a year earlier. Hardware accounted for just 48% of total revenue, EMC said. Software and services contributed 26% and 25%, respectively.
Mark Detert, director of data center and automation operations at Visa U.S.A. Inc.'s debit-processing services unit in Englewood, Colo., said EMC is finally in the game of selling full solutions combining hardware, software and services instead of just "trying to push the Symmetrix like they have for the past 10 years."
Allen said users normally must wield a big club in order to soften up EMC's salespeople on services costs. "They'll give in on hardware and software but not give in on all three unless they're really hungry," he said.
That means an IT manager has to make a large purchase, work at a company that has strategic value to EMC or be good at negotiating to get the best possible deal. For example, it helps to be serious about turning to another vendor if EMC won't come down enough on price, Zaffos said. "If the [EMC] account team recognizes that you want them and that it's not really an honest competition, that will impact the bid price," he added.
Even so, EMC has changed for the better, said David Kadow, director of systems administration and infrastructure at CDC IXIS Capital Markets North America Inc. in New York. Kadow, who has been an EMC user for five years, said the increased competition has transformed its sales staff from pugnacious to polite.
"They've stepped up in the past two or three years and made many changes," Kadow said. "At this point, I feel like we have a partnership with them."
Forecast average per-gigabyte selling prices for disk arrays during the first half of 2004
HP EVA 5000
IBM ESS 800T
Note: All prices are for arrays that use 146GB disk drives and have total capacity of 4TB to 8TB.
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