Audio: EMC CTO Jeff Nick on the Company's Tech Priorities
EMC's chief technology officer, Jeff Nick, was on the opening panel at the XSITE 2009 conference at Boston University this morning. We sat down for a few minutes to chat about the tech themes currently on his radar screen (virtualization and the "private cloud" among them), and also what's up with EMC's consumer division, Decho (which includes Pi Corp. and Mozy.)
The 13-minute long MP3 is here, or you can just click play below.
"Cloud computing will change how we do IT, end-to-end, over the next five years," says Chuck Hollis, vice president of global marketing at EMC, the Hopkinton-based storage firm. "It's like in the early 20th century, if you were a manufacturer, you had to build your own power plant. But eventually, you had the option to buy your electricity from the grid, and let someone else worry about how it was generated. Corporate data centers are going to have that kind of choice, too."
David Friend, Carbonite, and the Case of the Employee Reviews
The folks at EMC were kind enough to point out this blog post by David Pogue, which exposes the embarrassing issue of some Amazon.com reviews that were posted by employees of Carbonite. In 2006, two Carbonite employees posted glowing reviews of their company's back-up service. They used their real names, but didn't disclose that they worked for the company. Carbonite competes with Mozy, an online backup service owned by EMC.
I called Carbonite CEO David Friend this morning to find out what was up. He acknowledged that not disclosing that the Amazon reviewers were connected to the company was a mistake. "We had eight employees at the time but no sales," he said. "Frankly, every little company does that kind of stuff." But since 2007, he said, the company has explicitly prohibited posting-sans-disclosure as part of its policies.
Friend added that Pogue didn't contact him before he published yesterday's blog post -- which was based on info from an ex-Carbonite user using a pseudonym; Friend has since posted a comment on Pogue's blog.
Consumer-Oriented Online Storage: Mozy vs. Carbonite
Sunday's Globe column looked at how Carbonite and Mozy are building the market for consumer-oriented online backup services. Carbonite is a Boston-startup funded first by CommonAngels; Mozy is a Utah start-up acquired by EMC in 2007.
From the piece:
Mozy and Carbonite are two of the leaders of the online backup business, a rare bright spot in a gloomy tech economy. Rather than buying their own hard drives to save a copy of their data, consumers and small businesses pay a fee (Mozy's is $59 a year, Carbonite's is $50) to send their information securely over the Net, and have Mozy or Carbonite keep a copy that can be retrieved any time. IDC, a Framingham research firm, predicts that online backup services will generate about $715 million in annual revenue by 2011.
The big question is whether a start-up like Carbonite, with 125 employees and $47 million in venture capital, can capture a bigger piece of that market, or whether a division of a big company like EMC will have the edge.
Tom Kennedy, who does some communications consulting for Iron Mountain, pointed out to me that that Boston company also offers online PC backup. I should have included them, even though none of the reviews I could find of consumer back-up services mention their Connected Backup for PC offering. (Perhaps because its pricing is much higher than Carbonite's or Mozy's?)
This past Sunday's Globe column focused on eight rules for surviving the recession. It mentions companies like MessageSling, EMC, VistaPrint, Cubist Pharmaceuticals, and Cognex Corp. Here's the opening:
There are two predictions that no businessperson in Boston is ready to make: how bad this recession is going to get, and how long it will last.
"I'm afraid it's gonna be longer than six or 12 months," says Michael Bonney, chief executive of Cubist Pharmaceuticals Inc., a Lexington drug developer. "This is the biggest economic disruption since my parents' youth in the 1930s."
"This will not be easy to fix," says Robert Shillman, chief executive of Natick-based Cognex Corp. "People are in a gloomy mood, and if enough people feel like they shouldn't be spending money, you get into a downward spiral."
...So what do we know about how the economic climate of the coming year will affect our region's innovation economy? In talking last week with a dozen CEOs, chief financial officers, and venture capitalists, some common themes surfaced.
The video is an interview with Chris Marstall, a Cambridge software developer who runs the Web site Tourfilter.com. He talks about the merits of a one-person start-up with unbelievably low operating costs.
Good Management or Bad Management? EMC's Firing of VMware's CEO
Ashlee Vance has a great story in this morning's NY Times, dealing with Joe Tucci's firing of Diane Greene, the CEO of the virtualization pioneer VMware (publicly-traded, but majority-owned by EMC.)
Here's the opening:
In the summer of 2007, Diane Greene was lauded as a business hero for leading VMware, a maker of business software, to the hottest stock debut since Google. But in the ensuing year, despite her popularity with employees and on Wall Street, her relationship with her directors, and especially VMware’s chairman, Joseph M. Tucci, grew increasingly chilly.
On July 7, she found out just how cold it had become. After Ms. Greene made a special presentation to VMware’s board, Mr. Tucci, who heads VMware’s parent company, EMC, pulled her aside, according to people familiar with the events, who asked for anonymity because they were not authorized to discuss internal company decisions.
Inviting Mendel Rosenblum, Ms. Greene’s husband and the co-founder of VMware, into the room, Mr. Tucci told Ms. Greene she was fired, effective immediately. And he said the board wanted Mr. Rosenblum, VMware’s chief scientist, to take her seat on the board. Mr. Rosenblum declined the offer.
When Ms. Greene’s firing was announced to investors the next morning, VMware’s shares plunged 24 percent, and the high-flying company was thrown into a tailspin from which it has yet to recover.
Check out this press release noting that VMware (before Greene's firing) had been named one of the Top 100 IT companies of 2008. EMC was also on the list, but much lower than VMware.
You could view this situation in one of three ways: either Greene was better-suited to leading an independent, fast-growth tech company, and wasn't working well with her corporate overlords...or EMC is not great at managing entrepreneurial folks who may sometimes have strategic disagreements (or personality clashes) with top leadership...or a little bit of both.
Either way, EMC (and Paul Maritz, the EMC exec who took over Greene's post) has a lot to do to prove that Greene's firing isn't a major setback for VMware. VMware's stock has been sagging since the firing, and its chief scientist, Mendel Rosenblum (yes, Greene's hubby), just quit to go back to academia. The head of product also left recently, too.
Big Tech Companies in New England: An Impossible Dream?
Last Sunday's column focuses (again) on New England's penchant for selling start-ups short rather than building what I call "pillar companies."
From the column:
Maybe I'm a glass-half-empty sort. Maybe I refuse to acknowledge the reality of the financial markets, and the need for entrepreneurs to deliver a return for their investors within a reasonable time.
But I can't help feeling that, whenever a New England company is sold to an out-of-state acquirer for big bucks, we've missed another chance to build a "pillar" company of our own.
When Dell Inc. pays $1.4 billion in cash for New Hampshire's EqualLogic Inc. this year after the storage start-up had filed to go public, it feels as if we've missed the opportunity to cultivate another EMC Corp. in our backyard. When VeriSign Inc. buys m-Qube Inc., one of the pioneers of content delivery to cellphones, for $250 million, that's a potentially significant anchor tenant we've lost for the mobile software com munity here. When Microsoft Corp. buys Softricity Inc., that's a pioneer in application virtualization - delivering software over a network connection - no longer seen as a leading player in the field, and headquartered right here in Boston to boot.
The column includes a chart of some recent acquisitions by out-of-state buyers, and also a video from the recent Y Combinator "Demo Day," where fledgling start-ups show their stuff.
Sunday's Globe column: How non-competes make states less competitive
Yesterday's Globe column attempts to explain how non-competes can make states less competitive by limiting the cross-pollinating effects of people moving from one company to another, or forming new start-ups.
Here's some video of HBS researcher Matt Marx explaining how non-competes work -- and how they worked on him (Matt began his career as a speech recognition engineer in Boston, before moving out to Silicon Valley and then back):
Very simply, big companies like to use non-competes as flypaper, so they don't have to worry about their best employees zipping away when a better opportunity presents itself. (At Future Forward back in November, Art Coviello of RSA/EMC and Paul Sagan of Akamai said as much... Sagan even suggested that a good solution to the problem would be to have California *start* enforcing non-competes.)
Two interesting data points about local companies...
- EMC Corp. had 8900 employees in Massachusetts, and 4900 in California (these numbers include VMware) at the end of Q3 2007. The California numbers were growing *much* faster -- California had added 1400 people since Q3 2006, and Massachusetts only 270.
- Biogen Idec has 1750 employees in Cambridge, Massachusetts, and 400 in San Diego, California.
Why (let me ask rhetorically) do these companies even bother having operations in California if it is so hard to retain top talent without non-compete agreements?
Sunday's Globe column: Building new pillars in the Bay State
I'm saying it: we need a new generation of pillar companies here in Massachusetts, and the wider New England region.
Sunday's Globe column explores what we need to do to start thinking bigger. From the column:
I understand the argument that big acquisitions, like September's $430 million deal to sell Waltham-based Adnexus Therapeutics to Bristol Myers-Squibb Co., return profits to venture capitalists they can in turn invest in new start-ups and allow newly wealthy entrepreneurs to go off and try something else - maybe even a riskier idea.
But we also need to build the next generation of "pillar companies" here - companies like EMC Corp., Genzyme Corp., Boston Scientific Corp., Hologic Inc., and Nuance Communications Inc.
These companies employ hundreds or thousands of people. They're acquirers, not acquirees. They lead industries, set the agenda, and attract the attention of media and Wall Street analysts. Smaller companies cluster around them.
Right now, acknowledges Steve O'Leary, an investment banker with Jeffries Broadview, New England "is a net sellers market, as opposed to a net buyers market." O'Leary, who earns a living by selling tech companies, says, "I'd like to see more of a food chain, from the big companies on down."
Venture capitalist Bijan Sabet has launched a discussion about getting rid of non-compete agreements in Massachusetts -- and I'm glad. In fact, Sabet's firm, Spark Capital, has decided to stop requiring that its portfolio companies ask employees to sign non-compete agreements.
A lot of people say that non-competes aren't a big deal. If you are one of those people, why not read this piece: 'SANgate CEO ruled out of job by EMC non-compete lawsuit.' Non-competes are not enforceable in California, Connecticut, and many other states ... but they most definitely are in Massachusetts.
Other people say that it is impossible to measure what the impact of enforceable non-competes is. And that's sort of true: it's hard to tell how many Raytheon, Analog Devices, EMC, or Biogen employees today have great ideas for start-ups ... or would be more productive working for a start-up ... but they can't do it because they worry about being tangled up in litigation.
But there has been some great data collection recently, by a Harvard Business School PhD candidate named Matt Marx. Marx and two colleagues looked at what happened after legislators in Michigan accidentally made non-competes enforceable in 1985. Inventors were suddenly 34 to 51 percent less likely to move from one company to another. And the "star" inventors were the least likely of all to move. (Marx also provides a history of the non-compete, which traces back to 1414.)
You can read an excellent Q&A with Marx here. The full research paper is here (in PDF form). Here's a cool data point: Marx himself was an engineer/executive at a Massachusetts speech-recognition company, Applied Language Technologies. While Marx wouldn't have been able to jump to another Massachusetts speech recognition company because of our state's enforceable non-compete agreements, he was able to go work at a Silicon Valley speech rec company, because non-competes aren't enforceable there. He says:
At first I thought I wouldn't be able to take the job [in Silicon Valley] given the noncompete agreement I had signed in Boston, but I was nonetheless able to make the move because the California courts generally refuse to enforce such agreements. Ironically, when I returned to Boston a few years later for business school, the founder of the first company [Applied Language] invited me to do some consulting on the side while a student, but I wasn't able to because the Massachusetts courts would enforce the noncompete that the California company made me sign.
But if we want to change the non-compete environment in Massachusetts, we need more than just start-ups and VCs to agree that non-competes are a hindrance. We need the state legislature to change the law. That will require that big companies join in the crusade -- and in recent conversations I had with the CEO of Akamai and the president of RSA Security (now part of EMC), it struck me that they are very unlikely to want to get rid of non-competes.
I have to confess that I did not take copious notes during Future Forward yesterday, a conference I help organize, but I did shoot some video, which I'll post here soon. (Update: video is below.)
But there were some great questions raised, some really insightful comments, and lots of interchange between the speakers and the tightly-packed audience.
The big question in the opening panel, which featured CIOs and CEOs, was whether it makes sense to be the "first one in the pool" when it comes to deploying new technology, or to be a fast follower. Bill Wray from Citizens Bank said his budget doesn't allow him to experiment in too many places, so he tries the latter strategy. George Orlov from Forrester Research said he's creating a sort of sandbox, so that his employees (technology analysts) can play with new technologies they are writing about. Ken Chaisson from Legal Seafoods talked about how some of the company's servers gravitate to new technologies, and that others follow when they see that the first group of servers is turning tables faster and earning more tips.
CEOs Paul Sagan (Akamai) and Art Coviello (former CEO of RSA Security, now a division president within EMC) were up next. Sagan talked about Akamai's near-death experience after the dot-com bubble burst, which required letting go hundreds of employees and getting out of high-priced leases. He also talked about how the company had to focus - quickly - on what he called "permanent economy" customers. I asked whether the start-ups in the room represented the "transient economy." "Too soon to tell," Sagan quipped.
The question of whether the enforcement of non-compete agreements hampers entrepreneurship in Massachusetts came up. Sagan said cheekily that we should lobby California to institute non-competes, rather than eradicating them here. Attorney Gabor Garai from Foley and Lardner, in the audience, seemed to think that they're a real problem. When Art Coviello got on stage, the first thing I asked him was his position. EMC/RSA, of course, likes to hold on to its best employees, and Coviello said non-competes help them do that.
Next, Dan Primack ran a very high-energy panel about VCs, IPOs, and M&A. He started by exploring corporate venture investing ... and particularly the fickle nature of it. Corporations open and close venture groups as the economy changes, and one of the VCs on the panel, Maria Cirino, said that in her previous life as an entrepreneur, one corporate venture arm replaced the person who sat on Maria's board three times in four years. The panel also touched on the problem of big funds (Battery was named) trying to do everything from early-stage deals to buy-outs. There was quite a lot of skepticism about that, but no one from Battery or General Catalyst was present to defend the big boys.
Giles McNamee brought up a very salient piece of data - only one or two percent of companies ever make it to an IPO, so it's quite natural that entrepreneurs consider and explore the M&A route.
After a nice long lunch, we came back to hear from the delightful and insightful artist John Maeda, who works at the Media Lab. I've long been a fan of John's work, but this was the first chance I'd had to see him speak. (TED has a video of a shorter talk he gave about his book 'The Laws of Simplicity,' but yesterday John got a full hour.)
Next, George Colony and Fidelity exec Charlie Brenner sparred on stage about the future of IT. Colony is trying to change the term to BT (business technology), since he says IT people should no longer be talking about information-related metrics (how many records are in a database, or how many queries they handle every day), but rather business metrics, like how much they've increased the average order size on the Web site.
Colony blasted the news media, mentioning the NY Times in particular, for "pumping up Google like they pumped up Amazon in 1997." The degree of hype, he said, is "very irresponsible." Colony was very skeptical that Google can revolutionize the cell phone business, since its new Android strategy will require carriers to work against their natural interests.
The last session, as tradition dictates, is a murderer's row of entrepreneurs, showing new products they're working on. Mark Thirman of AirPrint Networks had a pretty nifty demo, of a small printer that can spool out lottery tickets, movie tickets, or little maps; it communicates via Bluetooth with your cell phone. And Mike Phillips showed off Vlingo's speech recognition technology, which speeds up data entry on cell phones.
One VC in the audience made a telling comment. He asked a question of Vertica CEO Ralph Breslauer, dismissing the rest of the panel as "not real companies" (I'm paraphrasing). Everyone else was a consumer-oriented play, and some have slightly hazy business models. Are Boston area VCs just a wee bit prejudiced toward heavy-duty enterprise tech? Hmmm....
One thing we've started doing is allowing the audience to "invest" play money into the start-up company that they like the best.... as a joke, we put General Georges Doriot on the face of the bills (Doriot was the founder of the first venture capital firm, ARD, and a prof at Harvard Business School.) During the cocktail hour, one of the FF attendees, Tom Hagan, told me that he'd actually been in a pitch meeting with Doriot, early in his entrepreneurial career. Pretty cool ending to the day...
Dell is paying $1.4 billion in cash for Nashua, NH-based EqualLogic. Company is run by Lotus alum Don Bulens, and backed by Charles River Ventures, Sigma Partners, Focus Ventures, and TD Capital. This is a big exit for all involved, since only about $52 million had been invested in EqualLogic. (Earlier this year, Bulens had touted the company as an IPO prospect.)
I had lunch today with a storage industry entrepreneur who suggested that EMC had likely been in the bidding, but dropped out before the price reached $1.4 billion. He also speculated that this could mean the end of EMC's partnership with Dell; Dell's reseller arrangement with EMC accounts for about 16 percent of EMC's storage revenue. The official word from EMC is that there will be no changes to the Dell partnerhship.
EMC needed a play in Web-based back-up. If they didn't get into this business, geared to consumers and small companies, Wall Street analysts would never stop bugging them about why they didn't have a play.
So this week, EMC bought Berkeley Data Systems, the Utah company which runs the online back-up service Mozy. EMC didn't disclose the price, but TechCrunch says its sources peg the tag at $76 million.
What's interesting to me is that EMC didn't make a bigger deal of this acquisition: no quote from nominal EMC CEO Joe Tucci in the release...and they didn't seem to offer Tucci up to the Globe, which ran just a brief item or the Wall Street Journal. The NY Times hasn't covered the news at all, so far as I can tell.
Is that really the way to indicate that this is an important new direction for your company?
VMware Delivers 2007's Best First-Day IPO Performance
VMware, based in Palo Alto but owned by EMC of Hopkinton, went public today. The IPO price was $29, and the stock closed at $51, according to The Wall Street Journal. From the piece:
"Considering their light competition and extreme growth continuing, this may still be a reasonable valuation," said Scott Sweet, managing director of IPOBoutique.com, an IPO-research service in Tampa, Fla., of the company's first-day's gains. Mr. Sweet received shares in the offering for his personal account, but sold them in early trading Tuesday.
Rachel Chalmers, an analyst at technology-research firm the 451 Group, says VMware's virtualization software can reduce office space dedicated to hardware, cut down on the amount of air-conditioning needed to keep servers cool and run upgrades and do maintenance without having to shut down machines. VMware began shipping a new product last year that targets desktop computers, which she says is the next market frontier for virtualization. The company estimates that only 1% of the world's business desktops are currently using virtualization software.
Since its founding in 1998, "VMware has grown faster than any other software company we have come across," says Ms. Chalmers, whose husband is employed by another virtualization-software firm, XenSource.
The Journal also offers a primer on what VMware does, calling it "an unsexy technology with a sexy stock price."
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