EMC Targets Hyper-Converged Infrastructure

Just days after reporting respectable numbers for its fourth quarter – $7 billion, up 5% year over year and net income up 12% YoY (but down 6% for the year) – looming layoffs, and that Chairman and CEO Joe Tucci’s future at the storage giant is still to be determined, has announced the VSPEX BLUE Hyper-Converged Infrastructure Appliance. It delivers compute, storage, networking and management powered by VMware EVO:RAIL and EMC software, and can go from power on to provisioning virtual machines in under 15 minutes, said EMC’s Chad Dunn, Sr. Director, VSPEX.

infrastructure is a small part of the overall CI market, but it is growing rapidly, he said. “Many of our customers large and small wish to consume infrastructure this way… we want to make … as consumer-like as possible.”

A week ago EMC combined its and VSPEX businesses into a single $1-billion-plus converged infrastructure organization. The new business unit also includes EMC Enterprise Hybrid Cloud.

“[The] EMC Global Solutions organization now reports into VCE CEO Praveen Akkiraju. The combined team under Praveen will drive the creation and delivery of a full range of converged infrastructure platforms (including Vblock and VSPEX), as well as enabling the development, go-to-market and delivery of both EMC Enterprise Hybrid Cloud and EMC Federation solutions resulting in the industry’s most powerful and differentiated suite of Converged Solutions for the Data Center and Hybrid Cloud,” EMC stated.

For his data center infrastructure predictions for 2015, Enterprise Strategy Group Senior Analyst Mark Bowker blogged that vendors are betting on a shift in thinking among customers where enterprises will no longer want to “accessorize” their existing systems, and will see the light when it comes to converged solutions. ‘Convergence and hyperconvergence can help solve the infrastructure complexity problem, reduce CAPEX expenditures, and, perhaps most importantly, can positively impact IT process and operational efficiency.’

Released in June, the The State of Converged Infrastructure report from Zenoss, primarily focused on North American and multi-national organizations, found that just under half the organizations surveyed are using a converged infrastructure stack and another 44% are considering or planning its adoption. Top vendors included (now EMC) VCE, , , EMC VSPEX, Pure System, and Dell. Agility and efficiencies are the two leading reasons for the consideration and adoption of converged infrastructure.

Released a week prior to the Zenoss study, the inaugural Gartner Magic Quadrant for Integrated Systems estimated the overall market would exceed $6 billion in 2014, with a growth rate of 50% over the prior year. That’s a small fraction of the $80 billion total hardware market, but its ‘continual growth rates (50% or more per year) will pose a challenge to the vendors to maximize share of wallet and margins with a compelling value proposition going forward in the future.’

A recent study from MarketsandMarkets paints a rosier picture, putting the CI market at $11.53 billion in 2014. It puts the Compound Annual Growth Rate (CAGR) at 24.1% through 2019, reaching $33.89 billion.

EMC and Dunn put the CI market at just $4 billion, with a CAGR of 33% through 2017. Their market share numbers were also somewhat confusing, splitting the market into two buckets:

-in the first market break out, VSPEX is the industry leader at 57%, with FlexPod accounting for the other 43%;

-in the second, VCE accounts for 45% of the market, followed by IBM (25%) and HP (20%).

As the market for converged systems continues to mature, EMC will face stiff competition from a range of vendors including HP and Cisco, but evolving its technology and channel partnership strategy will help EMC sustain high levels of revenue growth, stated Technology Business Research Analyst Krista Macomber, following last week’s earnings report. ‘EMC is leveraging its VSPEX reference architecture program and increased control over its VCE systems integration arm following Cisco’s reduced stake in the business in October 2014 as springboards to work with new partners around converged infrastructure.’

In January, EMC expanded its partnership with Lenovo to integrate (formerly IBM-branded) Flex System compute and networking capabilities into VSPEX. This followed Cisco’s announcement of a joint venture with IBM for VersaStack-branded converged systems that compete directly against VCE Vblock systems by targeting third-generation (cloud- big data- and mobile-focused) workloads in midsize enterprise accounts. ‘TBR believes that EMC, in addition to broadening its alliance strategy, will work to incent partners to sell reference architectures and pre-integrated systems to maximize flexibility for customers, and as a result its growth opportunities.’

‘VSPEX is another good example of EMC’s innovative go-to-market efforts; a reference architecture for converged and cloud infrastructure solutions based on its server vendor partners’ platforms and EMC storage hardware and software solutions’, noted Analyst Charles King, Pund-IT. He was commenting following the Lenovo extension, which leverages the companies’ mutually complementary technologies to good effect. ‘But a larger story and greater benefits lies ahead as Lenovo and EMC’s partnership continues to grow and evolve.’

This makes the next recent EMC channel move a surprise. In an apparent what-have-you-done-for-me-lately move, EMC has just trashed its relationship with mega-distributor Ingram Micro, part of a distribution rationalization initiative. Coming just seven months after being recognized as its distributor of the year, Ingram will still be carrying VMware and RSA, but storage – and VSPEX, a recent focus of the partnership – are now no more.

Consisting of modular building blocks, VSPEX BLUE offers linear scalability from one to four 2U/4-nodes. Dunn said it is ideal for infrastructure consolidations, virtual desktops in large remote or branch offices and managed service providers.

One of the key components is VSPEX BLUE Manager, which enables users to access electronic services, such as EMC knowledge base articles. It also simplifies IT management by delivering patch and software update notification that can be installed automatically without interruption or downtime.

VSPEX BLUE will help enterprise IT accelerate the strategic imperative of virtualization/migration to a hybrid cloud, according to a canned quote from ESG’s Bowker. “The appliance is a simple, low-risk path to delivering virtualization, and snaps well into an existing line of EMC solutions. It helps reduce TCO, and ensures availability and flexibility so that enterprise IT can achieve infrastructure excellence and connectivity to the cloud.”

Excluding storage – the bulk of its business – EMC reported 16% revenue growth at VMware and 18% at Pivotal. Demand for its converged infrastructure offerings were up more than 40% for the year, with VCE turning in better than 50% growth for the seventh quarter in a row.

As for Tucci, his contract runs out at the end of the month, and while he had stated that could be shortened or lengthened by several months – or quarters – it appears he will there for the foreseeable future. At the earnings call he said there will not be another contract, but that he will continue to serve “at the will of the Board, the will of the all the employees here and of course the will of our shareholders”. There will be an end, but he and the board “are going to do to make sure everything is smoother succession we can possibly have here.”

Converged infrastructure – and hyperconverged infrastructure – are still small markets, and EMC faces formidable competition from the likes of Cisco, HP, Oracle and IBM. But the growth rates far exceed every other business segment (excluding VMware) it plays in, so continuing to drive this market should eventually pay big dividends.

DISCLAIMER: I am an EMC (and VMware) shareholder.

Author: Steve Wexler

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