Thesis (05/22/12)
"As businesses digitize everything from correspondence to confidential customer information, the amount of data to store, protect, and archive is exploding. With an expansive customer base reluctant to switch vendors and a strong balance sheet to defend its technological leadership, EMC has established a narrow economic moat that will enable it to capitalize on this data growth, in our opinion.
The proliferation of digital files and databases has made storage management a top area of corporate information technology investment. Industry experts project enterprise storage growth will average more than 40% annually for the foreseeable future, though spending growth will be lower as the cost per unit of storage falls. EMC specializes in networked storage, one of the hottest segments of the market. Historically, storage was a set of disks attached to a piece of hardware with a specific purpose. Today, however, the treatment of storage is evolving as technologies such as virtualization are fueling demand for centralized storage that can be carved up as needed and shared by a pool of servers or desktops. As the use case for storage evolves, there is greater demand for increases in performance, flexibility, and energy management.
EMC continues to demonstrate its desire and ability to remain at the forefront of the technology curve. Falling memory prices are beginning to make solid-state drives viable options and a disruptive trend for enterprise storage solutions. With 10 times faster response times and significant energy savings, EMC jumped in front of this trend with the first implementation of SSDs in enterprise arrays, and it continues to break new ground in terms of capacity and performance, recently adding options to take advantage of flash storage solutions directly attached to the server. Additionally, EMC's most recent refresh of its high-end Symmetrix VMAX array expands the firm's reach . Finally, after struggling to internally replicate Data Domain's success in deduplication, EMC put its balance sheet to work and stole the firm from rival NetApp NTAP to cement its technological edge. None of these advances will cement EMC's leadership for the long term, but each move incrementally strengthens the firm's position.
A major reason for EMC's success is the firm's cognizance that the value in enterprise storage lies in software that manages and protects the arrays, not in hardware components comprising commodity disks and standard components. All storage firms share this trait, but EMC takes it to a new level by diversifying beyond storage software into document management, security, and even virtualization software. Recently, EMC has been shifting its storage arrays to run on standardized processors as well, avoiding the custom silicon that has powered these systems in the past. This enables the firm to refocus resources that were committed to the hardware side back to software, where EMC has a better chance of delivering a differentiated product that will keep it firmly entrenched in data centers around the globe."