The scale of IT is growing immensely and for firms it is about harnessing that immense power
Adrian McDonald, president of EMC Corporation for Europe, Middle East and Africa spoke exclusively with The Edge about how the IT company has evolved over the years, how technology is impacting business strategy and the challenges in securing employees to fill the increasingly high-skilled positions the IT sector is demanding.
You have worked at EMC since the 1980s, can you tell us about how the company has changed over time and your role there?
When I joined EMC there were 700 people globally. The company was founded in 1979, back then we had just moved into the form of IT that we are now known for. At the time we were selling memory boards, it was quite different, they were closed markets around IBM, Hewlett-Packard, Prime and Digital Equipment Corporation.
So as a firm once you bought the system there was no more competition, we, in essence instituted competition around system enhancement in the add-ons and upgrades environment. That was the big change agent for EMC. At the time the company was doing USD125 million (QAR455 million) in sales with 700 people.
We used to sell and do the service ourselves, the sales people. I would not recommend that going forward. EMC alongside Dell was the fastest growing IT company in the world in the 1990s, we then moved into storage systems, the thing we have, I guess, become known for, and so it was a storage system based company throughout the 1990s. Then from 2000 to 2010, we started to focus much more on information infrastructure. We realised there is no point having storage without backup recovery, archiving without security or without content management, so you might say an expansion of the value proposition.
Did you move into these areas because you had to?
As in all these decisions, because it is desirable and because you have to, so it is playing both offence and defence. People often ask me what made EMC, what EMC is, and my answer is always, the ability to change and to lead. At that time it meant giving a full portfolio of information infrastructure, product and services. Nowadays, it needs something different.
We are going through a fundamental change in the IT industry; we are going through a fundamental change in business. Increasingly, business is IT. Even government is IT. If you want to provide a service to a citizen, it is primarily IT-driven nowadays which is causing immense changes in IT and likewise there are things that are possible in IT that were not possible just a few years ago.
Among all this massive fragmentation in IT, I would say that the entire market is up in the air, the whole USD2.5 trillion (QAR9 trillion) to USD3 trillion (QAR11 trillion), and we are currently waiting to see where it lands. The scale of IT is growing immensely and for firms it is just about harnessing all that immense power.
When you say, “things are up in the air”, and people are not sure about how these technology trends are going to play out, are companies apprehensive about investing in these technologies, and if they do not invest now, are they going to be left behind?
There is actually a number of ways of answering this question. So number one, they know they have to. There is no chief information officer (CIO) out there that does not feel exposed about the fact that IT is now, the centre of business and is not getting beaten up by the board on a daily, weekly or monthly basis. So today, do they know they need to invest? Yes.
The other question is where and how? And I will tell you right now, there is actually so much choice and so much fragmentation that if anything CIOs are reticent to make big career influencing bets. They are tending to pick a path, and they are trying to make smaller decisions that move them towards that path, so things that make a return within six to 18 months from a return on investment point of view.
But I think that is going to change as things become more clear. Then people will start to make bigger bets and we feel that coming back hopefully. You know the next wave of the IT industry because obviously IT at the moment is, in stock market terms at least, in a lull. We always have a kind of three-year shoot forward and then we have a lull for a little while and then we have another shoot forward again. Therefore, in our industry, we also have another big shake out, some companies were very strong in what we call a second platform of IT will not make it, they will not be able to change. Thankfully, we are very strong in second platform of IT and we leave a great deal of benefits for our customers there today but we are also possibly the strongest in third platform.
You have to do a dance in both areas to provide all the benefits today in second platform but to bring leadership and relevance for your customers in the new ways of doing IT going forward. So we are spending 12.5 percent of sales reinvested into research and development. Nowadays, that means USD3 billion (QAR10.9 billion) worth of spend, primarily working on integrating technologies going forward.
Is that the big challenge and opportunity now, to bring all these technologies together?
Yes, that is right. We have platforms in the business that it continues to build out. We also acquire, we have become skilled at acquiring in the last 14 years or so, since Joe Tucci our CEO came on board, and there is a great engineering effort to make sure that we can make this one contiguous stack for our customers. With one contiguous stack we believe that everyone should buy the whole stack, but we are also engineering in choice.
We believe one of the big subthemes here is that no one wants to get locked in and we have all been through the mainframe wave, and there are still people who are locked in to mainframes from the 1970s, today. We are really trying to lead with a preference, we are trying to lead with, I think technological innovation that no one else has, but we are also hardwiring in the ability for choice.
Going back to your mergers and acquisitions strategy, can you talk about that? EMC spent a lot since the 2000s and how important have acquisitions been for growth?
It is massively important as we spend on average USD2 billion (QAR7.28 billion) to USD3 billion (QAR11 billion) on acquisition, and ultimately the market’s moving so quickly you have to constantly adapt to where you think you are going to need to be a few years from now. Thankfully, Joe Tucci has been very adept at doing that. A number of years ago, I got to spend a great deal of time in the US. Joe outlined exactly where he thought industry was going, he was 100 percent correct.
And if I look at the acquisitions we have made, obviously VMware’s been incredible, RSA has been phenomenal, lot of the acquisitions that we have put together around our backup and recovery portfolios have worked out phenomenally well, basically there is not a loser amongst the portfolio Joe has put together. We will be acquiring more, we will be an acquisitive company and it is because we aim to build out this world beating automated information infrastructure platform.
So where do you see growth going forward? Is there a lot of innovation and acquisitions of startups on the B2B side?
What is the business nowadays? Any company, a bank, is a good example, there are only two things and you talk to the CEOs of banks and they would say the same thing. All it is, is a brand and a factory, so within the factory you can have a number of different things, in a finance organisation most of the factories are IT. I mean all the bank does is quote on money, quote on opportunity, deliver that to a customer, calculate risk, build profiles for a business going forward. It is all driven by IT and it comes to an answer through IT.
Likewise, once you drive a brand, how do you drive a brand nowadays? You have traditional marketing tools but the main way is social media.
So the digital customer experience has become critical for companies. That is probably why the big money, the kind of high profile acquisition of USD20 billion price tags are in that space. But what we do enables things like social media, if you do not get our bit right, which is let us say more factory orientated, you do not have the platform to do the fancy digital customer experience thing and within business that is well understood.
So do you think there is a lot of demand? Are you seeing a lot of demand for these technologies in the Middle East?
Absolutely, I mean let us face it, Qatar and the Middle East are in a boom phase at the moment and I would say an actual fact, in our studies, and we intimately studied each market particularly in the Middle East, we see a profile of investment and a willingness to get to the new thing that is higher than the rest of the world. So one of the trends that we have seen is that Europe with the recession is more prone to try to save money and not necessarily thinking of new ideas. Whereas we saw Russia and Middle East and Africa in a different place looking for the new opportunity, investing for change. Most importantly it went very well in the Middle East and clearly it also helped to build a larger base of skilled people in their industry.
As a tech company, how much of a challenge is it finding skilled people? And how much time do you spend trying to find the right people?
It is a massive subject. This year, we are committed for the market to be USD25 billion in sales, by 2016 we are committed to be at USD30 billion, so we want to double the company in a hurry. Today we have 65,000 people and we are going to need to double that in the near future. Candidly, there are not nearly enough skilled people in our industry to go around.
Clearly this will have an impact on wage inflation to some degree, but secondly, the bigger fear would be, would we have to slow down, would we have to not run at the pace we want to run if we do not have enough efficient and skilled people in each of these areas. That is why, for example, we have a number of side programmes with some of the bigger technical universities globally to develop curriculums around some of the new IT subjects. So for example, in the Big Data analytics there is a massive worldwide shortage in data scientists. So we have a whole programme to try and produce more data scientists globally in the world, to help us get to what is possible fundamentally earlier. Likewise, in research and development, in our technical pre-sales community, we have an active programme to get in people, probably with two years experience before they get to us, but then we accelerate their development from there. That has been the focus for us, and we look to put more and more of you know, you might say… tech college facilities into the field and probably build those up.
So will there be a time when this demand will catch up with the supply?
Hopefully. You know it is a nice problem to have, if you think about it. I think our industry is one of the most paranoid of all. Before this, everyone was worried that there would be a great deal of unemployment in our industry, that we would automate things to such a degree that we would not need all these IT people anymore and now the fear is, we are not going to have enough. Current studies show that while productivity is going to increase immensely, so for example, in terms of how one runs IT, a single person will be able to run 10 times the amount of IT that they could have done previously. This would mean massive productivity gains, but we are still going to need more people.
Now we are going to need them in newer skill areas so there is a subtle change. We will not need so many people to just run large IT systems, increasingly IT systems will be highly automated. We need many of those skills to transfer to some of the newer areas such as data analytics, security analytics. IT gets to, I think, make a bigger difference in the world, both, commercially and in governmental terms, employment goes up and we all get to learn more.