EMC’s costly battle against upstarts

by Robin Harris on Friday, 12 February, 2016

A few weeks ago Nimble Storage CEO Suresh Vasudevan flagged EMC’s aggressive sales tactics as a key problem for Nimble’s enterprise penetration. We can now put a number on how much this is costing EMC.

For the full year, EMC’s Information Storage group product revenues dropped from $10.785B in 2014 to $10.2B – an almost $600M drop. Gross margins – including services – also fell from 55.5% to 52.3% – over 300 basis points.

In response, EMC has stuck it to their loyal customers by tightening the screws on service revenue: up almost $450M, despite declining product sales. EMC’s traditionally rich services pricing is getting richer.

As a result, total IS gross profit dropped from $9.18B to $8.52B. But the impact of competition is greater than that indicates, because the services revenue and profit is bundled into that gross profit number. If we assume that services profit margins have remained constant – and there is no reason why they wouldn’t – we get closer to the truth of the battle. I estimate that EMC’s lost gross profit is the order of $650M – just from reduced margins – plus another $400 or so from lost business.

The StorageMojo take
Nimble can’t take all the credit for EMC’s Information Storage results. There’s AWS, Google, HDS, Nutanix, Pure, Violin, Scality, and others. But with their direct charge into EMC’s enterprise market, they and Pure have put EMC on a very costly defensive.

Given Nimble’s $300M current annual run rate, and Pure’s $450M annual run rate, EMC is lost more than a dollar in Gross Profit for every dollar in revenue these two upstarts are earning. In the coming quarters I expect EMC IS revenues to shrink even faster than they have been, and the cost of winning sales to grow even more.

Will EMC’s emerging storage products like XtremIO and DSSD be able to grow fast enough to take up the slack? Stay tuned.

Courteous comments welcome, of course. I’ve recently done work for Violin.

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Snow on the rocks

by Robin Harris on Monday, 18 January, 2016

Dial-a-climate
People are often surprised to learn that it snows in Arizona. While much of state is low Sonoran desert – it rarely gets below freezing in Phoenix – altitude is the primary determinant of climate in Arizona.

That’s why it can be freezing on the edge of the Grand Canyon and in the 70s on the Colorado far below. There are parts of Arizona that look like Idaho’s evergreen forests, once you get up to 7 or 8 thousand feet.

My town is at 4500 feet, so it doesn’t look like Idaho. But we get snow every winter, and it is beautiful on the red rocks. I took this picture from my house.

Click to enlarge.

Click to enlarge.

The StorageMojo take
I don’t go hiking when there is snow on the ground – too slippery. Luckily the snow is usually gone in 2 or 3 days due to sublimation in the dry air. That means no slush either!

Courteous comments welcome, of course.

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Paul Graham’s naiveté – MLK day, 2016

by Robin Harris on Monday, 18 January, 2016

In Economic Inequality, Paul Graham – of Ycombinator fame – posted an astonishingly naive essay on income inequality. While many others have written take-downs (see here and here, of Mr. Graham’s factual and logical flaws, there’s another that deserves attention.

The role of entrenched wealth in creating a less just society
The stagnating incomes and declining social mobility of America’s shrinking middle class is well-documented. The role of entrenched wealth in making that so is less so.

The most visible example are the brothers Koch, whose billions have funded conservative think tanks, “astro-turf” advocacy groups like Americans for Prosperity, climate change denial, national debt scare tactics, and many political campaigns for decades. Their work led directly to the infamous Citizens United Supreme Court decision, gutting campaign finance laws.

Who on the side of working Americans is doing the same as the Kochs? Unions have been eviscerated, despite the fact that Europe’s biggest enconomy – Germany – is heavily unionized, with mandatory union representation on company boards. George Soros and Pierre Omidyar – both immigrants – do what they can, but despite their billions they are outgunned.

The Democratic party takes a lot of money from Wall Street and big corporations – they’ve got it, right? – and, most famously, not a single executive responsible for the Great Recession has faced legal action.

The difference is that the 0.01 percent take a long view – decades – while most Americans live paycheck to paycheck. Average Americans don’t have $800 an hour lawyers arguing their views in court or with regulatory agencies. Average Americans can’t call their Senator or Congressman at home to ask a favor or schedule a dinner. Average Americans don’t have Presidential candidates visiting their homes begging for money.

At the same time, average Americans are constantly told by media elites that “government isn’t the solution, it is the problem” encouraging fatalism and cynicism. News flash: America has – despite its many imperfections – the best government on earth. Which is why we are, at our best, a beacon to the rest of the world.

The Silicon Valley bubble
Not the economic one. The data-driven, engineering, “transformational power of technology” one.

That’s where Mr. Graham lives. While I love the Silicon Valley culture, Valley people should recognize that the wealthy of the world often operate in a less savory bubble: naked self interest, greed, self-absorption, and empathy-free.

The problem of storage in a democracy
One problem is the asymetric nature of public policy information. Problems are forgotten while the laws and regulations meant to manage them remain on the books.

Take the Depression-era’s Glass-Steagall act, which kept banking boring – and safe – for decades. After looking at the causes of the Great Depression, Congress passed that law to prohibit the abuses that led to the crash.

In the 1990s, after decades of propaganda funded by entrenched wealth, Bill Clinton signed a bill that repealed Glass-Steagal. It only took 10 years for Wall Street to use its new-found freedom to drive most of the world into a ditch.

Canada, which retained similar laws, didn’t have the housing crisis we did. Nor did they have to bail out their big banks. Today, even Clinton admits it was a mistake.

The StorageMojo take
It is the success of laws and regulations that allows the forces of entrenched wealth to argue that they aren’t needed. But as the recent conviction of a peanut company exec who recklessly shipped products that killed people shows, there are awful people that we need to be protected against.

Whether it is tobacco companies arguing against medical science, oil companies arguing against climate science, or banks arguing against economic experience, the wealthy and powerful are all too often happy to ignore the future misery of others in favor of this quarter’s profits – and their bonuses.

So, Mr. Graham, please step outside the Silicon Valley technocracy bubble and breathe the air the rest of us do. Open up an Old Testament and read what Isaiah and the other prophets said about the wealthy grinding down the faces of the poor.

Ask yourself, has human nature changed in the last 5,000 years? I don’t mind people getting absurdly rich. I do mind it when it leads to abuse of the less fortunate.

Courteous comments welcome, of course. When Martin Luther King Jr. was murdered, there were riots at my high school. Nine white kids managed to fold themselves into my VW bug. Extra credit: Watch the excellent Talk to Me, starring Don Cheadle, tonight.

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Gödel Machines, deep learning and the limits of AI

by Robin Harris on Wednesday, 13 January, 2016

If, like me, you’re interested in AI and deep learning, you’ll like this. Neural networks are all the rage in AI, but there is a newer technology – Gödel machines – that is now a standard part of the AI toolset.

What is a Gödel machine? From the abstract of the paper A Family of Gödel Machine Implementations by Bas R. Steunebrink and Jürgen Schmidhuber of the IDSIA & University of Lugano:

The Gödel Machine is a universal problem solver encoded as a completely self-referential program capable of rewriting any part of itself, provided it can prove that the rewrite is useful according to some utility function, encoded within itself.

Gödel machines run on von Neumann architectures – they are not a new computer architecture. They consist of two main parts:

  • Solver. The solver interacts with some environment and determines utility using a reward function embedded in the machine.
  • Searcher. The searcher seeks to improve the entire Gödel machine in a provably – subject to Gödel’s limits of provability, of course – optimal way.

The Gödel Machine was invented by Jürgen Schmidhuber in 2003.

The limits of AI
As Gödel proved, any formal system that includes arithmetic, either allows for unprovable but true statements, or is flawed. The implication of the former is that since at least one improvement cannot be proved by the searcher, the AI will remain less than optimal.

For an interesting overview of the Gödel Machine, deep learning, and how a program can rewrite itself while running, Schmidhuber’s lecture is an excellent introduction.

The StorageMojo take
This is StorageMojo, not AIMojo. I’m curious about the system architecture running the Gödel Machine and the I/O workload the machine generates. IBM’s Watson runs on a massively parallel system, and I assume a Gödel Machine can too.

I’m also pleased – probably unjustifiably – by the notion that however smart Ais become, they won’t be perfect. Fallibility will always be part of an AI’s nature.

Courteous comments welcome, of course. Please feel free to expand on this topic in a comment.

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Market share: HP & Others up – everyone else down

by Robin Harris on Monday, 4 January, 2016

IDC’s Worldwide Total Disk Storage Systems Market for Q3 2015 had some interesting results. The thumbnail is the title of this post.

But there are a couple more details. ODM vendors – who sell direct to the hyperscale data center customers – had the fastest revenue growth of any supplier at 23.4%. HP’s revenue growth came in second at 16%, while the Others followed closely at 15.2%.

That’s where the growth stopped. EMC was down 8%. Dell down 1.6%. NetApp down 12.8%. And IBM, whose results reflected their sale of the x86 server business to Lenovo, was down 32.5%.

HP turning the corner
HP’s bold bet on 3PAR – which StorageMojo discussed in mid-2014, seems to be paying off. EMC’s disjointed product line – and NetApp’s tired one – aren’t competitive.

Beyond percentages
The most telling IDC number though is the absolute dollars. Out of a $9.1B revenue quarter, fully $3.8B went to Others and ODMs. That’s over 41% of the WW revenue.

Here’s the table from the IDC press release:

Click to enlarge.

Click to enlarge.

The StorageMojo take
It is now clear that modern storage architectures – the Others and HP – are taking share. The reluctance of EMC and NetApp to cannibalize their aged product lines is hitting them where it hurts.

But they are fighting back, as Nimble CEO Suresh Vasudevan recently noted in discussing their recent shortfall:

I would say in our competitive engagements pricing action by the large vendors is by far the most dominant factor that impacted us.

Deep discounts by legacy vendors are slowing down the Others. But that’s a tactic, not a strategy.

Legacy vendors are caught in a market vise between efficient modern architectures and low-cost hyperscale cloud providers. The jaws are closing and it isn’t likely that DSSD (EMC) or SolidFire (NetApp) will be enough to save either one.

Based on his actions, EMC’s Tucci doesn’t believe EMC has a future as an independent company. If NetApp’s board thought about it they’d see that the same is true of NetApp.

Once upon a time Boston’s Route 128 had a thriving flock of minicomputer makers. But the advent of the PC and its enormous volumes made commodity servers ever more competitive and one by one the minicomputer makers failed. A similar dynamic is overtaking the legacy storage vendors.

Courteous comments welcome, of course.

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New year’s eve & new year’s day hikes

by Robin Harris on Sunday, 3 January, 2016

I was under the weather for much of November and taking it slow in December. But for the new year I took a couple of short hikes of 2-3 miles.

On the 31st I parked on Chapel Road and walked the Chapel Trail. The spires in this picture are the Two Nuns. The Chapel in question is a minor masterpiece of mid-century modern architecture. Here’s a view from the Chapel trail:

The next day I took the Broken Arrow trail, an easy and popular walk. Here’s a shot from the trail:

Click to enlarge.

Click to enlarge.

The StorageMojo take
Last NYD had 9 inches of snow on the ground. It didn’t last, but it was nice to be able to get out and celebrate this year with a short walk.

My next hikes will be in Las Vegas Monday, where I’ll be attending Storage Visions. Maybe I’ll see you there.

Courteous comments welcome, of course. For some reason the images are enlarging when clicked as they normally do. If anyone has an idea why, please pass it along in a comment. Since I’m traveling this week, I can’t promise to get it fixed for a few days. Sorry! Fixed! Still don’t know why it chose now to quit the usual behavior though.

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When will SSDs kill the 2.5″ disk drive?

December 15, 2015

Probably never. Here’s why. DRAMeXchange is predicting that in 2017 some 41% of laptops will sport SSDs. As the per gigabyte price difference between disk and flash shrinks, the price differential becomes irrelevant at ever-higher capacity points. Most people have little idea how much storage they use or need. Compulsive music/photo/video folks will use terabytes, […]

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How storage is changing the world

December 2, 2015

Cheap storage is changing the world. Whether it is in the cloud, on a dash cam, or embedded in an app, cheap – as in inexpensive – storage is enabling new relationships between individuals, and with culture, power, and groups. Facebook is the most prominent example of a storage-powered app. All apps use storage of […]

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Mr. Dell’s eyes fixed on the rear-view mirror

November 16, 2015

Zigging when others are zagging can be smart. Dell buying EMC to create a large computer company could be genius – or the last hurrah of a failing business model. Dell’s perspective is simple: ≈50% of Dell’s revenue comes from PCs, a rapidly shrinking market. Dell needs to get into higher margin, non-shrinking markets if […]

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Is AWS trying to throttle back its growth?

October 22, 2015

I was hoping to go to this year’s Amazon Web Services re:Invent conference, as I did last year, but no joy. Not enough press passes to go around, I was told. But then I learned that AWS limited press and analyst passes to fewer than 30, much to the disappointment of exhibitors, who love to […]

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Dell buys EMC & Tucci wins

October 16, 2015

EMC’s Joe Tucci has long been the smartest CEO in storage. While not every one of his bets has paid off, enough have done well, while the VMware $625M buy was a monster smash. Since VMware accounts for some 70% of EMC’s market cap, it is really the only deal that matters. So what to […]

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Hike blogging: Cibola trail

September 24, 2015

Fall is finally starting in the high desert. October is a wonderful month for a visit. This picture, taken from near the top of the Cibola trail, imperfectly captures one of my favorite views. Several vertical rocks and spires create a tense, 3D arrangement of unpeopled skyscrapers that never fails to enthrall. I haven’t figured […]

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Inifinite io’s network storage controller: what is it?

September 23, 2015

Infinite io’s Network Storage Controller (NSC) is a rarity in enterprise storage: an original and unique device. It turns your file storage network into a software defined resource. But it’s not a file server, a caching controller or an intelligent front end to existing storage resources. The NSC differs by applying deep packet inspection and […]

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Throwing hardware at a software problem

August 28, 2015

Maybe software will eat the world, but sometimes the physical world gives software indigestion. That fact was evident at the Flash Memory Summit this month. As mentioned in Flash slaying the latency dragon? several companies were showing remote storage accesses – using NVMe and hopped up networks – in the 1.5 to 2.5µsec range. That’s […]

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Flash slaying the latency dragon?

August 13, 2015

I’m at the Flash Memory Summit this week. Two observations, one short and one long. Short first. FMS is much larger than last year. Haven’t seen numbers, but the huge exhibit floor looks like a first rank storage show. VMworld has been a top storage show, but now they have competition. Has latency met its […]

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