Phillip R. Sargeant, Adam W. Couture, Carolyn DiCenzo, Mike Chuba, Fara Yale, Pushan Rinnen

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1 Research Publication Date: 1 August 2006 ID Number: G Vendor Rating Update: EMC Storage, 2006 Phillip R. Sargeant, Adam W. Couture, Carolyn DiCenzo, Mike Chuba, Fara Yale, Pushan Rinnen In 2005, EMC held the No. 1 position in external controller-based storage revenue. Competitors have increased their capabilities during the past 12 months, and 2006, like 2005, will see a competitive storage market. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

2 OVERALL RATING Positive WHAT YOU NEED TO KNOW EMC is a major supplier in the external controller-based storage market and, through its focus on software, is expanding storage solutions based on its portfolio of hardware and software products. In the area of storage virtualization, EMC has yet to clearly articulate the value of its Invista offering. EMC will incorporate some of the technology into Invista from the recent Kashya acquisition, signaling an acceptance that Invista may have initially fallen short. EMC has announced a number of initiatives for the growing and important small and midsize business market, relying heavily on indirect channels, including low-end storage products and OEM relationships with companies such as Intel; however, it must execute well on these initiatives or lose out on this growing market. EMC is frequently competing on price to hold or gain market share and grow software revenue. The transition from DMX-2 to DMX-3 systems is essentially completed, despite the lack of a formal end-of-life DMX-2 announcement. EMC's continuing strong showing from a market share and penetration point of view from storage hardware, software and services means that most organizations looking to purchase storage solutions should have EMC on their shortlists. VENDOR RATING Analyst Comments Since our 2005 rating, EMC continues to broaden its offerings and its reach through partnerships and the acquisition of companies such as Rainfinity, Captiva Software, Internosis and Kashya. Table 1. Detailed Rating Initiative Rating Change Corporate Viability Strategy Promising No Change Financial Strong Positive No Change Marketing Positive Up Organization Promising No Change Market Offerings Product/Service Positive No Change Symmetrix High-End Storage Arrays Strong Positive No Change CLARiiON Midrange Storage Arrays Strong Positive Up Publication Date: 1 August 2006/ID Number: G Page 2 of 10

3 Centera Content-Addressable Storage Positive No Change Celerra Network-Attached Storage Positive No Change Tape Libraries and Virtual Tape Libraries Promising No Change Backup and Archiving Software Positive No Change Data Replication Software Strong Positive No Change Storage Resource Management Software Promising No Change Content Management Positive No Change Server Virtualization Software (VMware) Strong Positive No Change Storage Virtualization Caution New Technology/Methodology Positive No Change Pricing Structure Positive No Change Customer Service/Support Sales/Distribution Positive Down Storage Professional Services Promising No Change Customer Service/Support Positive No Change Support/Account Management Positive No Change Source: Gartner Corporate Viability Strategy (Promising) EMC continues to balance its revenue across hardware, software and services, offering a broader portfolio of storage solutions to its customers. EMC continues to use information life cycle management (ILM) messaging to drive the sale of point products and solutions that it has developed or acquired. A major part of this strategy includes a focus on virtualization, network-based intelligence and an information security strategy. EMC will use technology from the acquisitions of companies such as Rainfinity and Kashya to enhance its virtualization and replication offerings, and information security will become a major focus of all of EMC's offerings hardware, software and services. EMC believes that, with a greater focus on information security, it will open up additional buying centers within organizations. EMC continues to acquire companies and technologies, and integrating these creates challenges. We are beginning to see the fruits of some of these acquisitions, as EMC is combining and leveraging some of the technology and expertise that it has acquired. For example, EMC has announced the Storage Insight product, which uses the technology it acquired from the Smarts acquisition. Financial (Strong Positive) EMC continues to be financially strong, reporting record levels of revenue and net income in EMC grew revenue 17 percent over 2004, with growth in all major business areas. System revenue continued to be the largest portion of EMC's revenue (46 percent) and grew at 16 percent over Software (37 percent) and services (17 percent) grew at 20 percent and 18 Publication Date: 1 August 2006/ID Number: G Page 3 of 10

4 percent, respectively, over This is in line with EMC's plan to balance its revenue across hardware, software and services. Of concern was a major reduction in growth in the Asia/Pacific region and Japan for the first quarter of EMC has acknowledged that it must do better in these regions. EMC generated an impressive amount of cash from operating activities, in excess of $2 billion in 2005; when this is combined with cash already on hand, we expect EMC to make further acquisitions throughout the coming 12 months. It has announced an extension to its share buyback initiatives. Marketing (Positive) EMC's marketing organization continues to create recognition for its products, brands and concepts. Symmetrix, CLARiiON, content-addressed storage and ILM are all well recognized by most organizations. EMC has had success creating markets such as content-addressable storage while working to drive the perception that EMC competitors are typically late to market and lacking the functionality of EMC products. While doing this, EMC invests heavily in countering any potential impact of product problems. Users are increasingly looking toward storage virtualization to make their storage infrastructures more efficient; however, this is an area where EMC needs to articulate its storage virtualization vision in simple terms. A major focus for EMC will be information security. Many organizations that see EMC as a major storage hardware and software provider may not associate EMC with security. EMC must find a way to articulate its security focus. This will also create challenges and opportunities for EMC, because it will be entering into conversations with people in organizations with which it has previously not had relationships. Organization (Promising) In early 2006, Mike Ruettgers retired as chairman and Joe Tucci became chairman of the board of directors in addition to his CEO role. Bill Teuber, EMC's CFO, took on deputy chairman duties. Howard Elias, who reports to Joe Tucci, recently took over EMC Services, including generally product support and professional services. Chris Gahagan continues to manage resource management development (Control Center and Smarts) and reports to Howard Elias. Frank Hauck, a longtime EMC executive reporting to Tucci, runs marketing and EMC Total Customer Experience. BJ Jenkins, also a longtime EMC employee, leads the Global Marketing Group (combines traditional corporate and field marketing) and related functions. Reporting to Mark Lewis is the CTO Jeffrey Nick and the new Security Initiative led by Dennis Hoffman. Dave DeWalt continues to lead EMC Software, David Donatelli continues to lead Platform operations, now including Centera development, and David Goulden continues his responsibility for EMC sales, channels and operations. EMC's absorption of large numbers of people from its many acquisitions complicates not only product and strategy rationalization, but also the propagation of its corporate culture. Although EMC is absorbing most of its acquisitions into the main EMC company, it has kept VMware a separate entity. Publication Date: 1 August 2006/ID Number: G Page 4 of 10

5 Market Offerings Storage Hardware Products High-End Storage Arrays (Strong Positive) EMC has enjoyed good success with its high-end Symmetrix products and, in July 2005, announced the Symmetrix DMX-3 networked storage system, aimed at the high end of the market. The new DMX-3 introduced the capability of mixing a number of disk options in one system. In January 2006, EMC announced the ability of DMX-3 to support more than 2,400 disk drives and also announced DMX-3 starting with as few as 96 disk drives. EMC continues to face formidable competition from the Hitachi/Hitachi Data Systems (HDS) Tagmastore and IBM's DS8000 products. Midrange Storage Arrays (Strong Positive) Early in 2005, EMC announced additional models in its CLARiiON CX Series. These models include Internet Small Computer Systems Interface (iscsi)-capable models. EMC's focus in the midrange market is on functionality, performance, cost and time to market. What was evident from Gartner's Midrange Enterprise Array Magic Quadrant, published in November 2005, was that EMC continued to deliver a balanced performance against these areas. The CX Series has been most successful for EMC. In May 2006, EMC announced the follow-on CX3 models (20, 40 and 80). Although it will take time for these models to prove themselves, if recent history is any indication of the future, EMC should be quickly selling the new models. The new CX3 models are Restriction of Hazardous Substances (RoHS)-compliant, enabling EMC to offer them to European Union customers. Content-Addressable Storage (Positive) Centera offers content-addressed storage, is innovative but is beginning to find competition. Although the competition might, at this stage, be low, EMC will find competition coming from such vendors as HP with its RISS product, IBM with its DR550 product and Network Appliance with the SnapLock features. Network-Attached Storage (Positive) EMC strengthened its network-attached storage (NAS)/unified storage products early in 2006 by introducing a number of new features. However, EMC continues to face significant competition in the NAS/unified space from Network Appliance. EMC saw a moderate increase in Celerra revenue from 2004 to 2005 but lost market share in the same period. EMC needs to enhance user experience by consolidating and simplifying user interfaces. The latest NAS/unified storage offerings will enable EMC to compete more effectively against Network Appliance. Storage Virtualization (Caution) EMC was the last of the major storage vendors to offer a storage virtualization solution. EMC introduced its Invista product in the second half of 2005, but the product's functionality has been constrained, restricting it mainly to data migration between storage arrays. EMC still has few deployments compared with IBM and HDS. EMC recently acquired Kashya, a provider of continuous data protection (CDP) and remote replication technology, and Gartner believes that the acquisition and the technology that Kashya provides signals EMC's long-term direction for Invista. EMC needs to clearly articulate the future and the value of the Invista offering. Publication Date: 1 August 2006/ID Number: G Page 5 of 10

6 Server Virtualization (Strong Positive) In 2005, the VMware subsidiary grew its revenue 78 percent. However, the market will change. The open-source Xen 3.0 product will soon support unaltered operating systems, and Microsoft will introduce its own hypervisor in 2008 or As these products are introduced into the market, they are likely to put pricing pressure on the hypervisor portion of VMware's business. Gartner expects VMware to transform its business model more toward management and automation tools and other development priorities in light of these future possibilities. We expect VMware to focus heavily on enterprise-class features, especially on management and automation capabilities. Tape Libraries and Virtual Tape Libraries (Promising) EMC has been reselling the ADIC tape libraries (under the ADIC brand) for nearly two years and, although EMC does not put much focus on the sale of tape products, these products have helped to fill out EMC's overall ILM product portfolio. EMC's virtual tape solutions, the CLARiiON Disk Libraries (CDLs), are doing well in the market. EMC estimates that it has shipped more than 35.5PB of disk in CDL solutions (as of 31 December 2005) in sales of virtual tape libraries (VTLs). The CDLs have been enhanced multiple times, and the latest enhancements, in April 2006, represent the fourth-generation architecture for these products. EMC supports a broad range of tape libraries and drives, servers and operating systems, and backup software applications with its CDLs, and it continues to expand its range of support. In the April announcement, EMC extended its CDL family of products downward with an entry-level CDL, the DL210. In this same announcement, EMC became the first open-system VTL vendor to integrate the backup application inside the VTL. This is definitely a step in the right direction, because the backup application's media management is absorbed by the VTL, giving the backup application full control of the backup catalog and the tracking of virtual and physical tape. The main complaint that Gartner hears about EMC's CDLs is that they are usually priced higher than competing VTL products. Storage Software Products Backup and Archiving Software (Promising) EMC has finally dropped the Legato brand as it looks to reduce the confusing number of family names from its various acquisitions. Although Networker does well in EMC environments, particularly in disk-to-disk backup situations, the product lacks integration with key storage suppliers' replication products. EMC needs to move faster to integrate with key applications especially Microsoft's. Gartner expects EMC to jettison its OEM partner for its CDP product, RecoverPoint, and incorporate technology from its recent acquisition of Kashya. The move to integrate the backup and archiving sales force with the Documentum sales force resulted in stalled sales in the first quarter of 2006, and it remains unclear if there really are strong synergies between the content and data protection buying centers. A move to launch an integrated content archive solution to appeal to storage administrators, currently the strongest buying center for those products, was tempered by hooking the Documentum brand to the initiative. The archiving offering is in transition between the current Xtender offering, which has some scalability and functionality challenges, and the newer Archiving Services for , which does not support mailbox management or full-text indexing but is built on the Documentum technologies for storage and search. The company's approach to file archiving remains disjointed, with different products for each of its array technologies. Publication Date: 1 August 2006/ID Number: G Page 6 of 10

7 Data Replication Software (Strong Positive) EMC offers a robust set of replication products for all of its array families and a management product to facilitate the management by automating many of the procedures necessary to complete a replication and make the disk replication process more efficient. The company has recently worked to improve its support for mainframe environments. Working with Softek, a company that specializes in host-based replication products, the two companies developed Logical Data Migration Facility, a host-based online mainframe DMX data migration and volume expansion offering that automatically updates the mainframe catalog while the application is running. EMC has also re-launched and renamed its Data Relocation Utility online data migration tool for open systems under the name Open Migrator/LM. With the Kashya acquisition, EMC gains additional CDP and replication options. With the integration of Kashya's heterogeneous replication technology, we believe that Invista will compete more directly with IBM's SAN Volume Controller and Hitachi/HDS's storage virtualization products. Although this may enable EMC to capture additional revenue by addressing the heterogeneous replication markets, there is a risk that it may cannibalize EMC's SAN Copy and flagship Symmetrix Remote Data Facility revenue base. Storage Resource Management Software (Promising) The EMC ControlCenter family of storage resource management tools continues to lead the market as a result of effective packaging of the solution with EMC disk sales. Product improvements and company efforts to improve training via classes and user groups have increased the use of purchased components. ControlCenter has Web access for monitoring, and infrastructure overhead has been reduced with improved agent-to-management processor ratios. A new wizard enables agent installs and upgrades and does extensive prerequisite checking prior to installation. Users can view zoning changes without the need to rediscover the entire storage area network (SAN). SAN Advisor can be used to validate the existing SAN for optimal interoperability and to model planned changes before execution. EMC announced the first products of what Gartner expects to be a series of storage products that use the Smarts model-based approach and provide root cause analysis and correlation. Storage Insight began shipping in April The work that EMC is doing to help customers get value from their investment in ControlCenter is positive, but the product remains complex to use, and the new version needs to deliver on the promise of automation and usability improvements. Content Management (Positive) Gartner rates EMC's Documentum suite of content management products as "positive" overall. Two years after acquiring Documentum, EMC is a leading enterprise content management (ECM) suite provider and is being established as the enterprise standard for many large organizations (see "Vendor Rating Update: EMC Documentum Continues to Gain ECM Momentum"). Customer Service/Support Sales/Distribution (Positive) Despite its leading global position, in 2005, EMC lost nearly a 3 percent share of the fabricattached storage market. More specifically, EMC lost share in the high-end storage area, the NAS area and IP-based storage. Much of the high end is mainframe-based, and EMC appears to have taken its eye off of this space. It needs to focus more heavily on this area to regain market share lost primarily to HDS and IBM. In the midrange market, the Dell relationship remains a major success, and the recent signing of Intel has the potential of becoming another revenue source. Publication Date: 1 August 2006/ID Number: G Page 7 of 10

8 Storage Professional Services (Promising) Professional services continue to be a major EMC area of focus and expansion, accounting for 16 percent of EMC's 2005 revenue. The launch of EMC Consulting in 2005 formalized a number of professional-service offerings in the areas of ILM, consolidation, storage management and data protection. In addition, the company boosted its Microsoft practice through the acquisition of Internosis in 2006 the company's first pure-play storage acquisition. The company considers storage security a major initiative and has rolled out security assessment services in early In April, it announced plans to grow a security consulting organization. Although it was the first in the industry to offer on-demand storage pricing, EMC has been slow to warm up to providing true managed storage services with on-demand pricing. With EMC having new service management dedicated to managed services in 2005, Gartner anticipates more on-demand pricing alternatives and additional managed services from EMC in Customer Service/Support (Positive) Much of EMC's positive reputation for customer service and support has been based on consistent warranties across product lines. With the introduction of the CX200 in 2004, EMC began offering tiered product support on selected offerings. In 2006, EMC extended this tiered approach to more products and replaced its traditional four-hour same-day hardware support with a variety of tiered offerings on newly announced CLARiiON products. Hardware support is primarily delivered directly for Symmetrix and through service partners for CLARiiON. In addition, EMC is pushing more customer support services through reseller partners and has implemented new technical certification training programs for them. Service offerings are frequently bundled with EMC Insignia products aimed at the small and midsize business market. RECOMMENDED READING "EMC/Intel Agreement Seeks to Bolster SMB Disk Array Storage Penetration" "EMC Buys Kashya for Replication Technology Opportunities" "EMC Tightens up CLARiiON Warranties but Will Offer More Choices" "EMC Joins the Move to Integrated Content Archiving Platform" "Market Share: External Controller-Based Disk Storage, Worldwide, " "Market Share: NAS/Unified Storage, Worldwide, " "High-End Enterprise Storage Systems: Overview, 1H06 Update" Company Information EMC Headquarters: Hopkinton, Massachusetts Acronym Key and Glossary Terms CDL CDP CLARiiON Disk Library continuous data protection Publication Date: 1 August 2006/ID Number: G Page 8 of 10

9 ECM HDS ILM iscsi NAS OEM RoHS SAN VTL enterprise content management Hitachi Data Systems information life cycle management Internet Small Computer Systems Interface network-attached storage original equipment manufacturer Restriction of Hazardous Substances storage area network virtual tape library Rating Definitions Strong Positive Positive Promising Caution Strong Negative Solid provider of strategic products, services or solutions Customers: Continue investments. Potential customers: Consider this vendor a strong strategic choice. Demonstrates strength in specific areas, but is largely opportunistic. Customers: Continue incremental investments. Potential customers: Put this vendor on a shortlist of tactical alternatives. Shows potential in specific areas; however, initiative or vendor has not fully evolved or matured. Customers: Watch for a change in status and consider scenarios for short- and long-term impact. Potential customers: Plan for and be aware of issues and opportunities related to the evolution and maturity of this initiative or vendor. Faces challenges in one or more areas. Customers: Understand challenges in relevant areas; assess short- and long-term benefit/risk to determine if contingency plans are needed. Potential customers: Note the vendor's challenges as part of due diligence. Difficulty responding to problems in multiple areas. Customers: Exit immediately. Potential customers: Consider this vendor only if there are no alternatives. Publication Date: 1 August 2006/ID Number: G Page 9 of 10

10 REGIONAL HEADQUARTERS Corporate Headquarters 56 Top Gallant Road Stamford, CT U.S.A European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo JAPAN Latin America Headquarters Gartner do Brazil Av. das Nações Unidas, andar World Trade Center São Paulo SP BRAZIL Publication Date: 1 August 2006/ID Number: G Page 10 of 10

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