By Alan Radding
It's not exactly the OK Corral, but there is a professional services shootout developing at the top of the high-end storage business. IBM and EMC have been facing off against each other for years to determine which is the leading storage provider. Now professional services have emerged as a key weapon, with both companies bolstering their storage professional services as they continue the battle.
"We identified the need to define storage services as an area of competence eight years ago," says Sergei Varbanov, IBM's global offering executive for data storage services. To that end, IBM has cultivated an impressive lineup of storage professional services.
According to IBM, in a statement crowing about its recent designation (May 2005) by Gartner as the leader in the research firm's Storage Professional Services Magic Quadrant ranking: "IBM storage services include the combined power of IBM Global Services, IBM Systems and Technology Group, IBM Tivoli software, and IBM Research." Included in its set of service offerings, the company continues, are business continuity and recovery services, infrastructure and systems management services, networking services, technical support, IT education services, and Systems Management Consulting and Design for Data Recovery, which IBM describes as a service designed to help customers assess current data recovery capabilities; clarify the strategy, requirements, and plans to implement the strategy; and recommend a data recovery target model and solution design that supports business requirements.
EMC is newer to the storage professional services game at this level, starting a little over two years ago to build out its professional storage services, says Paul Goetz, vice president of technology solutions for EMC's consulting and managed services business. EMC may lack the array of services groups touted by IBM, but it is bolstered by an unpublicized ally, Accenture. Late in 2002, EMC joined with Accenture in what Goetz calls a strategic relationship dubbed Information Solutions Group (ISG).
"Accenture helps us build capabilities around delivery. We are responsible for the client relationship. Our customers never actually see Accenture," Goetz insists. Basically, Accenture showed EMC how to run a professional consulting practice. Previously, EMC's services experience had been in break/fix, maintenance, and technical support. Today, Accenture's role is to help EMC expand ISG, which is the professional services brand name EMC has been using in the market, and grow the professional services side of the business rapidly, he explains.
Gartner ranked EMC very high in its Storage Professional Services Magic Quadrant Report, although you'll notice that it never mentions ISG or Accenture directly: "EMC is a market leader in direct and fabric-attached storage, with an extensive customer base for services. In 2004, EMC grew services revenue to greater than $2 billion, contributing about a fourth of the company's overall revenue. Consulting and management services now account for about a fourth of EMC's storage service business. EMC has established professional service (PS) practices around enterprise resource planning, Microsoft, Backup, Compliance, and ILM." (ILM refers to information life cycle management.) The Gartner report went on to cite recent EMC product introductions, such as network-attached storage (NAS) heads, for the low end, but clearly Gartner sees storage professional services focused on the high end: "High-level support is still standard for its Symmetrix and CLARiiON CX products. [We] anticipate more on-demand pricing alternatives and additional managed services from EMC in 2005."
It was IBM's storage professional services, however, that grabbed the top honor in Gartner's Magic Quadrant. Acknowledging IBM as the market share leader in storage services and as the industry's standard-setter when it comes to professional services, Gartner points out that "IBM has developed extensive multivendor support capabilities. IBM's storage and storage services vision is coupled to its On-Demand Business initiatives and more recently to ILM." Gartner further cites the breadth of IBM's service portfolio — business continuity and recovery services, infrastructure and systems management services, networking services, and technical support services, as well as new professional services such as data classification services and managed services for e-mail compliance. In addition, Gartner noted that IBM's new managed backup services target the midmarket.
In addition to IBM and EMC, Gartner identifies nine other storage professional services players: CNT, Computer Sciences Corp. (CSC), Dell, EDS, Hitachi Data Systems (HDS), HP, Network Appliance (NetApp), StorageTek (STK), and Sun Microsystems. Of these, Gartner categorizes Dell, HDS, and NetApp as challengers, and one, CNT, as a visionary. The rest are designated leaders. No niche players were included in these rankings. To be included in the Magic Quadrant rankings, companies must generate at least $100 million in annual storage services revenue and offer multiple storage services. The vendors were evaluated on the completeness of their service offerings and their ability to execute.
The main action, however, focuses on IBM and EMC, which are fighting it out for leadership in the storage market overall as well as in storage professional services. In an industry where storage hardware is being driven down to commodity-level pricing and margins are evaporating, storage vendors are turning to software and professional services to provide both competitive differentiation and profit margins. According to IDC, in its Worldwide Storage Service Market, 2004-2009 Forecast, April 2005: "The storage services market will continue to show moderate growth across all regions through 2009, with the greatest growth occurring in Asia/Pacific during this period. The United States, representing the single largest market by country, will enjoy a compound annual growth rate (CAGR) of 4.3% from 2005 to 2009, a slightly slower pace than that of other regions."
Driving the storage services business is not the traditional break/fix kind of technical support the vendors have long delivered. Rather, as far as professional storage services go, the industry "has entered a new era where customers will require assistance in implementing virtualization, data protection, and information life cycle management (ILM)." Specifically, IDC identifies as the areas of greatest customer interest consolidation of storage operations, improving the backup-and-recovery process, and developing a strategy regarding regulatory compliance issues pertaining to storage.
EMC's latest professional services initiative is driven in part by customer demand and in part by the company's strategy to expand beyond selling storage systems. "In the past we focused on break-fix and software maintenance. With professional services, we want to plan, build, and manage the storage," says Goetz.
Originally formed as a small presales group with EMC and Accenture each kicking in 100 people dedicated full time to the venture, over the past two and a half years the storage professional services group has grown to 3,500 people — and it continues to grow. EMC originally relied heavily on Accenture for help with recruitment and management of the professional services operations, including building the group's infrastructure by managing HR, finance, training, knowledge management, and administration.
Today, Accenture is assisting EMC as it expands its storage professional services operations in Latin America and Asia/Pacific/Japan. EMC also intends to expand its ILM services. "There is a lot of room for growth in ILM," Goetz notes.
"At the same time, we are moving away from the ISC brand to EMC Consulting," says Goetz. Although such a shift implies moving away from Accenture too, this is not the case, he insists: "We still have a strategic relationship with Accenture." The initial partnership deal was a five-year agreement beginning in July 2002. He expects that they will leverage that relationship as they expand into new areas, such as ILM.
From a professional services competitive standpoint, Goetz identifies IBM, HP, and STK as its major competitors. BearingPoint is more often a partner than a competitor, and EMC finds itself only occasionally competing with Capgemini. Part of EMC's storage professional services is managed services (outsourcing). It provides conventional managed storage around a specified service level, either with or without providing the storage assets. It also provides what EMC calls "storage residencies." This involves EMC providing skilled storage personnel and their management inside the customer's environment.
At IBM, the storage services group is part of IBM Global Services. "We actually cut across different areas — business consulting, outsourcing, strategic consulting. We've had to define ways to engage with each group," says Varbanov. The company has developed vertical solutions that bundle hardware, software, and infrastructure services with various parts of IBM Global Services.
Varbanov's group prefers to approach storage professional services from the standpoint of the customer's data. "We have an issue-based consulting methodology that focuses on the data usage, not technology or products," says Varbanov. It doesn't ignore storage technology and products; it just doesn't get to them until later in the process, after dealing with strategy and performing gap analysis.
For the past year and half, the biggest customer demand has been for integration services. "Customers want to squeeze the most value from the products they have bought. Integration is the way to add value," says Varbanov. IBM typically will tie its integration efforts to specific service-level delivery goals.
Even with the help of Accenture, EMC will be hard-pressed to match up head-to-head in services with IBM, which, in Global Services, runs the world's largest IT professional services operation. However, with the storage infrastructure business valued at $14 billion and the ILM services market expected to exceed $50 billion, the pie is big enough either to share or to fight over — as the case may be.
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