SearchStorageChannel.com: Why did EMC decide to partner with Lenovo?
Jeremy Burton: We started talking to Lenovo last year, as our relationship with Dell was winding down. We actually used a lot of Dell servers in appliances we ship. Take Avamar, for example. There's storage in an Avamar appliance, and there's also compute. We used Dell servers in our appliances for the last six or seven years. As we were winding down the Dell relationship, we were looking at other vendors. We were looking for low-end commodity x86 servers.
As we talked with [Lenovo], the relationship broadened. So, in the end we decided to come to an agreement around servers and to use Lenovo servers in our appliances. We also thought there would be a lot of merit to putting together a reseller and an OEM agreement so that their storage and server sales team could go out and sell EMC equipment. These guys have a huge brand in China. If you're going to access the Chinese market, you're better off doing it through a Chinese company.
You can consider the Iomega business now a part of the joint venture of EMC and Lenovo, not a separate division of EMC.
chief marketing officer and executive vice president, EMC Corp.
We also thought we'd form a joint venture with them around low-end storage, and we'd put the assets from Iomega into that into low-end joint venture. We feel like we've got a low-end server capability that we can use in our appliances, we have a low-end storage capability which allows us to go further down market, we have a big Chinese partner in a big Chinese market, and we have a selling agreement so that we could potentially leverage their sales motion.
SearchStorageChannel.com: Will [Lenovo] OEM the same EMC storage products as Dell did?
Burton: It's limited right now to the VNX product line. We expect this to build up next year. We anticipate most of what they will sell will be VNXe and maybe the bottom end of the VNX line. And we see the lion's share being sold through the OEM agreement with their servers.
If you look at the big players in the low end of the storage market, it tends to be HP[Hewlett-Packard Inc.] and Dell because they can just attach that storage to a server sale. In the low end of the market, you find the server and storage affinity. Server vendors are able to sell storage because it comes attached to it. We anticipate we can attach a low-end VNXe to a low-end x86 Lenovo server, and we can get access to a segment of the market we did not have a good channel to get access to in the past.
We're focused on China initially. Our business there is decent, but small compared to the rest of the world. We think this can move the needle for us.
SearchStorageChannel.com: Where does Lenovo fit into EMC's Vspex reference architecture, which provides channel partners with integrated IT stacks?
Burton: Vspex is completely server independent. In the specs we put out, we define a class of server but we don't say which server could or should be used. I think of Vspex as a recipe book. Our channel partners pick up a recipe book and bake a "Vspex cake" based on the ingredients. If a partner is carrying an HP or Dell server line or a Lenovo server line, then they can bake a Vspex cake with whatever server they carry. It broadens the market opportunity for us.
We won't be specifying any server in the Vspex spec itself, let alone Lenovo servers. But we will be going to Lenovo channel partners and incenting them to bake more Lenovo Vspex cakes. We want to incent the Lenovo channel to build Vspex boxes with Lenovo servers. At the high end of the market, we do the same thing with [Cisco Systems Inc]. For obvious reasons, we don't go to market with Dell, HP or IBM but at the same time there are many partners that carry Dell, HP or IBM servers that are building Vspex. The preference is for Lenovo [and Cisco]; the spec itself is independent.
SearchStorageChannel.com: So [the EMC Lenovo deal] doesn't conflict with Cisco in Vspex?
Burton: If Cisco UCS servers went to the low end of the market, we'd be putting Cisco UCS in the low end and not Lenovo. But Cisco [doesn't] do commodity x86 servers. Even if you speak to Lenovo, they would never consider themselves a data-center blade player. They're just getting into the game. They're entry level and up.
SearchStorageChannel.com: Will Lenovo replace the Dell storage revenue?
Burton: Dell revenues are pretty much gone. That has declined dramatically over the last couple of years. There's not a tremendous amount of Dell storage revenue left. We've done a good job of making it up elsewhere. I think Lenovo can enter the part of market that Dell has been strong in, and they can drive the attachment of EMC gear. I think they can make life difficult for Dell. That's the hope and the aspiration.
SearchStorageChannel.com: How does the [EMC Lenovo] deal work with Iomega?
Burton: Think about Iomega as intellectual property. We have a bunch of technical know-how in that sub-$5,000 market segment. You need volume at that price. We thought if we could join forces with the Lenovo channel, we could leverage their distribution channel with the Iomega technical know-how and do a lot better. Let's have a focus group with broad distribution at that level of the market, and it should give us some lift.
The VNXe goes down to a $10,000 price point. We have nothing beneath that. Iomega fills that gap. We tend to be enterprise guys here at EMC. With Lenovo, Iomega will have like-minded people on the low end.
SearchStorageChannel.com: Why did you decide to give a majority portion of the Iomega deal to Lenovo?
Burton: Well, they own 51% and we own 49%. In the short term, we'll retain the Iomega brand on the products that they ship. It's still to be determined what the new products will be branded. There are probably three options: Iomega, Lenovo or Lenovo EMC. You can consider the Iomega business now a part of the joint venture of EMC and Lenovo, not a separate division of EMC.
SearchStorageChannel.com: Will Lenovo sell low-end EMC backup products like Avamar and the smaller Data Domain appliances?
Burton: Our initial focus is low-end storage. The key thing with the partnership is we'll start where Lenovo is strong in China and Asia. We'll start where that makes the most sense, and that's primary storage. We have an open mind about it, but we [will] be very focused starting out with VNX.
SearchStorageChannel.com: How will this affect EMC's relationship with the channel?
Burton: Lenovo is an incredibly channel-friendly company, and it has a fantastic reputation with the channel. As we move from China to North America and the U.K. and more mature markets, we think they'll be an asset with our channel rather than a hindrance.
Ten years ago, when we did the deal with Dell, Dell struck fear into the minds of every channel partner because it was Dell-direct. Channel partners thought, "Oh no, they're going to take business away from me." Our partnership with Lenovo should be seen as net positive with the channel. Even with EMC at that end of market, the channel is our primary route to market.