Re: EMC and IBM
Let me offer a few points for consideration. By way of background, I worked for IBM for 12 years (class of '95) so I am somewhat familiar with this subject.
IBM is a great company and no competitor can afford to ignore them. However, there is a very real advantage to having whole-company focus on a market rather than divisional or departmental focus. EMC has that advantage. They also have the considerable advantage of being ahead of the technology curve.
Technology is a game of leapfrog. Today's "cutting edge" products quickly dull. As a result, any company wishing to maintain a viable presense in a technology market, let alone a leadership position, must maintain a "pipeline" of at least two generations ahead of their current product set. What many people outside of the technology industry do not pause to fully consider, however, is that the advantages of leadership extend through the pipeline, not just in the current product set. The astute leader uses this fact to their full advantage. What this means is that when #2 comes out with a new product, #1 is able to respond with its N+1 generation product. Moreover, it can time the announcement of its N+1 generation product to undercut #2's product launch and compress its investment recovery period.
The way the investment cycle works in the techology business is that you spend a lot to bring a product to market and then expect to recapture that investment (plus profit) over the lifespan of the product. What a lot of folks don't realize is that the vast bulk of that recapture occurs very quickly--often within the first six months of product availability. The advantage of being the leader is that the highest margins (and hence the quickest recovery period) flow to the leading-edge. The leader is thus quickly able to recapture their investent and redeploy those funds back into their technology pipeline. It's a virtuous circle. #2, by contrast, is faced with an uphill battle since it typically cannot recover its investment in its generation N product before it has to bring out its generation N+1 product in response to #1's moves. Unless #2 is willing to eat losses for an extended period of time, it is very difficult to overcome this structural disadvantage. This phenomenon explains, for example, why AMD has labored for so long without being able to make serious inroads against industry-leader INTC and it applies equally well to any competitor who wishes to take on EMC in the enterprise storage systems market. |
