Wikibon Blog

I wasn’t going to write about this because generally there’s no value to users in writing about what essentially is gossip fodder. But something was missing from the analysis I did read about the news that Dave Donatelli was leaving EMC to join HP to run its storage, server and networking division.

I, like many other observers, know Dave Donatelli. I don’t hang with him on weekends but I’ve known him for a long time– PS, as in pre-Symmetrix. Although less in-your-face, he was one of the many young, aggressive, type A personalities I worked with when EMC was cracking into the storage business with things like add-on cache memories for 3880 controllers. BTW – I think they sold two but it got them thinking about how cached disk could improve performance– nice idea.

To me, there are three categories of things to talk about regarding Donatelli leaving EMC: 1) The tabloid news; 2) The tactical implications and 3) The strategic issues. By far the most interesting is #3 but it’s understandable why people want to focus on #’s 1 and 2– so let’s start there.

The Why

The whole speculation that somehow Donatelli was informed he wasn’t next in line for the CEO’s job is silly. In my opinion there’s no way Dave Donatelli was in line to be CEO of EMC. He wouldn’t have been the best choice in the eyes of Wall Street and that alone would have killed any aspirations he had at this time. Maritz is the clear #2 at EMC/VMware (even though he has work to do) and there were 3′s and 4′s ahead of Dave in my view.  My guess is Donatelli knew this and had no animosity over it. It doesn’t mean he couldn’t have been successful but it would have been like Larry Bird getting the Celtics head coaching job over Rick Pitino– wasn’t gonna happen.

Donatelli had hit the glass ceiling. He was the President of EMC’s largest division and other than Tucci’s job and running VMware there isn’t a role in EMC that is more influential and interesting than was Dave’s. The job he’s taking at HP is. He’s obviously moving to CA because in MA, this employer-friendly state helps companies enforce non-competes and I guarantee EMC’s lawyers tried/are trying. Of course HP and Donatelli knew this was coming and I’m sure they have it covered.

Tactically, What does this Mean?

This is the biggest defection in EMC’s history. Moshe was as high profile but EMC wanted him out. Donatelli is a shocker. Dave Dewalt’s departure wasn’t even close to this. But I don’t think it ultimately will mean that much to EMC if they fill Dave’s shoes with someone that has his execution ethos. While as others point out, Donatelli is smart and stoic, the thing that makes him stand out is execution. He worked very closely in EMC’s early days with Dick Egan and Jack Egan and Mike Egan and Chris Egan and while they are all really smart what makes them stand out is they are brutal task masters. They just don’t make excuses, period. When people talk about EMC’s ability to execute, the roots are the Egans. Mike Ruettgers left an imprint but the Egans deposited the DNA firmly into EMC’s culture.

So watch closely for Dave’s replacement because if they find a mini-Dave you could see some flowers blossom.

The question is how will this play at HP? Scott Stallard replaced by Donatelli– wow. Donatelli, a micro-manager with an insane focus on delivering features and functions on time, at spec, no excuses. Someone who is a clear ‘finisher.’ I actually think it will play pretty well and fits with what Hurd wants. Frankly it sounds alot like Randy Mott. And this business about Donatelli replacing Hurd is just a waste of speculation. Don’t even worry about that. If Donatelli is successful he may inherit Ann Livermore’s role but more on that later.

Another interesting thought is Donatelli has been trashing Hitachi’s USPV (HP’s XP) for the past 1/2 decade or so and now it is his current high end offering. With V-Max out maybe EMC will make a run at HP again. HP is so much more of a services company now with EDS and unlike IBM doesn’t manufacture a high end product so who knows. Hitachi must be freaking out a bit– what a month; one OEM gets acquired by a Oracle who just wants to commoditize all hardware and your other OEM just put the dreaded enemy in charge– yikes!

And don’t forget NAS. EMC went from nowhere to leader with Celerra under Donatelli’s watch and that’s where the high growth is.

Bottom line: EMC is fine if it doesn’t mess with the recipe and HP gets an understated superstar. HP overnight becomes a more credible competitor in storage but that’s maybe not the story here.

The Bigger Picture

So HP just put a storage person in charge of servers and networking. Finally, HP makes a management move that acknowledges storage spending accounts for half of people’s hardware budgets! But there’s more to this chess match than storage and HP just moved a pawn on the board. The question is what can the Rook now see that it couldn’t before?

The landscape is changing as often it does at the end of decades. We are seeing a re-integration of the data center. EMC/VMware/Cisco, Oracle/Sun, IBM, HP/EDS, Microsoft, Amazon, Google. These are the big cloud players converging storage, servers and networks and supporting the data center of the future.

To round out the portfolio and compete, I’m told by my networking gurus that HP needs a stronger high end data center networking play than ProCurve. So an acquisition there could be one of Donatelli’s first big moves. To be sure he knows where Cisco/EMC/VMware are headed and has a running start. Services is a critical part of any data center player’s strategy and with EDS, HP is instantly credible and Donatelli’s boss, Livermore oversees HP’s EDS business.

The big question is in this world of consumerized everything, does IT become outsourced? Are the big bets by IBM, Oracle, EMC/VMware and Cisco misplaced? I personally don’t think so. I think the data center business will be alive and well for some time and virtualization, metering, ubiquitous networking, etc will be applied to internal data center operations to drive efficiencies and improve agility. IT management is going to keep the jewels in house for some time and adopt cloud-like technologies in the data center.

The IT business is becoming an oligopoly where control is in the hands of a small number of players and any move by one of the players can have a major influence on the market. So the next big question is can EMC/VMware thrive independently as a ‘tiny’ $15B company with a ‘puny’ sub $30B market cap and compete against $100B+ revenue giants like HP and IBM? Throw in a $60B Microsoft with a huge market cap and companies like Cisco and Oracle that are on their way to $50B in revenue competing with $100B+ valuations. NetApp? Not even on the radar in this scenario.

Bottom line: To be a major cloud player, EMC has to grow faster through acquisitions or get bought.

Amazing what a little diagonal move on the board can bring into focus.

Update: On 5/26, HP released this statement.

HP today announced that the Suffolk County Superior Court of Massachusetts entered an order that allows David Donatelli to begin working at the company.

This order modifies an earlier ruling by the court temporarily prohibiting Donatelli’s employment by HP.

Donatelli will serve as executive vice president of Enterprise Servers and Networking. Due to certain restrictions in the court’s most recent order, Dave Roberson, senior vice president and general manager of the StorageWorks division, will report directly to Ann Livermore, executive vice president of the Technology Solutions Group at HP, until the order is lifted.

HP is pleased with the court’s recent decision and looks forward to the contributions Donatelli will make to HP’s business.

Translation. We just ran back the kickoff but it was called back for holding. 

To my surprise, Donatelli and HP didn’t have this covered. I’m not sure if it’s because Donatelli wasn’t a California resident or maybe the California courts didn’t want to set a precedent with such a high profile executive or maybe HP and Donatelli took an ethical pill. Either way, it’s classic EMC– even when you beat them they extract a pound of flesh. Now HP has to re-org and Roberson gets to play ‘acting big cheese’ while Donatelli bones up on servers and networking.