Joseph Tucci of EMC

Not many companies can claim to be bigger now than at the start of the downturn. But led by charismatic New Yorker Joseph Tucci, Boston-based EMC continues to rip up the regular recession playbook.

On the day of our meeting, Joe Tucci is a man of divided loyalties. As CEO of one the world’s largest IT infrastructure firms, he’s spent the past nine years putting Boston on the technology map through an ambitious acquisition strategy that has seen his firm – the $38-billion, Hopkinton-based EMC Corp. – become the number-one data storage solution provider in the world, as well as significantly expand its IT consulting and services businesses through a number of strategic investments. He lives and breathes Boston; nearly 9000 of the company’s 41,000 employees live and work in Massachusetts, and Tucci is intensely proud of what he and his team are building down in the Cradle of Liberty. It’s a tightly knit firm with strong roots in the local community. There are productive links with Harvard, MIT, Northeastern and the numerous other colleges and universities in the area. And EMC is a major sponsor of the local football, basketball and baseball teams. But therein lies the rub: this weekend his beloved New York Yankees are in town for the opening game in the 2010 MLB season, and for one night only Tucci is hoping against hope that not everything goes right for the people of his adopted hometown.

A native New Yorker, Tucci grew up just blocks from Yankee Stadium in the Bronx, watching greats such as Yogi Berra and Mickey Mantle take teams apart for fun. "Baseball is in my blood," says the tough talking chief executive. "I always dreamt of playing pro-baseball." Indeed, in his early 20s, he played in semi-professional leagues as a catcher - "the one position where I could see the entire game and call the shots", he recalls with a grin - until a skiing accident put paid to his major league dreams. Even so, the hugely competitive Tucci never lost his love of the game and appetite for a scrap; instead, he transferred his keen analytical skills and ability to read a situation before making the right decision to the world of big business, and has never looked back.

Since his arrival at EMC in January 2001, Tucci has led EMC through a period of dramatic revitalization, continued market share gains and sustained double-digit growth. Most notable has been his transformation of the company's business model from what was a near exclusive focus on high-end storage platforms to what is now the industry's most comprehensive portfolio of best-of-breed platforms, software, services and solutions that enable organizations to implement what EMC calls "information lifecycle management" - the ability to align IT infrastructure with business needs based on the changing value of information. Today, EMC operates with a balanced product portfolio in which software and services generate more than 50 percent of its annual revenues, a far cry from when he first arrived and the company was known purely as a hardware heavyweight. Over the past nine years, Tucci has doubled revenue, transforming EMC from a supplier of high-end data storage systems to a multi-faceted vendor of storage, virtualization and security products with $14 billion in sales.

Unsurprisingly, people at the company love him for it. "He puts himself last, his customers first, and leads with humility," explains former head of EMC Investor Relations Polly Pearson. "He offers praise to his people profusely, and seeks no accolades.  He spends most of his time in the field, not in any executive suite. And he has a brilliant understanding of business strategy."

Riding out the storm

We meet at the firm's Hopkinton campus on a grey weekday in April. The rain is hammering down on the rooftops, as it has been for days; Boston has been experiencing some of its wettest weather for years, and the incessant rainfall provides an apt metaphor for the financial storm that has been pummeling IT companies large and small for the best part of two years now. According to outplacement company Challenger, Gray & Christmas, the technology sector announced 174,629 planned job cuts in 2009, 12.3 percent higher than the 155,570 job cuts announced in 2008 and the biggest year-end total since 2005, when tech employers eliminated 174,744 jobs. The list of those cutting jobs was a real technology 'Who's Who': Microsoft, IBM, Adobe, Yahoo, AOL, AT&T, Sprint, Cisco Systems, Nokia, Seagate and Sun, to name but a few. Even Google made cuts in its sales and marketing and recruiting forces.

Yet unlike many in the software industry, EMC has weathered the recessionary whirlwind particularly well. It took $450 million out of its cost base last year and has committed to remove another $500 million in 2010 - and yet it has a higher headcount now than at the same time last year and is aiming for 14 percent growth by 2011. Ambitious? You bet. Achievable? Tucci certainly believes so.

For one thing, the company's cash position is really strong. "Despite spending almost $3 billion on acquisitions since 2008's economic crisis, our cash is ahead of where it was 18 months ago," he says, leaning across the desk in his understated office to make his point. "And if you look at how we ended the year, we ended it with the best quarter in our history. Sure, the downturn affected us, but we have emerged with a record quarter, with close to record cash, a couple of great acquisitions, and with forecasted growth of 14 percent on the top line and 24 percent on the bottom line. So yeah, I think we dealt with this recession much better than most."

Later in April, the firm backed up this success by announcing record financial results for the first quarter of 2010. So how did they do it? "It took a lot of hard work," he concedes. "But the other part of it was that we didn't deny what was coming." One element of this transparent approach was to ask employees to help out by taking a five percent pay cut (Tucci himself slashed his own pay by over 20 percent) and promising to keep layoffs to a minimum if they did; the response was overwhelming. "More than 85 percent signed up voluntarily to the measure because they knew it would keep EMC stronger, preserve jobs, and they liked the program we laid out for them," he says. "That's pretty amazing. I've always said that whatever doesn't kill you makes you stronger, and in fact I think you learn more in tough times than good times; it's how you react to external and internal events in a tough period that really shape a company. We found ways to be more efficient and we learned a lot."

For Tucci, the key to getting that message across successfully was to ruthlessly focus on what he calls the most important aspect of leadership: communication. "The three rules of managing in a tough environment are communicate, communicate more and communicate again," he explains. "And then you start over: communicate, communicate more, communicate again, and go back to point A. You have to communicate a balance of reality and honesty, with vision, strategy and proof points built in. If we do X, this is what's going to happen. If we do Y, this will happen. You honestly address the reality of the situation. 'I thought this would happen, but we fared even better that that'. Or 'I thought this would happen, but we fell a little short for these reasons; here's what we're going to do about it'. You have to be very open, and I don't care where you're from in the world, people react to that. If they think for a second that you're giving them spin, you've lost them."

Catching the next wave

The reality of the situation is that actually, the company has little need for such spin; as far as Tucci is concerned, EMC is in great shape. "There's this great wave of change that is happening right now in the form of cloud computing, and we think virtualization and storage are incredibly important to that," he explains. "You look at survey after survey that say companies are going to spend more on virtualization, companies are going to spend more on storing information, companies are going to spend more to make sure what they're storing is compliant in terms of GRC, and this is where our strengths lie."

While some enterprises still shy away from the idea of cloud computing, a recent survey of over 1500 global CIOs showed that investigating the possibilities of the cloud was their number two priority for 2010. Worldwide spending on data center technology infrastructure and services exceeds $350 billion annually, according to McKinsey and Company estimates, with half of that spent on capital expenses and half on operating expenses. Further, an estimated 70 percent or more of those costs are expended to maintain existing infrastructures, leaving 30 percent or less for new technology initiatives and applications that can provide breakthrough differentiation for businesses. It is also estimated that approximately $85 billion, or 20 percent of this total market, can be addressed with data center virtualization and private cloud technology by 2015. The cloud is coming, and EMC plans to be at the forefront of that movement.

Indeed, Tucci feels that cloud computing offers the greatest opportunity to transform the IT landscape since the advent of distributed computing in the mid-1990s, and follows previous waves such as mainframe, minicomputing and PCs as a potentially game-changing technology. "In such waves of change, companies can get very dislocated and disrupted. In a way, it throws a lot into the air, and how you embrace that change and what technologies you have at your disposal will determine how well you do."

In this regard, EMC is very well placed. Driving the demand for cloud computing models are the increased complexity and costs inherent in current data centers, and the explosion of data that only promises to grow, says Tucci. Such data growth comes from multiple sources, including the growth of mobile device users, medical imaging advancements, increased access to broadband and smart devices. But unlike firms such as Amazon and Google, which use cloud computing to deliver their own online services and host business applications for other firms through so-called 'public clouds', EMC is pushing the concept of 'private clouds' where individual companies create specialized online data centers. Tucci predicts that thousands of businesses will set up private clouds in the next few years, and he is positioning EMC as a major supplier of the hardware and software they will need.

"If you look at some of the basic tenets of cloud computing, we're sure X86 technology plays a major role, we're sure virtualization plays a major role, you have to build in a lot of automation, you have to find ways to deliver IT as a service," says Tucci. "And if you think of what EMC does, we're the leader in virtualization through VMware and X86 technology, the leader in information management, the leader in information security - all pivotal technologies that will help form this next wave of computing."

In response to this growing trend, EMC recently announced the Virtual Computing Environment (VCE) coalition - a three-way collaboration with Cisco and VMware - that promises organizations of all sizes an accelerated approach to data center transformation and significant reductions in both capital and operating expenses. The partnership aims to build reference architectures (or Vblocks - complete technology packages that have been built, tested, proven and documented by the VCE coalition) for different goals such as internal cloud, external cloud, virtual desktops, etc. Need an internal cloud capable of supporting 2000 virtual machines? There is a Vblock for that, as the commercial might say. "I don't think any company can get where it needs to be by itself," explains Tucci. "I think you need to first of all have a good business yourself and then you need to cooperate."

Looking to the future

For Tucci, riding the next technology wave is all about looking after the long-term interests of the company - something he concedes is increasingly difficult in today's results-obsessed environment. "It's getting more like a sprint than a marathon," he admits, referring to the relentless pressure to hit quarterly earnings targets. "And in a sprint, if you don't start well it's almost impossible to win. In a marathon you can fall down, and as long as you don't hurt yourself you can get up and run because you've got 26 miles to catch up. But in a 100-meter dash, if you fall down you're done."

The challenge for EMC is that business survival is increasingly like trying to run a marathon at 100-meter pace. Companies need to be agile enough and fast enough to be quick-to-market in a rapidly changing technology environment, but, as Tucci is at pains to point out, they also need to be in business for the long haul if they are to be truly successful. Balancing that focus on the long-term whilst keeping shareholders happy is key. "You need to set the right expectations and do what you say you're going to do," he suggests. "A lot of people complain about too much short-term focus or too much long-term focus; I find if you have a good long-term plan and you come clean and tell the world what you're going to do this quarter, next quarter, and the one after that in order to achieve those aims, they're usually very accepting."

For instance, EMC increased its R&D expenditures this year by a not-insignificant 20 percent to around $2 billion, while since 2003, the company has invested approximately $11 billion in upwards of 45 strategic acquisitions. "On the hand, that suggests I'm not maximizing profit, per se; but I am investing, and the stock went up as a result. I think our shareholders are happy with the fact that EMC is going to deliver a pretty good top line, a pretty good bottom line, and that we're investing for the future."

Such long-term thinking is a big part of the company culture; Tucci is one of only three men to take the role of CEO since EMC was founded in 1979. But while he has committed to stay on until the end of 2012, the firm's leadership beyond that date is less certain. High-profile hires, such as Pat Gelsinger from Intel as President and COO of Infrastructure Products, along with a recent reshuffle in the executive suite, suggest that the company is already looking beyond Tucci's tenure, while the CEO himself has admitted that the current executive management structure needs to be enhanced and expanded as the firm progresses from $14 billion in annual revenues to a $25 billion IT infrastructure company capable of competing with the likes of IBM and Hewlett-Packard. Currently in the running for the top job, according to the Wall Street Journal, are Gelsinger; Howard Elias, President and Chief Operating Officer of Information Infrastructure and Cloud Services; and David Goulden, current EVP and Chief Financial Officer. According to Tucci, it's all about having options. "You've got to assume something could happen," he says. "Say you get hit by the proverbial bus tomorrow, then you need to have plans in place for that."

So what can his successor expect from the job? "In a business like this that changes so frequently, there's a lot of pressure," he says. "There are some businesses that have a lot of time to create change, but technology's not one of them; the cycles of new products and the ways you can get disrupted occur very quickly. So there's always a lot of pressure on, and that's never fun. But on the other side it's tremendously challenging; it's like the world's greatest game of chess, and you're playing against some really great players. So it's incredibly invigorating, and it's intellectually challenging. It's a real thrill, and I like it. But I would not call it fun. I definitely would not call it fun. Fun is when I'm scuba diving, fun is when I'm playing golf, fun is when I'm with my kids. That's fun."

Such candor - not to mention self-awareness - is refreshing in a leader, and one of the reasons Tucci's management style has proved so successful over the years. "I've witnessed him handle brutally strategic situations and confrontations with such wisdom, conviction and blunt honesty it took my breath away," says Pearson. "He does not fear doing what he sees as the right thing; he cares, big-time."

Which brings us back to that season opener at Fenway Park, and Tucci's other great passion. The Red Sox overcame multiple deficits en route to a memorable 9-7 victory over Tucci's Yankees - their bitter rivals and defending World Series champions - thus subjecting the EMC boss to much short-term teasing from his staff at HQ. But like Tucci, the Bronx Bombers are nothing if not resilient; at the time of writing they currently have the best win-loss ratio in the league for 2010, top the division and remain favorites to defend their title. It provides confirmation of an age-old sporting truism that an ex-ball player such as Tucci would appreciate: that championships are won over a season, not on the basis of one game. He knows that immediate results don't automatically translate into longer-term success, and under his guidance, EMC certainly won't be taking anything for granted. But they will be expecting plenty more wins over the years ahead.

CURRICULUM VITAE

Born: 1947

Education: Bachelor's degree, Manhattan College; MS in business policy, Columbia University

Career: 1969 Started as a management trainee in RCA's computer division and became a systems programmer 1972 Joined Sperry Corporation, an early computer manufacturer, where he continued programming 1986 Sperry merged with Burroughs Corporation to become Unisys, where he rose to the role of president of US information systems 1991 Became chief executive of Wang Global and guided the company through a quick emergence from Chapter 11 bankruptcy protection 2000 Joined EMC as president and COO 2001 Became chairman and CEO

Family: Married with two children and two grandchildren

Hobbies: Water sports, downhill skiing, golf, playing guitar

EMC at a glance

Founded: 1979

Headquarters: Hopkinton, Massachusetts

CEO/Chairman: Joe Tucci

2009 revenues: $14 billion

Worldwide employees: 43,000

Country presence: >80

R&D investment (2009): $1.6 billion

Market capitalization (March 2010): $38 billion