The Hindu Business Line : EMC sees India as high growth market

MR WILLIAM J. (Bill) Teuber, Jr., is the Executive Vice-President and Chief Financial Officer (CFO) of EMC Corporation, an $8.2-billion company in the information storage solutions space.

Mr Teuber has played a major role in turning around EMC from a company that incurred a net loss of $500 million in 2001, to one that turned in a profit of $850 million in 2004. He is visiting India during February 22-25 for the first time.

In an e-mail interview with Business Line, Mr Teuber expresses his views on the role of today's CFO, trends in the technology industry and outsourcing.

How do you see the evolution of a CFO, from somebody who used to just handle the finance department to someone who nowplays a pro-active role in the corporate affairs of a company?

In the early part of my career, when I started in accounting and auditing, people in finance were there to keep score. Today, the best CFOs are integral partners and rank among the most valued players in their business. They have influential voices in decisions about strategy and direction of the company, helping to ensure that resources are being invested for maximum competitive advantage and the highest rate of return. A CFO who is truly engaged at the top of the business is one who is budgeting for future growth, driving improvements and more efficient processes throughout the company.

With all of the highly publicised recent corporate scandals, the CFO in many instances, like it or not, has become a public face for the company - someone whose integrity and communication skills can really build up or break investor trust and confidence in a company.

What role does the CFO play in a technology company like EMC?

I'm one member of a small team of senior managers who report directly to the CEO, Mr Joe Tucci.

I'd like to think that finance, information technology and investor relations — the three functions I'm responsible for directly — have been major enablers of the dramatic transformation that EMC has undergone since the synchronised global recession hit our industry hard in 2001.

EMC went through a stabilisation phase in 2001 when we lowered our annual cost structure by $1.3 billion, maintained R&D at 15 per cent of revenues and managed to grow our cash position by $600 million.

Then, we embarked on a renewal phase in 2002, when we reinvigorated our core business in storage platforms, started rolling out the most aggressive schedule of new products in EMC history, revamped our go-to-market model and expanded our business in software and services.

Now, EMC is in the growth phase of that dramatic transformation story. We swung the company from a $508 million loss in 2001 to $496 million in profits in 2003 — a swing of one billion dollars in two years.

Where does India stand in EMC's strategies?

EMC sees India as a high growth market opportunity with a remarkable pool of highly skilled people. One of EMC's strategic goals is to grow our international revenues to 50 per cent of our total, up from 43 per cent in the fourth quarter of 2004.

The demand for networked storage in India may be small relative to other countries in the world, but the rate of growth expected in India over the next five years is almost unrivalled.

We plan to enhance our investments in India to strengthen our sales operations and local partnerships, augment our best-in-class global services operations to better serve customers, and expand product support and development work to benefit our customers worldwide.

Where is the technology industry headed for?

The strongest companies in IT are getting stronger. Customers are looking to do more business with fewer vendors who are extremely well capitalised and who can offer a broader portfolio of best of breed technology and solutions rather than point products. They also want their IT suppliers to have consistent and well trained support and service personnel wherever they happen to be in whatever time zone around the globe.

All this is leading customers to a stronger preference for larger, proven IT suppliers, who have breadth and best-of-breed products and services.

The information storage industry has really come into its own as a major force in IT as more storage systems get liberated from their former role as peripheral devices attached directly to servers.

The major trend now is for organisations to deploy networked storage, or networks of storage devices for multiple servers and applications. Right behind the networked storage trend is the increasing use of disk instead of tape for back-up and recovery.

Recovering your business from disk is enormously faster and less complicated than trying to recover it from tape. Plus, the falling price of disk technology and the introduction of richer software functionality are making disk-based recovery a more attractive option than tape. We don't expect tape to go away, but its use will be limited to archiving purposes in the future.

What is a CFO's perception about outsourcing (to low-cost destinations such as India)?

EMC is in India because of the skills that are here. In the leap from an agricultural economy to an industrial economy, people have followed jobs, migrating from the rural areas to factories in the cities. In the leap from the industrial economy to the information economy, more jobs will follow people — migrating to wherever special pools of labour happen to be.

In the context of outsourcing, do you have to do a great deal of balancing act between the urge to save costs and the need to save jobs? How do you go about this issue?

The best way to protect jobs and create more of them rather than fewer is sustained, is profitable growth over time. Cost efficiency is necessary for profitability, but no company ever saved its way to greatness. The way we intend to grow is to seek out high growth market opportunities and plan accordingly.

No global company can expect to do much business in a rapidly growing country such as India if it is unwilling to make long-term investments in that country and establish itself with a strong and growing presence.

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