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EMC INSIGHTS

Remarks to Intellectual Property Owners Assoc.

By David Goulden
Chief Executive Officer of EMC Information Infrastructure

September 2013

On behalf of my fellow 9,000 EMC employees based here in Massachusetts, and our 60,000 employees around the world, it is my pleasure to welcome you all to Boston for the 41st annual gathering of the Intellectual Property Owners Association.

I am delighted to be with you to put in a plug for Boston as a hotbed and hub of innovation and to share our company’s perspective on what innovation and intellectual property mean to our business.

But first, I know what you’re thinking: This guy doesn’t sound like a Bostonian at all.
Although I’ve called New England my home for 20 years, I was born in “Old” England, so that makes me a member of a large and growing group in Boston — the people our Mayor, Tom Menino, calls the “New Bostonians” — the staggering 27% of this city’s population who were born in another country.

Many come to Massachusetts, like I did, with degrees in engineering and business,
attracted to Boston for its wealth of job opportunities as one of the world’s leading centers of innovation in information technology, biotech, medical research and delivery, financial services and higher education.

A quarter-of-a-million students — undergraduates and graduate students — flock to Boston every year. In the 19th century, they called Boston the “Athens of America,” a nod to Greece in the fifth century B.C., the place where everyone went to learn. Today, our research universities and teaching hospitals make Boston one of the best hubs of innovation in the world.

We lead the nation in federal research funding. Close to half of our state’s population has a bachelor’s degree or higher. Our percentage of immigrants with advanced degrees is nearly one out of every five. The intellectual capital and IP generated here is virtually unrivaled in America when the metric is patents per capita, venture capital investment per dollar of state GDP, or the number of academic articles in science and engineering per dollar of R&D invested.

Benchmarked against the most innovative states in the U.S., we rank next to the top in turning R&D funding into ideas, technologies and startup companies. And our state enjoys strong job growth in our innovation industries.

The company I represent, EMC, is one of the largest private employers in New England, and its largest technology company by revenues and market capitalization. We see the location as a powerful magnet for the talent and brainpower we need to keep our leading edge.

For those of you who may be less familiar with EMC and our business, let me say a few words on who we are.

EMC pioneered the data storage industry and grew to surpass large IT providers such as IBM and HP in the storage market. We rank 133 on the Fortune 500, based on 2012 revenues of $21.7 billion.

We are the market leader in enterprise scale information storage systems and backup and recovery systems. We serve the information security market through our security division, RSA. And we own about 80% of one of the most successful software companies today, VMware, as well as the majority interest in Pivotal, another Silicon Valley-based business that is building the platform for next generation cloud computing and big data applications.

According to The Patent Board, our patent portfolio ranks higher for industry impact than the patents at all of the top 10 leading technology innovators today except Amazon.

Innovation and intellectual property are our lifeblood, our key to survival, and our future. To succeed in our rapidly changing industry, a market leader like us must play defense as well as offense when it comes to IP. And by offense, I mean we have to be willing to disrupt our existing business model — before someone else disrupts it for us.

That sounds straightforward, but it is very hard to do. Many of us at EMC, including our CEO, Joe Tucci, worked in Massachusetts in the 1980s, when personal computers disrupted and decimated the region’s minicomputer companies, all of which are gone.

We have innovated repeatedly, reinventing ourselves over a 34-year track record of foreseeing future needs and building and acquiring the technology solutions to solve emerging problems in new and innovative ways.

To maintain our innovation edge, EMC invests each year on average about 12% of revenues in R&D and the equivalent of another 10% of revenues on technology related M&A —so approximately 22% of revenues combined each year to extend our technology leadership.

Today, we are betting the future of our business on what our customers tell us are their three most important priorities in IT, namely: cloud computing, Big Data and IT security.

I guarantee you, that for your CIO back at your office, adapting your organization’s IT for the cloud is the most transformative, long term task your IT function is undertaking today.

Running your applications in “the cloud” is what lets you access your information from anywhere, on any device. All of us started using cloud based applications years ago when we logged on to third-party sites that manage HR benefits, like your health plan, or your retirement plan. That’s known as the “public cloud,” because those applications reside in clouds maintained by third parties for the use of many customers.

We sell our systems to lots of these service providers in growing numbers, but more organizations ask us for help in setting up their own “private clouds” — to handle their most sensitive information and applications — in a more secure environment that they protect and control. They prefer it that way because a lot of risk managers are skittish about signing contracts with public cloud providers that don’t mention anything about liability for data loss, or who pays for outages, or security breaches.

The journey to the cloud is well underway, and the next big thing, as we see it, is what our industry calls “Big Data.”

“Big Data” is a catch all term for the aggregation and analysis of enormous data sets… to discover new or hidden value in virtually any field — whether in pharmaceuticals, in the capital markets, geothermal exploration, online retailing… at law firms, as they analyze past billing and staffing data with predictive modeling to bid on new projects… or even baseball.

EMC is proud to be a partner of the Red Sox. If you’ve read the book, Money Ball, by Michael Lewis, you know that the Red Sox refined the use of sophisticated data analytics to gain a competitive edge and win the World Series in 2004 and 2007.

But I bet you didn’t know that your business may have something in common with the Red Sox: chances are you store your most valuable information on EMC systems. Today, 22 of the 26 largest law firms in New York store their information on EMC, along with 10 out of 10 of the world’s top pharmaceutical companies and telecommunications companies, and 9 out of 10 Fortune 500 financial services firms and retailers.

If you work at a law firm, the old way you stored your data was to ship boxes of paper files to Iron Mountain. Then, when electronic records came along, many of your firms outsourced the job to online hosting providers. Outsourcing can be easier, but it can also get expensive for law firms that generate terabytes of new data every month. For example, we have customer that just put 600 terabytes of litigation data on an EMC system. Keeping all that information in house actually saves them quite a bit of money on their storage costs — on a total cost of ownership basis, personnel costs included.

Some of you might be asking: Just what is a terabyte, anyway?  To put this in context… a terabyte is a thousand gigabytes. Your smart phone might hold 16 or 32 gigabytes depending on which model you use. One terabyte is about the size of a large backup drive you might use at home. To scale this even larger, it takes 1,000 terabytes to make up one petabyte. And a thousand petabytes gets us to what’s called an exabyte.

It took our company 25 years to ship one exabyte worth of storage systems. This year, we shipped one exabyte of storage in the second quarter alone. And 85 petabytes of that went to a single customer.

What’s driving the growth? New data formats. First there was paper. Then came email and PDFs. Now, businesses keep video and wav files, much of that generated and accessed by mobile devices and stored in the cloud and shared via social media apps like Facebook or LinkedIn or Instagram.

The Red Sox, for example, use EMC’s file sharing application Syncplicity (think Dropbox with sophisticated security features that consumer file sharing applications don’t have). They use it to store scouting videos in their private cloud, so their scouts can access them securely from the road on their mobile devices.

If you’re like me, you travel a lot and use a tablet device when you move around.
Mobile-enabled, cloud-based applications are the fastest growing kind of applications in business today. And your business is no different.  We’re talking with organizations today about how to adapt and evolve your applications at work to be accessible, and secure, on your mobile devices.

Ensuring trust in cloud computing is perhaps the greatest challenge to cloud adoption today. Your customers have to trust you, and you have to trust your IT. Information security is the one IT topic that gets discussed in every corporate boardroom.

There is a huge shift happening in the way IT security is done these days. The old way of protecting your digital IP was to build a sophisticated perimeter defense to keep the bad guys out — using firewalls and anti-virus protection. But today’s attackers have grown stealthy enough to get around that. When it comes to IT security breaches, we see two types of organizations: those that know they have been breached… and those that don’t but probably have been. If you are responsible for protecting IP at a large enterprise and you don’t know if you’ve been breached, I urge you to start asking tough questions when you go back home.

The new model for IT security is all about using data analytics to monitor IT networks for irregular patterns of behavior… to catch data moving to places where it doesn’t belong. It’s about building capabilities to detect and respond in real time… to protect intellectual property from loss, not unlike like the way banks protect themselves against electronic fraud. That’s why EMC’s security division, RSA, acquired the leading technology innovator in this space, NetWitness. Putting heavy locks on heavy vault doors is no longer enough to protect your assets from theft or loss.

When it comes to protecting IP, as I said earlier, a market leader like us has to play defense as well as offense. And since we’re here together, I would be remiss if I failed to point out that too many leading, innovative firms like ours are suffering losses out in the open — in broad daylight — due to unfair patent litigation.  

I expect most of you saw the piece in The New York Times back in June written by Randall Rader, chief judge of the United States Court of Appeals for the Federal Circuit, and two law professors. They wrote:

“…as the vast number of frivolous patent lawsuits have shown, too many people are rewarded for [doing it for the wrong reasons, and the result] has slowed the development of new products, increased costs for businesses and consumers, and clogged our judicial system.”

“In the meantime,” the authors wrote, “vexatious patent litigation continues to grind through our already crowded courts, costing defendants and taxpayers tens of billions of dollars each year and delaying justice for those who legitimately need a fair hearing of their claims.”

These “vexatious” plaintiffs, as Judge Rader calls them, “filed the majority of the 4,700 patent suits last year — many against small companies and start-ups that often can’t afford to fight back.”

I’m disappointed to say that our company has also been a victim of the same disturbing trend. But I am proud to stand before you today to tell you that we have no hesitation in defending our ground in the face of intimidation. We are proud of our legal team’s hard earned reputation for defending ourselves vigorously. And we applaud all of you who do the same for your companies back home.

I can’t finish without a shout out to two MVPs [Most Valuable Players] on our legal team: EMC’s Executive Vice President and General Counsel Paul Dacier and our Senior Vice President and Deputy General Counsel Krish Gupta, who manages our intellectual property and technology licensing team. Paul Dacier, by the way, just assumed leadership this month as President of the Boston Bar Association, the oldest bar in the U.S., which claims John Adams as a founding member.

Our legal department’s most recent claim to fame was being named last month by The National Law Journal as “Boston’s Legal Department of the Year” — for winning a series of important patent cases, executing significant deals, and for being a “thought leader in the region.” All of us at EMC are very proud of the world class legal team that Paul has built over the years, and we can’t thank them enough for everything they do to enable our company’s success.

I’ll close quickly by noting that EMC’s history of innovation is only 34 years long. That’s long in the tech industry, where few companies ever grow past adolescence. But that’s far shorter than Boston’s long history of innovation that stretches back nearly 400 years.

We are a city focused squarely on the future… on innovation in cloud computing, big data, and IT security… in the life sciences… in biotechnology… at our teaching hospitals… and across our numerous research universities throughout the region.

There is no city better suited as a backdrop for this conference. There is so much to see and do here, and we at EMC consider ourselves fortunate to be a part of it.

We are delighted to welcome you to Boston. Enjoy your stay.

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