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EMC response reminds me of Clinton.

Byline: Peter S. Cohan

If you reach back into the dim recesses of your memory, you will remember that back in the 20th century, President Bill Clinton was struggling to keep from being impeached. That's when he uttered the memorable quote, "It depends on what the meaning of 'is' is.''

On Sept. 15, I asked Hopkinton-based EMC Corp. to comment on whether it had lost a bid to sell security software to a big insurance company. Its answer reminded me of that phrase. But in EMC's case, the phrase would have been: "It depends on what the meaning of 'this' is.''

To refresh your memory: In 1998, Mr. Clinton was being questioned by a grand jury in connection with the Monica Lewinsky affair. He was asked about why he wasn't lying when he told his top aides that 'There's nothing going on between us,'' referring to himself and Ms. Lewinsky. Slate reported that, according to footnote 1,128 in Kenneth Starr's report, his reply was as follows:

"It depends on what the meaning of the word 'is' is. If the -- if he -- if 'is' means is and never has been, that is not -- that is one thing. If it means there is none, that was a completely true statement... Now, if someone had asked me on that day, are you having any kind of sexual relations with Ms. Lewinsky, that is, asked me a question in the present tense, I would have said no. And it would have been completely true.''

What does this have to do with EMC? On Sept. 12, I interviewed the CEO of a document security software company in Silicon Valley who told me his company had recently beaten EMC in a bid to sell its software to a large insurance company. When I contacted EMC for a comment on the claim, its response was positively Clintonian.

Before getting into that, it is worth pointing out that document protection software is a big, fast-growing market that accounts for a tiny proportion of EMC's revenue.

What is document protection software? For a movie producer, there is nothing worse than the script of a movie getting into the public's hands before the movie is released -- as happened last January with Quentin Tarantino and his script for "The Hateful Eight.'' After all, that unintended release could spill the beans on a key turn of the plot -- and change what would have been a blockbuster into something that most people decide they don't need to pay $15 to see in a movie theater.

Software intended to keep that from happening -- by making sure that only authorized people can view documents -- is a $10 billion market annually, growing at a 40 percent annual rate.

But it accounts for a tiny proportion of EMC's total revenue, which mostly comes from selling big boxes that store data. For the first half of 2014, EMC reported $11.4 billion in revenue, according to its most recent quarterly statement.

EMC makes most of its money from selling data storage hardware and virtualization software and services. According to its most recent quarterly statement, which reports on five business segments, 68 percent of EMC's first half 2014 revenue came from information storage, 25 percent from VMWare, and the balance from RSA (4 percent), Information Intelligence (3 percent), and Pivotal (1 percent).

Document security is an unspecified part of EMC's Information Intelligence Group which suffered a 13 percent drop -- down $72 million in the first half of 2014, according to EMC's second quarter 2014 report. "This business continues to make progress as it continues to innovate to meet customers' demand for technologies that work seamlessly in mobile cloud environments, like xCP and Syncplicity,'' notes EMC's 10Q.

Syncplicity is EMC's document security product, based on technology from a startup that Boston Business Journal dubbed "a DropBox also-ran'' acquired by EMC in May 2012.

Moti Rafalin is CEO of WatchDox, a Palo Alto, Calif.-based provider of document security. As he explained to me, Watchdox has a new approach to document security. Instead of trying to tie security to specific physical devices, WatchDox wraps a security envelope around corporate documents.

In a Sept. 12 interview, he told me his company recently won a "seven-figure'' contract from EMC, after Syncplicity failed a test given by a 50,000-employee insurance company.

Mr. Rafalin said, "The insurance company tested Syncplicity, and the testers were able to log into the documents of the company's chief information security officer. So the insurance company went with WatchDox's product, even though EMC offered to give Syncplicity at no charge to the company along with the EMC hardware it was buying.''

I asked EMC spokesman Dave Farmer to comment. On Sept. 15, he said, "EMC does not discuss specific customer situations, but this is factually inaccurate.''

However, I was not sure what the word "this'' in his response meant. I wondered whether he meant that Syncplicity, not WatchDox, actually won the contract; or whether it was false that the insurance company's testers were able to access the chief information security officers' documents.

To that question, Mr. Farmer responded, "Although I'd like to, I'm not at liberty to delve any further. As mentioned, EMC has chosen as its policy not to discuss the specifics of customer situations. I hope you understand.''

I understand that this sounds to me like a non-denial denial of Mr. Rafalin's claim. It may not rise to the level of Clinton's evasiveness, but it still casts some doubt on Mr. Rafalin's story.

Since Mr. Farmer's statement is vague, if a judge holding the purchase contract between WatchDox and the insurance company in question asked him to defend his reply, he could say that its loss was not the "this'' that was "factually inaccurate.''

Mr. Rafalin took issue with EMC's comment that "this'' is factually inaccurate. He said, "We have several enterprise customers that formerly used Syncplicity as well as other solutions. When it comes down to it, enterprises need more than good file sharing, they need the data-level file protection that only WatchDox provides -- at the end of the day, (rival solutions like Syncplicity) can't provide that.''

Ovum's principal Enterprise IT analyst, Richard Edwards, believes that WatchDox's claim sounds plausible, though he is not familiar with this particular case. As he said in a Sept. 14 interview, "I'm guessing that (the reason WatchDox passed the test that it says Syncplicity failed) was the rights management technology.''

Peter Cohan of Marlboro heads a management consulting and venture capital firm, and teaches business strategy and entrepreneurship at Babson College. His email address is
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Title Annotation:Business
Author:Cohan, Peter S.
Publication:Telegram & Gazette (Worcester, MA)
Date:Sep 21, 2014
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