$24 bn market is no longer available to EMC, IBM or HDS: Hubert Yoshida, CTO, HDS

Hubert Yoshida, CTO, Hitachi Data Systems often comes to India and has interacted with Dataquest several times. However, in his recent conversation with DQ during his visit, he revealed that the storage landscape is no longer the same. What he stressed most was the fact that the traditional storage companies like EMC, IBM and HDS cannot do business in the traditional way. As cloud has redefined the storage space, the storage companies will have to focus on delivering business outcomes. Excerpts:

As a veteran in the industry, can you give us a glimpse of the overall storage landscape and what trends do you foresee in the storage ecosystem?

To begin with, the storage landscape will never go away. Although cloud is having a major impact on the storage industry, analysts say that for every dollar that goes into Amazon cloud, public cloud displaces 3 to 4 dollars of infrastructure spend. I believe AWS closed down last year at about $8 billion. It means that $24 bn of addressable market is no longer available to EMC, IBM or to Hitachi Data Systems. It means if we try to compete with cloud within the infrastructure space, we will be out of business in the next three to five years. This also affects the GSIs because out of that dollar of infrastructure, they provide the services to support and install. They will be impacted even more strongly than the infrastructure vendors themselves.

It’s a major impact on the whole storage industry. Hence the focus is not going to be so much on the storage in the near future. Realizing this now what we are doing is focusing more on application emblement since that is the real thing that customers want. They do not really care where their storage is. They want to have business outcomes. If you look at the productivity chart published by the OECD, it shows that productivity has been declining even though we have all the wealth of technology. The reason is that although we have the latest technologies available to us, we are not using them in any new ways. As a result, we are not gaining the productivity that comes with those technologies. For example, I was recently speaking to the CIO of a bank who showed me the mobile app on his phone which aids in applying for loans. That technically means you do not have to go to a bank personally to apply for a loan. But the problem here is that the loan still takes two to three weeks to process. That CIO is competing against firms in the US like Lending Tree or loanme.com that can process the loan in just two days’ time.

How do they do it?  I mean it is not about storage. It is about transformation of the whole infrastructure and even the mindset within that organization.

The focus has to be on business outcomes. Where we have been successful is that we have a large B2B customer base in the US and we were able to save them 80% of their infrastructure cost and make them more agile by moving to cloud. In the cloud we have our own content platform and with the content platform you don’t have to back it up. So, all these Oracle databases where they will make copies and backups of the management mostly go away. This way they are able to save money and become more agile.

How do you plan to increase your footprint and earnings in the overall IT landscape?

There is still a healthy infrastructure business, which we use to help finance and leverage. IoT is a big opportunity in the infrastructure space. As part of the Hitachi Group, HDS has the opportunity to increase its presence in newer domains. Our approach to IoT is to leverage all of the capabilities of Hitachi - One Hitachi. We are reorganizing around the One Hitachi approach in order to synergize the trends of these different companies. The other approach that we are taking and is different from most other companies is of co-creation on the IoT side. It means that we are going to be working with customers on their business outcomes. We are not going to be building IoT devices or products and sell them into the commodity market. With the co-creation approach, we work with large customers and we create solutions which then eventually turn into a more general solution thereby being available to more enterprises. A lot of the IoT business is about services.

In our last reporting by our CEO, he reported revenues for the IoT business at 900 trillion Yen which is about $8.3 billion. But that really comes to redefining things that we have been working on all along. For instance, we have been working with the UK Inter-City train system for some time. We are trying to identify this business separately. Out of  the $8.3 billion, 1.1 billion is around the core IoT products. But $7.2 billion which a huge chunk alone comes for services and system integration.

Does it mean that Hitachi Data Systems will eventually increase its footprints into the services business?

There are opportunities because all the GIS and IS companies are also looking for opportunities. We believe that we can work with them and leverage their strengths using our capabilities. One thing that distinguishes Hitachi is that we do have a very strong R&D capability. We have strong technology arm, be it visual analytics or artificial intelligence. We are still a technology company. However, we have changed the focus of our research. If you look back, Hitachi has been ranked among the top 10 for the number of patents filed. But eventually we decided to focus more on business outcomes. In order to do this, we have reorganized our whole R&D.

Where do you see Hitachi Data Systems in the overall ecosystem in India especially when the government is pushing for Digital India and Smart Cities?

We see a great opportunity for us here. We also have been very active in working as One Hitachi. For instance, we have established ties with Siemens and CII to build the smart city corridor between Mumbai and Delhi. This is going to be about one hundred smart cities within the corridor. Other opportunities in infrastructure include the rail system, roads and water etc. In all these areas we have expertise and we hope that we will be able to work with the Indian government, municipalities and states. We have increased our capability share. In India, we have a number of Hitachi companies. We are trying to work as One Hitachi.