Customer Service: EMC Corp.

Great Service Pays -- If You Lose the Profit Motive

For all of the skill that EMC brings to bear on customer service, its most important innovation doesn't reside in its "mind-reading" technology or in its procedures for escalating problems. It lives in Ruettgers's insight, now implanted in the company's DNA, that customers get better service because EMC doesn't expect to earn a profit from fixing their problems.

Customer service is certainly run like any other business unit at EMC, with a budget of its own. But the absence of the profit yardstick changes the logic of how that business runs. EMC invests more in customer service than it gets in revenue from maintenance agreements, more than the $780 million it spent on R&D in 2000 (though it won't say how much more).

Consider one striking example: Kathie Lyons, who headed up a team of 20 people responsible for moving EMC spare parts around the world, understood that her unit would be under the gun during the 1996 Atlanta Olympics. The city center -- including Atlanta's business district, where several EMC customers housed their computer operations -- was snarled by traffic and security checkpoints for weeks. So Lyons stationed bicycle messengers at two dozen locations and stocked each one with EMC spare parts. As a backup, she hired two helicopters and kept them on standby during the games. "She never had to use them," says Frank Hauck, who ran EMC's customer service at the time. "But nobody ever said to her, 'Waste of money.' "

Doesn't Ruettgers have a right to expect an immediate payoff from that sort of spending? He doesn't think so. "What happens," he asks, "when one of my customers runs into a problem, and it would help if I flew five people out to help them through that situation? If I'm running a service organization, and I've signed up to deliver a certain profit line, then I've got conflicting objectives. The way we're set up, those five people are on that plane."

Dan Gaffney, 39, COO of eTrue Inc., which provides face, voice, and fingerprint recognition over the Internet, knows what it feels like to be treated that way. Organizations such as NASA pay eTrue to keep unauthorized users off their networks. His is not a storage-intensive business, but Gaffney does need nonstop access to the face and fingerprint data that's kept at eTrue's headquarters, in Southborough, Massachusetts, in order to make exact matches in less than five seconds. Last November, just before he was due to start testing eTrue's new service, Gaffney lost confidence in the system he had ordered from Sun Microsystems.

For EMC to get the business, it had to locate a machine at the end of the quarter and have it up and running within three days. "I'm still not sure how they did it," says Gaffney. "I'm a pretty tough customer." Gaffney was on the phone with EMC's sales group while the machine traveled by truck to eTrue's data center. A team of EMC engineers met the truck, unloaded it after regular business hours, and worked around the clock for the next two days to get it online.

Gaffney says he choked when he first heard EMC's price, but he soon became a convert. "There was no question of cost after I bought the machine," says Gaffney. "No one ever said, 'Installation costs are so much, and if we go over and above that, we'll have to charge you.' I literally said, 'I need you guys to be there at 12:30 tonight,' and they worked until 4:30 in the morning without ever saying, 'Gotta go.' Yeah, it was painful to write the check. But what I got in the end made me understand why I paid a premium."

"Guilty Until Proven Innocent"

No competitive advantage lasts forever, of course, and EMC's rivals are betting that its commitment to service may be less meaningful as competition in the storage field heats up. The company's phenomenal growth has drawn intense scrutiny from Compaq, Dell, Hewlett-Packard, IBM, and Sun, among others. And all of them are hammering away at what they call EMC's greatest vulnerability: the relatively high cost of its storage systems.

Up till now, as in the case of eTrue, EMC has gotten away with charging premium prices because its service has been so exquisite. But mold breakers like Dell and upstarts like Network Appliance are asking a new question: Why pay more in order to manage complexity? Why not simplify storage technology, with lower-cost products that are easier to install and maintain, so that service itself becomes less crucial? "If we make our products simple for customers to order, install, and manage, they won't need the same level of complex support and service," declares Bruce Kornfeld, worldwide marketing director for Dell PowerVault storage. "It's plug and play."