Yesterday s Resellers, Tomorrow s Competitors


Yesterday's Resellers , Tomorrow's Competitors

In fact, new storage start-ups are appearing at a more rapid pace than ever before. In many cases, these start-ups are not strangers to storage, but, to the contrary, are staffed and managed by former insiders or resellers of an established vendor.

As former insiders, the newcomers know the foibles of their previous employers and of their products. As solution architects and engineers , many resellers have the skills to develop comparable product offerings to those of leading vendors that offer full "backward compatibility" with the products of their former suppliers, while offering improved functionality at a lower price point.

Take, for example, the case of a Newark, Rhode Island-based reseller of NAS solutions. In 2002, the company moved from the role of reseller to the role of competitor in response to the draconian marketing practices initiated by equipment suppliers, who were themselves attempting to address the general economic slowdown . Today, the reseller's product is every bit as capable as the leading products in the NAS market, but at a fraction of the cost.

As happened over and over again after February 2001, the storage technology supplier, a publicly -traded firm, sought to improve its quarterly earning reports by redrawing its sales territories and reassigning its most lucrative customer accounts (heretofore managed by resellers) to its own internal direct sales force. The move, which cost the Rhode Island reseller considerable income, fostered a desire to create a competitive product that was "plug and pin" compatible with the supplier's product, but redressed certain "margin-enhancing" features of the supplier's product to cut its expense.

For example, the supplier was selling as part of its NAS solution disk drives priced at three times the cost of the drives on the open market. The supplier ensured that only its drives could be used with its network-attached storage "head" (the thin server component of a NAS) by placing a proprietary block format on the drives. Consumers were denied access to the drive formatting utility that could be used to format less expensive drives , readily obtained on the open market, for use with the vendor's platform.

By removing the special formatting step and using commodity disks, the reseller was able to reduce the cost for his "new" product, while at the same time ensuring that customers who already had an investment in his former supplier's products could preserve that investment and use their older drives and trays with his new NAS head. Such a scenario is repeating itself over and over in the industry today ”to the chagrin of brand- name vendors.

While the business motives that drive some vendors to seize control of the most lucrative accounts from their resellers are understandable, the practice is somewhat short-sighted. Virtually every industry observer who has monitored the emergence of networked storage has noted the close link between NAS and SAN adoption rates and the sales education efforts of channel partners (resellers/integrators.) Of the 11,000 or so SANs deployed in the market at the time of this book, the preponderance have been sold to customers by reseller/integrators who have been better situated to educate consumers and to dedicate the necessary time to account cultivation than the minimalist direct sales forces that most equipment manufacturers would permit. Vendors ignore this relationship between channels and NAS/SAN adoption at their own peril. What's more, it is unwise to anger channel partners who possess the engineering talent and the knowledge of their products and access to the vendor's own parts suppliers, and who therefore have the ability to manufacture competitive products at reduced cost to the consumer.

A further gap in the wisdom of the vendors who "disrespected" their channel partners was evidenced by subsequent failure of direct sales in many cases. Direct sales forces are an expense that many vendors have found themselves unable to bear as the economy worsened. It was not unusual, therefore, to see renewed cultivation of channel partnerships in 2002, following massive layoffs of direct sales staff that the vendors could no longer afford to keep on the payroll.

In the final analysis, economic downturns have the twin effect of 1) bringing to the surface increased price sensitivity among consumers (and, in many cases, an increased willingness to try comparable products that cost less money) and 2) opening the door for plug and pin compatible products that provide viable alternatives for the established vendor's products. Some of the brand names of today, including EMC and parts of Hitachi Data Systems, were born of just such economic downturns in the 1980s that increased the vulnerability of dominant vendor IBM to competitive products.

The bottom line is that economic challenge breeds competition and competition, in turn , fuels consumer perceptions of commoditization by providing numerous "generic" alternatives for expensive "brand-name" technologies.



The Holy Grail of Network Storage Management
The Holy Grail of Network Storage Management
ISBN: 0130284165
EAN: 2147483647
Year: 2003
Pages: 96

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