Change your storage mind-set

No matter which way you look at it, the storage infrastructure market is one of the fastest growing areas within the ICT industry.

Enterprise organisations and SMBs have an ever-increasing hunger for data and as a result, the serviceable market for storage is exploding.

In fact, the amount of storage capacity shipping each year in Australia is going up by between 40 and 50 percent, according to researcher IDC.

Recent Frost and Sullivan research commissioned by Hitachi Data Systems (HDS) also found that the storage hardware and services market in Australia would grow 16.8 percent year-on-year over the next five years, and about $724 million worth of storage products and services would be sold here in 2006.

At the same time as the storage industry is seeing growth, it is also going through a period of massive consolidation.

Big storage giants such as EMC are in a buying frenzy as they look to fill gaps in their storage portfolios and broaden their offerings beyond just storage hardware alone.

HDS, IBM, Symantec/Veritas, Sun and Hewlett-Packard are also fighting the battle for storage supremacy at all levels, touting their abilities to handle data throughout the organisation with a focus on what is known as information lifecycle management (ILM).

Just as these storage giants work through new ways to describe and market their wares to the broad marketplace, local storage resellers and system integrators are faced with some great challenges of their own.

Storage hardware is now a commodity and channel players are being forced to rethink their business models away from product alone to more a consultative sell.

This trend has in some ways resulted in some storage integrators having to be acquired to survive - or drop off the radar altogether.

In the latter half of 2004, storage reseller and service provider SecureData Group ran into financial difficulties and was acquired by Dimension Data.

In May this year, storage integrator Enstor tumbled into administration, with its remains subsequently snapped up by Storage Dynamics, a company intent on building up a storage consultancy practice.

A the time, the company's CEO Tim Davoren, a former Enstor senior account rep, said the company would use 'Coherence' a storage system middleware product developed by Enstor as a platform to launch its consultancy operation. He agreed that the days of the storage reseller selling products were numbered.

Sell them nothing

Taking the storage consulting route can most definitely pay off, according to Max Goldsmith, director at storage and system integrator XSI.

"We're doing a lot of consulting with large firms where we don't sell them anything - we just advise them," he says.

According to Goldsmith, the integrator is now advising customers on whether they have the right products, how they can tier storage and which pieces of software will help them manage their storage infrastructure.

"They ask us, 'Come and tell us if what we are doing is right or wrong'. There's a bundle of options out there," Goldsmith says.

Many customers, according to Goldsmith, do not look outside a single storage supplier and there are often pieces around a storage infrastructure that the customer has bought that don't make sense.

"They're making life hard for themselves," he says. "We [XSI] know everybody's products. We've got 65 guys that do four sites per day. There's an enormous pool of knowledge here."

Goldsmith adds that the company would like to do more consulting. Today, around 60 percent of its storage sales revenue is derived from product sales with the remaining from services. "There's a higher profit margin from the consulting side," he says.

He warns that if storage integrators find themselves in a situation where they are selling the same thing as the competition, they will not make money.

"If you can't design a unique solution, you're gone. I think the customers now with the narrowing of the field and enormous acquisitions, customers feel they are getting a fairly limited stream of advice.

"They don't want to hear one story from one person - they want to hear about the multiple products that are available. We are saying 'There are five products in the market segment, we'll work out what's most appropriate for you'," he says.

Dez Blanchfield, senior executive at storage distributor Cradle Technologies, agrees that a lot of smaller resellers are "learning the hard way" when it comes to defining their place in the storage market.

"If they don't become the source of authoritative information, they're going to go bust very quickly," he says.

Blanchfield says that as an integrator, if you can help companies manage their data, you are going to be a partner that they can call on. "Anyone can sell them disk space, that's a mug's game.

We've been trying to re-educate traditional resellers that this is the way it's going. There are a lot of companies that are willing to spend thousands on that consultation," he says. He adds that an average reseller will make 10 times more money consulting than on the hardware sale.

Integrators that are doing it tough are doing the same old thing every year, selling their customers more capacity and bigger tape drives, says Clive Gold, director of product marketing at EMC. "This adds absolutely no value to the business."

Channel players that have taken a step back and question why a customer wants more disk drives for instance, are winning by taking control of the storage mess, Gold says.

Resellers need to identify the root cause of an organisation's storage problem. "You can [store] as much as you want, that's not the issue anymore."

EMC this year trained resellers on "data profiling", giving them access to a software tool that allows them to give customers an understanding of what lies inside their storage networks.

"The customer suddenly has an understanding of what they have and as an IT guy, I can show people where the money is going."

Vendors and integrators that employ the 'I can sell you this stuff cheaper' mentality are losing. "[Users] pay between five and 25 times the amount they pay to buy it, to look after it," he says.

Similarly, Mark Heers, director of marketing and alliances at Network Appliance, says that if an integrator or reseller relegates itself as a straight storage provider, that effectively turns their offering into a commodity.

"The customer will ring three or four different companies and get the best price. The resellers that have the most success solve the customer problem beyond more storage and will put in an archival solution if the customer is struggling with email," Heers says.

"Storage becomes one component and you can roll in software and services. The reseller that can reuse their IP are in a good position because that gives them a cost advantage in effect. In Australia, we have about eight or 10 partners, the lion's share of them do that. We keen for our partners to do the services."

Bert Noah, director of Acer's Enterprise Systems Group, says the vendor recognises that the technology is a commodity, but the knowledge and process is not.

Like EMC's Gold, he says that storage problems are due to an issue of managing storage at the customer site rather than throwing a bucket of disk at the problem.

"If the end user does not train at least two of his staff on all the management of storage, we refuse to supply. We train our end users for free," Noah says.