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.Anyone in the storage market already has a consulting business, according to Graham Penn, associate vice-president, Asia-Pacific storage at EMC.

"In some cases, they're undervaluing the consulting part and putting too much value in the hardware and doing themselves a disservice," he says.

"Integrators have knowledge outside the normal user's capability to ascertain what they need."

Still, Penn believes that there is a general "reluctance" among the user community to value the services that are being offered by the storage integrator.

"The user's expectations and the real price of the service - very often there's a difference of opinion on what that is worth," he says.

Obviously, a good integrator can save the customer a lot of money on storage in the long run, he says. "Mostly what we find in this region is that if people have a storage problem their first reaction is to buy more hardware.

Until we recognise the value in savings operational costs, as opposed to the hardware costs, there is going to be pressure on integrators to survive," Penn says.

Many users have not measured all the storage and management costs they are incurring at the moment. "If you don't know what your operational costs are and you never measured them, you can't possibly decide whether you should buy more hardware or not," he says.

Companies that have employed integrators to work that out for them are getting a good return on their hardware investments and are saving money, he says.

Tim Smith, marketing manager at Hitachi Data Systems in Australia and New Zealand, agrees that while there is a big opportunity for resellers and integrators in the storage market, they need provide a "value proposition to their customers or they won't be able to justify organisations buying from them.

"We've created a complete marketing department for our channel partners to leverage and have a complete team [28 staff] in place to make an initiative happen for the reseller. We are constantly providing our partners with opportunities for them to grow their business," he says.

Too much on their plate

Storage integrator disasters such as the demise of Enstor were caused by companies wanting to do too much and compete with the top tier suppliers, according to Acer's Noah.

"It is really sad that those companies are disappearing - they went under because they were trying to do too much and compete with the big boys, and you can't do that," he says.

Storage knowledge is fairly scarce, he says, and Acer gives resellers access to one of its technical staff members for three days of training and does not charge a penny, Noah claims.

"We are seeing more and more resellers starting to bite. We only started with a handful in every city; now we have close to 40 resellers that are reasonable active, they can talk the talk and walk the walk," he says.

High cost of certification

Storage resellers often complain about the high cost of training. Storage giant EMC recently launched an updated channel program that gives partners access to all nine levels of certification for $9000 per person each year.

At the time, David Henderson, general manager of channels at EMC, said: "I challenge any vendor to demonstrate a more profitable program".

The reality for many partners is somewhat different. "It [training] is a pain," says XSI's Max Goldsmith. He did recognise, however, that vendors are trying to do something about rectifying the high cost of training.

Still, he says that certification is a difficult process. "We go through certification, spend a fortune, and 12 months later, they [vendors] come back and say that it's no longer necessary," he says.

Hitachi Data Systems offers certification for a basic storage course that lets channel partners learn the basics of storage. "It's a black art to the channel," says HDS' Tim Smith.

Partners that want to become Certified Solution Providers and have the capability to provide all the services involved in a storage implementation will be charged between $3000 and $4000 for the course, Smith says.

Rob Stirling, executive director at the Storage Networking Industry Association (SNIA), says that what storage integrators need are generalised storage accreditation courses that are set by and the SNIA and recognised by the storage vendors.

The SNIA offers storage exams around technology manufactured by vendors like Cisco and EMC.

"A reseller can have his technical people accredited to an international standard, not just a local vendor standard. They know that the basics have been done and the qualifications go up to a high level," Stirling says.

"We set the exam and set the curriculum. At the basic levels, technicians should be able to pass that. We give them recognised training materials or they do a course at a training provider. There comes a point in time when the material gets so complex and hard that they have to do training.

"The point we make is that you don't have to be trained six times, you only have to be trained once. That's the problem with the vendors. If someone changes a product there are things you're going to have to know."