How to survive (and thrive) despite sinking server sales

New approach needed

Software may be eating the world, but it still needs to run somewhere, and for most people, that somewhere is a server. But as we’ve seen, there are now more options than ever for running that software, be it in public cloud, private cloud, on-site servers, converged or hyperconverged.

“The need of the customer has changed,” says Paul Vinton, CEO of South Australian reseller Vintek. “There’s been a radical shift in the way customers engage with technology.”

Customers are far better informed of the options available to them and IT departments are now far more business oriented than they were even five years ago. They are more likely to concentrate on the overall use-case and workload than the detailed specifications of individual servers. The consumerisation of IT has encouraged people to give up on
knowing the minutiae of everything themselves, and to rely on partners to deal with those aspects for them.

Vinton is enthusiastic about the prospects for resellers in this environment. “That’s the wonderful thing about technology: it changes all the time,” he says. “I think there’s never been a better time or more opportunity than there is today.”

Vinton also has some advice for resellers with existing businesses who are worried about the future. 

“Be prepared to engage with vendors and get their ideas,” he says. 

“Most partners are lazy and they go to market with what they already do because it’s too much work to change it.”

As servers become a commodity, there isn’t a lot of value in being a simple reseller unless you achieve a certain amount of scale. Lower margins will drive sellers to aim for higher volumes to maintain absolute profits, which leads to consolidation to achieve economies of scale. We’re already seeing that with the Dell-EMC merger, and with HPE acquiring SimpliVity and Nimble Storage. Nutanix is cosied up with Dell EMC, and Lenovo is partnered with Nutanix as well as DataCore.

Unless you’re in a position to go after substantial market share as a dedicated server slinger, the only other choice is to diversify and add other hardware and services to your playbook. Services are by far the most profitable, but selling them requires very different skills to simple hardware order-taking.

There is plenty of opportunity for partners who understand the options available beyond simple server specifications and hardware compatibility lists. 

Resellers who can understand their customers’ business and work with vendors to find the right combination of hardware, software, and commercial terms that best suit customer needs are the ones that will thrive.

The vendors and distributors understand that this is what the future looks like, and that their own future depends on their channel partners’ ability to make the necessary changes. They are only too happy to help willing partners make the transition, so if you’re not already talking to them about what’s available, now would be a great time to start.  

HOW THE SERVER SLINGERS ARE RESPONDING

Dell EMC

Dell, of course, famously merged with EMC in one of the largest ever tech deals. The US$60 billion deal closed in September 2016, and the combined Dell Technologies entity now controls the complex EMC Federation, which includes Dell EMC, VMware, RSA and Pivotal.

Dell has been a strong partner of Nutanix since 2014, though Nutanix has since diversified its server partnerships, cosying up to Lenovo in late 2015.

HPE

In an almost mirror image, HP split itself in half in 2015, creating HP Inc for the consumer products part of the business, – PCs and printers, essentially – and Hewlett Packard Enterprise (HPE) for the enterprise parts – servers, storage, networking and services. Just last year, HPE split out the services part of the business to concentrate on infrastructure.

Lenovo

Lenovo acquired IBM’s PC business in 2005 and bought IBM’s Intel-based server business in 2014. In late 2015, Lenovo announced a ‘strategic partnership’ with Nutanix to develop a new line of Lenovo branded appliances running Nutanix software.

Lenovo also partners with DataCore to produce
x86 based storage systems using DataCore’s software-
defined storage software.

Cisco

Cisco has already more-or-less committed to using Springpath as its HCI offering, but hasn’t actually acquired the company, despite it being essentially dedicated to UCS. 

Nutanix also claims to run on UCS, but it’s not officially supported by Cisco, so the HCI vision from Cisco is anything but clear at this stage.