Monday, October 22, 2007

IBM and Storage.... there seems to be a long term strategy brewing...

It looks like they are investing quite heavily in their own solutions, I wonder how long they will resell NetApp gear?

See here....
"In his session, Andy Monshaw, General Manager for IBM System Storage, estimated that IBM's storage effort to be a $6 billion plus business with some 6000 people spread across 170 countries. IBM invests heavily in storage with more than $500 million in R&D annually that last year resulted in hundreds of patents. IBM views the evolution of storage through a lens that sees the time prior to 2000 as the time of invention, the time between 2001 and 2004 as the time of integration, and 2005 and beyond as the time of innovation. The company plans to leverage differentiation comes through virtualization, archiving, and security/encryption (which were three of the topics in the deep dives earlier), and also wants to expand solutions through 'green' storage, the greater use of digital media, and expanded efforts in the SMB space. IBM views itself as having marketplace momentum in storage hardware, tape, external disk, and storage software according to market share numbers that it hopes to continue to grow."

It looks like IBM's storage business is investing almost 1/4 of NetApp's total revenue in storage R&D, that leads me to wonder how NetApp can compete with this investment in basic storage research by what they claim to be one of their largest customers. It also has me wondering how long IBM will be selling NetApp gear, they seem to be gearing up to use their 6000 people to sell their own solution, which would be more profitable for them. How significant a share of NetApp's business does IBM represent, and can they afford to lose that portion of the business? You can be certain that IBM's storage sales force will sell the gear that they are compensated the most on, that is the one certainty in all of this.

If I were in IBM's shoes I would compensate my sales force more and better to sell my own gear which has higher gross margins for the stockholders.

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