Outrage is building in NetApp's reseller channel as NetApp continues to redefine resellers' best accounts in an effort to build their own representatives' sales figures. NetApp acts towards resellers as if they are a missionary sales force working to generate leads and create house accounts for NetApp's direct representatives, instead of facilitating the reseller's long term revenue growth. Resellers' sales forces need to make a living and provide long term value to customers. However, NetApp seems to care more about unit sales and providing sales incentives to promote unit sales than long term service to resellers and their end users.
One reseller was telling me recently that NetApp would not let them quote Software Support only and that they must include hardware support also. I replied that many resellers and NetApp itself provides 'SSP' only quotes. I showed him the evidence and he chuckled at recent comments by NetApp that say they are trying to build a new relationships with their channel partners. Resellers know that NetApp seems to change its reseller stance with the tides.
"The most critical factor for channel success is to have executive support and sponsorship. For example, what we are achieving at Network Appliance is changing the company's business model, leveraging the channel to move the top line. This requires a change in attitude, affects our corporate culture and requires new processes that will lead to success with our channel partners."
"... the company is implementing a new pricing model, including lower list prices for commodity products and an across-the-board increase in partner discounts. Our discounts are off gross revenue to encourage partners to not discount off list price," he said. "We feel they can achieve [discounts] in excess of 20 percent if they don't drive the street prices down."
"We always said it was a matter of time, not when we would do it..."
" NetApp's goals for bringing its appliances through distribution are two-fold: let the distributors take care of administrative details so NetApp can focus on its core business, and use the distributors to expand its business to even more solution providers. Our channel sales are growing three times the rate of the rest of the company," he said. "We can't scale without partners."
"Network Appliance (NSDQ:NTAP) is preparing to offer solution providers customer leads for the first time. Starting Oct. 1, NetApp will provide leads to its channel partners."... "It's the first time NetApp has ever done a lead-generation campaign with the channel," he said. "I'm not sure if I should be proud of this, or embarrassed."
"The VIP reseller program and initiatives are an important component of the Network Appliance strategy to attract and retain the industry's top storage-focused resellers..."
"The StoreVault line will have only one sales channel: VARs. 'This is the only go-to-market vehicle for us,' Krishnan said. 'No CDW (NSDQ:CDWC ). No e-tailers.'”
"StoreVault, a NetApp (NASDAQ: NTAP) division, today announced it is adding CDW Corporation (NASDAQ: CDWC), a leading provider of technology products and services to business"
In a discussion I had with a NetApp direct customer a few weeks ago I was told
"Our discount structure with NetApp is 40% off Hardware and 65% off Software". This seems to be quite an aggressive pricing structure and it is more than the discount off list that many resellers seem to be getting. When a vendor provides this type of discount off their list pricing to end users it makes a mockery of the list prices that they publish. One customer recently was quoted software support by a reseller and NetApp and found the pricing difference of almost $20,000.00 . While this is significant in itself, the customer is trying to justify the pricing over a 36 month period and is concerned about the additional "tax" on his 6 TB of data. NetApp is turning into a very expensive storage platform when Software support is added in to his costs.
Robin Harris wraps up some of NetApp's problems well,
"NetApp needs to focus on their long-term marketing problem: NAS is a commodity. They’ve got 5 years to re-invent themselves for a world of Internet-scale data centers."
NetApp's sales management hierarchy historically has taken a very short term, tactical approach to working with resellers. Their pricing, discount structure and history of abrupt changes in channel marketing strategies creates an atmosphere in which resellers are disincentivised to build any strategic customer relationship. Storage is a long term investment for most customers, and creating long term relationships is very important to both resellers and end users. How can a customer make a strategic storage decision when the sales force is concentrating on monthly or quarterly numbers?