Monday, January 28, 2008
Mendoza, president of NetApp, said that improving sales through IBM (NYSE:IBM) is not affecting NetApp's solution providers. "IBM is very focused on what I call white space, which is where we are not covered," Mendoza said. "For example, state and local government, and retail. So it's largely incremental for us. They've done an excellent job of minimizing conflicts by focusing on where we are not."
It was interesting to learn last week that IBM is now going to be selling the NetApp line through distribution . After only a year, it seems that the IBM / NetApp relationship may be starting to cause some conflicts.
IBM, Armonk, N.Y., has signed agreements with Ingram Micro, Santa Ana, Calif.; Tech Data, Clearwater, Fla.; and Synnex, Fremont, Calif. under which the three will distribute the N Series products and work with IBM to recruit new solution providers to the line.
IBM's N Series includes nearly the entire hardware appliance line of NAS and SAN appliances from Network Appliance (NSDQ:NTAP), Sunnyvale, Calif.
Brian McCarthy, president and owner of Sencilo Solutions, a Lake Mary, Fla.-based NetApp solution provider, is not as excited about the new distribution agreement. NetApp has a history of helping IBM and its solution providers win deals that could have gone to NetApp partners instead, McCarthy said. "NetApp allows their reps to partner with IBM," he said. "When I go to register a deal, NetApp may decline it. And if I ask why, they might say they're working the deal with IBM."
IBM's new distribution deal will only hurt NetApp partners, McCarthy said. "IBM has been very predatory with pricing," he said.
Is IBM concentrating on 'white space' or their bottom line? Either way, it seems that IBM must have one great discount from NetApp to be able to purchase equipment from NetApp, and still have margin enough to pay distributors, while leaving enough profit for the integrators to make some money as they compete directly with NetApp's own resellers who have to purchase from Arrow and Avnet. It seems like a very convoluted go to market strategy to me. But it may not make a difference in a few years to the resellers, as this comment made by NetApp's CEO in Feb,2007 seems to be coming true.
Solution providers who do not take advantage of NetApp run the risk of being left behind as that company continues to grow rapidly, Warmenhoven said. "If that doesn't happen, you will be a less significant partner of ours," he said last week. "Let's scale together.
Is IBM's move going to provide an incentive to NetApp's resellers to start scaling up or down in 2008? In a tightening economy will small business people who run many integrators invest in staff training in the NetApp product line? What is the long term reseller strategy of NetApp?
Tuesday, January 22, 2008
Yahoo Inc. expects to cut staff in some areas under a drive to rein in its budget and focus its activities, people familiar with the matter said. The exact extent of any future layoffs at the Sunnyvale, Calif., Internet company isn't known, though one person familiar with the matter estimated they potentially may affect hundreds of workers. Yahoo expects to finish 2008 with about the same number of workers as it had at the end of 2007 while planning to add staff in some areas deemed priorities, these people said. The company, which has experienced executive turnover and increased competition for selling online advertisements in recent years, now has about 14,000 employees.
According to the Blog of James Burke of NetApp, Yahoo email is run on NetApp filers. As a major customer of NetApp, Yahoo probably gets pretty good prices from NetApp for service, support and systems. But they may be able to save some employees jobs by tightening their budget on NetApp upgrades and software support costs. Are they going to look at cutting their support costs for their filers? I'll bet their stockholders would appreciate it.
Losing technical support and institutional knowledge is hard on companies and their customers, because when systems go down, often the guy who knows how to fix things is no longer employed. Personally, I have visited many companies over the last few years that have been able to save technical staff positions by cutting their hardware support costs. When budgets get tight are you going to save people and cut back on support costs? Yahoo in the past has not been interested in the options we have provided them. When they contacted me in the past it was to purchase their excess NetApp inventory, not to cut their support costs.
Businesses have to adapt to the economic environment that they are operating in and faced with. Turbulent times are going to see businesses evolve in new ways to meet the challenges they face. I expect to see a lot more companies contact Zerowait as they look to adapt to these business conditions. Like many business people I have 20/20 hindsight, but my forecasting abilities are often myopic. In today's environment, I will be cautious with our budgets as we grow in 2008.
Friday, January 18, 2008
IBM has purchased IV , an Israeli company that specializes in high availability storage, for about $300 Million. With ownership of this company, it is safe to assume that IBM will compensate its sales representatives better to sell their own product, than the products they resell for NetApp as their margin will be better. As the phrase goes: Salespeople are coin operated. Although this may take a while to gel, expect IBM’s move to cost NetApp sales in the Enterprise glass house where NetApp has relied on IBM’s gravitas as a major lead generator. In 2005 SearchStorage noted that there was no time limit on the IBM - NetApp deal.
“Interestingly, there is no time limit on the OEM deal with NetApp, which raises the question of how long IBM might be willing to sell someone else's product?”
Sun and NetApp are fighting over patents and it looks like it will be a drawn out affair. This continues to worry IT decision makers: Where should they put their recession limited strategic storage investment dollars? NetApp’s lawsuit may have quite effectively legitimized ZFS in the marketplace. As Chris Mellor has pointed out
“Sun will have its ZFS market profile raised massively and have the opportunity to shift a boatload of ZFS-using Sun storage gear. Schwartz sees this as a win-win situation. Sun cannot back down from NetApp's initial lawsuit and he's going to ride the wild surf of the free software movement to help wash away what he and Sun perceive to be NetApp's castle built on sand.
NetApp on the other hand will be under attack. Competitors will comprehensively rubbish its position and sow fear, uncertainty and doubt among its customers using the questions above and others.”
HP and Dell are also aiming for NetApp’s market position.
According Internet news HP has stated,
"We're making deeper investments in our core technologies, and we plan to aggressively compete against NetApp," he added.
When the PolyServe acquisition was first announced, industry observers noted that the technology buy-up would not only make HP a competitor to NetApp but also to heavyweights such as EMS and Hitachi Data Systems.
Even if HP just takes a few percentage points of business from NetApp by bundling storage with their servers it will have an enormous effect on NetApp, by breaking their grip on the market.
Adding to sales and marketing problems is Dell’s purchase of Equallogic. NetApp’s former partner is now a direct competitor. According to SearchStorage.com
“EqualLogic has always considered midrange storage titans EMC, Hewlett-Packard and Network Appliance its main competition.”
.Assuming that Dell packages storage and servers in some of their data center deals in the next few quarters, you can assume there will be an erosion of NetApp’s market share by a few points.
NetApp’s customers are looking for affordable alternatives and there are a lot of them out there now. As Robin Harris says:
“NetApp appears to be the most vulnerable. Their largest customers are ripe for conversion to a more scalable architecture and lower costs. No matter how much NetApp discounts, their costs are higher than commodity hardware. They can fight for a while, but not forever. They have to be competitive and their big customers have to believe they will be competitive.”
And on top of all of this one of NetApp’s old friends, Greg Reyes, has just been sentenced to jail for stock option backdating.
What a way to start a new year.
Sunday, January 13, 2008
2008 is shaping up to be an unusual year. It has been many years since our economy has faced the problems caused by a credit crunch and uncertain monetary policy simultaneously. When combined, these issues may reveal some unintended consequences of the way High Availability storage manufacturers have approached the marketplace over the past few years. Whether we are in a recession or going into a recession, macro economic concerns are causing corporations to cut back on their IT expenses, or at least look into how they can contain costs if they need to in the next few months.
Over the last few days I have been visiting several customers with large storage infrastructures who are concerned by the costs of maintenance and upgrades from the manufacturer of their storage infrastructure. On one visit this week, the storage manager asked me “How can you provide service and support for half of what NetApp charges?" I thought about his question, and answered “Perhaps you should ask your NetApp sales representative how come they charge twice what Zerowait charges?" This customer wants to make certain that his staff can maintain their high availability service levels, while living within the rules imposed by a cost conservation 2008 budget.
The fundamental requirement of a storage infrastructure is that it must provide high availability at a reasonable cost. In good times, the costs of acquisition and maintenance could be justified and amortized over a 2 year or 3 year time frame. When the business cycle turns toward hard times, can you stretch your infrastructure to work for a 4, 5 or 6 year time frame?
If we are in a business downturn, customers may need to partner with vendors that help them maintain their equipment for the long term to conserve their precious financial resources. A company that is basing its revenues on selling new products and 'sizzle' may have trouble providing affordable service and support for the long term. The service and support business niche that companies like Zerowait inhabit, is diametrically opposed to the new product sales business. Unit sales businesses often compensate sales representatives with a commission on unit sales goals. Often service and support companies pay compensation on meeting service targets, which are longer term. This longer term view aligns a service company’s interest with companies that look to squeeze strategic value out of their IT infrastructures. Companies pinched by the business cycle in 2008 may look for vendors with a long term business model.
Commission salesman and marketing pros are often looking for quick solutions and catch phrases to find ‘the low hanging fruit’. Tough times will require studious reviews of technical documents and rethinking of storage capacites, ROI time frames, and costs structures. This is hard work. My conclusion after visiting many clients last week is that there are many companies that are staffed with innovative employees, with drive and creativity, which will be able to maintain and grow their storage resources in today’s tumultuous business economy.
Wednesday, January 02, 2008
The message is getting out! Because Zerowait is a specialist in NetApp equipment, with long-term knowledge of the products, we can help customers when they want to maximize their storage without breaking their budget. Regularly, we hear from NetApp users that the OEM, instead of simply selling them a few drives, will only provide them a quote for a new shelf and drives. The problem is that this often causes the filer to exceed its published maximum raw capacity. In other words, this is a subtle way for the OEM to force customers to upgrade their head unit when all they need is some drives.
Zerowait’s customers have learned that we are here to provide them with long term service and support of their storage infrastructures, not to force them to move on up to the latest models. We help them understand what they are being quoted by the manufacturer and recommend ways for them to get the most out of their NetApp storage investment. Often, the OEM sales force recommends a solution that is a long-term, cost-effective solution, but sometimes there are alternatives available simply by redeploying the customer’s own equipment. This is where Zerowait can save the customer a lot of money while maintaining the high availability and reliability they need. As we enter another tumultuous year of expanding storage requirements—and shrinking maintenance and management budgets—customers need to be aware of all of their viable alternatives for storage.