Sunday, January 13, 2008

The Economy and storage cost control

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.

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