Tuesday, June 10, 2014

Autumn for big storage vendors

One of the unintended consequences of virtualization is that it frees the consumer from the lock in of the hardware manufacturer.  At first this was just a problem for the folks making servers as applications and hardware were migrated to the web for efficiencies of scale.  As time went on the virtualization of ecommerce payment, CRM, and small business accounting all proved that small business could compete in larger markets by streamlining the costs of IT and its associated staff.  The online companies that could provide these services used Virtual Machines built on high quality commodity hardware that they assembled themselves and deployed quickly. Now storage is moving to the same commoditized, highly competitive structure.

It often seems like a contradiction at first when I talk to folks about how market competition increases quality while reducing costs, but it is true. Over time profitable companies will seek to increase quality while reducing costs, because customers don’t like the hassles of shoddy quality.  For the manufacturer, the service call to repair something costs more than it would to build in quality, so successful companies build quality in as a way of reducing their costs of service. Their customers that do need a service call receive a better experience since the best service technicians are available to assist, instead of handling everyday failures which don’t happen in a quality product.

Recently I read an article in the Wall Street Journal about how reliable cars are today as compared to those built 20 years ago. This is partly due to technology within the vehicles, but it also has a lot to do with the CAD engineering tools and materials science that has been applied to the manufacturing process.  Cars are so reliable now that the Journal article points out that the dealers are using the recall process to bring customers back in to their showrooms. This points out that the automobile dealers and manufacturers have learned what service companies have know for a long time; quality service builds brand loyalty and brings back satisfied customers to your store.

Zerowait has grown into an international company because we have focused on building quality service relationships with our customers. Consumers can buy from numerous vendors on the Web, but over time they learn that buying a commodity product from the cheapest vendor on the web may not provide the best value.  As labor costs go up the value of the service vendor goes up because a good technician can debug a problem quickly and efficiently.

The big storage vendors are in for a difficult few years, because in order to maintain their high quality service engineers they need to sell highly marked up technology to their customers who are already buying commoditized hardware for their virtualized servers and using open source software solutions.  Low priced commodity storage solutions are becoming more available, so it will be very hard to compete at their current high price point level.  Will they be able to compete in a deflationary marketplace?