How To Sell: Storage - Part 4 - SMEs to the rescue
With corporate spending on storage slowing down, vendors are pinning their hopes for growth on SMEs. In the fourth part of the How to Sell: Storage series, Nick Booth reports on a fragmented market.
The trouble with small and medium-sized enterprises (SMEs) is they just will not play the game when it comes to buying IT.
They are far more cautious than their counterparts at the enterprise end of the market. You would think it was their own money they were spending. Mind you, sometimes it is.
This reticence could explain why the SME sector is still a relatively untapped market while IT buying at the enterprise end has levelled off.
Now everyone from IBM to Ideal is organising seminars and making co-op marketing funds available to the channel, because the SME market is where all the big vendors have pinned their hopes for growth.
The good news is that vendors desperately need to make sales to the SME market. The bad news is that SMEs are still no easier to sell to.
But there's more good news. Vendors are falling over themselves to recruit channel partners, and are offering all kinds of marketing support to help resellers get the message across to the SMEs.
However, this is still a very fractured market, and there are a lot of conflicting messages being bandied about. The more competition there is for sales, the more confusing the market looks for the end user.
Storage, we keep being told, is one of the big growth areas in IT. There are endless market projections being made by research companies forecasting the UK market to the tune of billions of pounds.
IBM in particular is enthusiastically throwing its weight behind the channel with all the missionary zeal you would expect from a recent convert.
That said, there are a lot of objections that need to be overcome before you can expect to start collecting regular commissions. "Most SMEs don't buy into technology until it's a settled-down, mature, mass-market product," says Simon Clark, senior consultant at Katapult-IT.
"Unfortunately, the storage market doesn't appear to be all that settled. Disk storage was undoubtedly mature, but with the emergence of storage area network [San] and network attached storage [Nas] we've seen storage enter a sort of second youth."
There is no end of storage vendors. One industry newsletter recently put the current number of San and Nas manufacturers at over 300. Each of these has a marketing manager who would have you believe that all SMEs are desperate to buy their solutions.
The problem with SMEs, they will tell you, is they are being swamped with data and are scared witless by the legal responsibilities around securing data.
The third bullet point on their Powerpoint presentation usually mentions the weight of responsibility to shareholders who will see the value of their investments wiped, apparently, if the IT manager doesn't invest heavily in more storage technology.
These over-dramatised depictions of SME office life don't really ring true and may be a bit off-putting to some buyers. Anyone who survived the year 2000 fiasco will recognise hype when they hear it.
Some people would argue that SMEs are more sceptical about IT, and crying wolf to them, about the need for something as seemingly mundane as storage, would be counter-productive.
On the other hand, the hard sell has worked before, and it may be a question of battering down the last bit of resistance before the SME market lowers the barriers to a mass market. So it is worth hearing the arguments.
Mike Warne, marketing manager for storage networking solutions at vendor StorageTek, claims: "SMEs have just as much responsibility to their shareholders as larger corporations to implement business solutions that provide a profitable future and growth for the company."
Information and hence storage decisions are at the heart of IT infrastructures that run the business's applications, Warne adds, and companies need to take a holistic view of data management, and storage products should be selected in the wider context of an information lifecycle management model (ILM).
This is possibly so, but even if data volumes are increasing at between 50 and 100 per cent a year, it is still going to be difficult to draw most IT buyers at SMEs into the mesmerising world of Sans and Nas. Mention ugly acronyms like ILM and most SMEs will run a mile.
The positioning of the two main types of networked storage, San and Nas, echoes the way Ethernet and Token Ring were sold to SMEs.
Token Ring was exquisitely engineered, faster and supposedly had a well-thought-out upgrade path. But it was expensive, while Ethernet was cheap and prone to errors the more work you made it perform.
These days San is expensive and has been adopted by corporates, while Nas is cheap and nasty and popular among SMEs.
Anyone who remembers how the network industry panned out will remember Ethernet sold by the bucket load, despite its limitations, especially at the SME level. By the time users needed faster speeds, the makers of Ethernet products had worked out a way to run at 100Mbps.
The same happened when gigabits of data needed to be sent. Meanwhile, nobody buys Token Ring any more.
By the same token, you would expect the cheap and nasty networking technology for storage, Nas, to evolve to meet any of its shortcomings. Meanwhile, San vendors are adamant that SMEs investing in Nas products will come unstuck.
Paul Trowbridge, who spent years at 3Com and Bay Networks arguing over standards such as Ethernet, Token Ring and ATM, still insists that San is the more sensible option for SMEs.
Then again, he is the marketing manager for San vendor Brocade, which is aggressively targeting the SME market through the channel with its Fabric Application Partner programme.
The argument against San makes two false assumptions, he insists. "It's a fallacy that Sans are expensive and Nas isn't," says Trowbridge. If that wasn't bad enough, Brocade resellers have to overcome the myth that Sans are complex and that Nas is easy. Trowbridge claims this is a tragic over-simplification.
"If we examine the costs, you can get an entry-level San for less than £20,000. When you consider that the cost of a San is typically about 20 per cent of a business's expenditure on storage systems in a year, then it can become an easy purchase to justify," he says.
"Look at the time you'll save on back-up and restore times, on the ease of matching storage resources to the applications that need it and the overall improvement in storage utilisation."
That must be a tough case to make to the average IT buyer at an SME.
How often do they quantify the expense of managing storage? And how much will they trust any figures provided by an IT salesman?
On the question of the relative complexity of Sans and Nas, it's conceivable that Sans these days are getting just as easy to install as Nas.
A modern Nas solution uses the same Fibre Channel switching solutions 'inside the box' as most leading Sans. All storage sub-systems these days are Fibre Channel-attached. The difference is that in a Nas it is hidden from view.
"A good integrator can make the same true for a San. In fact many smaller businesses may already have 'unconsciously' purchased a San as part of a storage solution," says Trowbridge.
Besides, he adds, the Token Ring/ Ethernet comparison doesn't hold any water. Token Ring was seen as a 'closed' standard, dominated by IBM, while Ethernet was supported by everyone.
Sans based on Fibre Channel are supported by every storage vendor and systems suppliers alike, and the standards are well defined and not dominated by any one vendor. More importantly, modern Nas solutions use exactly the same connectivity standards inside the box.
StorageTek would argue that Sans and Nas are irrelevant. These days the management of storage is crucial, and software functions are being separated out from the hardware. Nowadays a storage device is a dumb box and the intelligence is bought separately.
Exactly right, says Steve Cliff, sales manager at IBM's storage software division. Whereas you once had all the intelligence built into a box, such as IBM's Shark or Hitachi's Lightning, these days their features, such as caching, are being moved into the network.
So controlling all the disparate hardware devices will be the name of the game. "Virtualisation will be the big technical change," says Cliff.
He believes this will happen even at SME level. "If resellers are going to make any money they must choose between commodity products that sell in volume, which are coming down in price all the time, or sell networking solutions.
"The cost of storage devices will be negligible, but the price of managing them will escalate. So end users will be able to make economies by getting better performance and value out of those devices, and keeping management costs down," Cliff says.
It is still questionable whether SMEs need this level of complexity. Of course, it all depends on how large the SME actually is.
In IBM's definition, an SME can be a company with 999 employees, whereas if you talk to one of its distributors their idea of an SME might be a company with a headcount of 100.
Nevertheless, IBM at least is throwing its weight behind the channel. Its Total Storage San Solutions Centres may impress those who like to see the concept in action.
"The money for the reseller is all in the consultancy, rather than the hardware. They identify a problem, put a solution in place, then the software they offer is the means of management," says Cliff.
IBM currently has two firms offering solution centres: Sagitta and Techtrade. Under a new programme, it is looking to achieve a critical mass of understanding for its San products and software, with the intention of making its storage offerings a mass-market product set.
It sounds as if it will be hard to sell such seemingly high-end products to the mass market of SMEs. It all depends on the psychology of the buyer.
Some IT buyers will be flattered that their role seems to be embracing the management of such powerful looking IT systems. Others, will look at the impressive set-up and think, "Do we really need all this stuff?" It's like chartering Concorde to hop across the channel.
But this is a far too pessimistic view of the market, argues Ursula Connolly, business development manager at Sagitta, one of IBM's partners.
"Most SMEs have their data on direct-attached storage, so they come to the market with a blank piece of paper. They need not worry about early investments in Sans or Nas which are not compatible with the latest stuff coming on the market," says Connolly.
The market has moved on since then, so end users can be flattered over their wisdom in not buying into storage earlier. Remind them also that now they are buying a software solution, they are really making a saving on hardware, Connolly advises.
"Since the intelligence has moved off the hardware, you get all the features now, like the ability to do data replication, mirroring of data onto other devices, and data migration, through the software, which is a separate system you sell.
"Setting up and running that software is where you make the money, and the customer can buy the cheapest hardware, because this eventually boils down to being a node on the network," she says.
Now even IBM Tivoli, which was about as high end as you could get, is getting in on the SME action. When IBM acquired Trellisoft last August it was with a view to deploying its storage resource manager more effectively for smaller organisations.
"Tivoli Storage Manager is now at a level of price and ease of use that will suit the mass market," says Jon Cooper, marketing manager at IBM Tivoli. "At the moment there are 30 IBM Tivoli storage resellers, but there could be more in this space."
This smacks of overkill, according to Barbara Murphy, 3ware's vice president of marketing. Let's keep it simple when selling to SMEs, she advises.
You want to make money, but if you over-sell to them you are running a very short-term campaign, as they won't come back to you.
"If you consider the expensive storage solutions, they tend to be built on homogeneous technologies backed by high levels of proprietary support. This, in turn, means greater cost.
"The key to heterogeneous solutions is SMEs have the ability to shop for best-of-breed components rather than being locked to a single vendor. Homogeneous could be risky because the very nature of it means expensive development," says Murphy.
The market may have changed, then, but SMEs are not in a position to buy homogeneous, expensive, exquisitely engineered Sans. They typically run on a Fibre Channel backbone and take highly trained personnel to keep them maintained, not to mention the additional expense of the maintenance contract.
When selling to SMEs, the solution must work with existing networks and competencies within the company, while being simple to install and upgrade.
CONTACTS:
Brocade (01189) 653 419
www.brocade.co.uk
IBM (01256) 343 000
www.ibm.com
Ideal (020) 8286 5000
www.ideal.co.uk
Katapult-IT (01932) 227 982
www.katapult-it.com
Sagitta (02392) 445 000
www.sagitta-ps.com
StorageTek (01483) 737 434
www.storagetek.com
3ware
www.3ware.com
ALSO IN THIS SERIES:
How to Sell: Storage - Part 1 - Space odyssey
How to Sell: Storage - Part 2 - Management issues