Sold on storage

Resellers are getting in on the act and moving into storage. The passage to becoming a professional storage provider is not a smooth ride and there are many challenges to face. But for those who put in the effort and make the transition, the revenues are more than worthwhile.

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By  Alex Malouf Published  June 29, 2004

First steps|~|storage-1-Pinnacle.gif|~| “Our distributor assists us in getting certified. In turn we will reduce our reliance on our distributor and should be able to do our own technical support and sales,” explains George Thomas, MD for Pinnacle Computer Systems|~|Storage is becoming a market of ‘haves’ and ‘have nots’, of resellers who lack experience and training, and integrators who have become experts in providing storage solutions. As data requirements grow, businesses are leaning more towards buying from integrators selling complete storage solutions rather than opting for stand-alone hardware like servers or tape drives. Integrators such as Dubai-based Gulf Computers have watched how customers have become more knowledgeable about storage and are choosing more than just a box. Sandeep Bhattacharya, general manager at Gulf Computers, explains: “Customers are becoming much more mature, and are pushing the market for solutions such as NAS and SAN by choosing to consolidate their systems. This trend has evolved over the years, through the proliferation of technology available, and demand for professional services in the market is only going to grow.” Resellers are finding themselves being pressured to sell storage by the push and pull of vendors and clients. Vendors tell the channel of all the benefits in the storage market, convincing channel partners by mentioning high margins. At the same time vendors are rolling out marketing campaigns to educate end-users about their storage solutions and these existing customer bases then approach their resellers and ask them to provide storage solutions. But becoming an integrator is a long and arduous task, not an overnight transformation. The most pressing need that those moving into storage face is to build up a skills base, both for sales and technical staff. Training in the storage market is an on-going process and can take years. Resellers are relying on vendors and value added distributors (VAD) for training to make the integrator grade. Pinnacle Computer Systems, a Dubai reseller, took the plunge over a year ago and is well on the way to becoming a fully-fledged integrator. “We are still going through that transition and receiving pre-sales and implementation training,” says George Thomas, managing director at Pinnacle Computer Systems. “Our distributor assists us in getting certified, which makes customers aware that we are experienced in storage. In turn we will reduce our reliance on our distributor and should be able to do our own technical support and sales, so the next time we go out for a sale it will be straightforward.” The second tier should not forget about the costs of training and education. While long-term revenues are healthy, the initial outlay can be a heavy burden to bear for resellers who lack the resources of those higher up the channel. Vendors and VADs need to step in, cover the initial losses, and provide reseller with the leg-up that they need to operate as true storage integrators. StorIT is one such VAD and provides partners with everything they need to establish themselves and build revenues. “We extend our resources to partners because we know that they cannot immediately start to sell in the market when they lack technical skills and have not yet undergone internal training,” says Sudhakar Suryanarayan, business development manager at StorIT. “So what we do is tell them, ‘wait for a few orders, and once you are confident of sustaining this storage business then start with services’. Until that time the partner can use StorIT’s experienced technical staff and then develop its own when they have enough clients.” Resellers moving into storage have found distributor and vendor support invaluable. Omnix International, an IT solution provider with locations across the Middle East, diversified into storage integration a few years ago and relied on technical assistance and sales support from distributor StorIT to gain experience and know-how. “StorIT showed us the fastest track to get into storage solutions and technology”, says G.J. Singh, sales manager at Omnix International. “They have been very helpful in getting us started and shortening our time-to-market period by bringing our sales people up to speed with the products, the technology and the solutions we offer to clients. As we progress we are getting our engineers trained with them so we will be able to do our own design and implementation. This is what we are building towards and StorIT has been instrumental in the process.” ||**||Switching to services|~|storage-2-Tony-Alam.gif|~|“The market is facing cut-throat competition when it comes to margins,” says Tony Alam, MD at CNS. “Today customers are always keen on working with companies that provides them with value-add."|~|As more resellers offer storage solutions, competition will intensify resulting in margin erosion. As this trend continues, what distinguishes one competitor from another is the level of service they provide to the client, and not simply the cost of the deal. “The market is facing cut-throat competition when it comes to margins,” says Tony Alam, managing director at CNS, a storage integrator with GCC operations. “Today customers are always keen on working with companies that provides them with value-add, not simply cheaper prices. The relationship doesn’t end by completing the storage implementation. For a lot of the customers, that’s where the relationship actually starts.” The future lies in services, where long-term relationships can deliver a constant source of revenue. Bhattacharya at Gulf Computers, explains: “Margins are disappearing . For services they are healthy, at around 15% to 25%, but for hardware and software margins are flat to shrinking — between 10% to 15% for hardware and higher for software. We offer the customer appealing service agreements renewable on an annual basis.” A first sale must be implemented efficiently and rapidly to convince the customer that he is receiving a professional job. This should then be followed up by increasing contact with the customer who will develop confidence and trust in the advice of the integrator and will then opt for a service package. “Customers have a high demand for and awareness of the technology,” adds Bhattacharya. “They need a great deal of support from storage experts developed through long-term relationships.” Resellers have to move away from a single deal mentality or else they will lose out on service contracts and not see their storage business mature. Storage investors often face a struggle when it comes to convincing customers that services are a necessity. Many businesses, especially in the SMB sector, believe that they only need the hardware. “We want to reduce the percentage of hardware we sell but that is the bread and butter from the customer’s perspective,” says Thomas at Pinnacle Computer Systems. “Hardware is what they want to see — servers and tape drives — and not services. Although we want to increase services, we can’t get away from selling hardware.” If businesses do see the need for services, they are often unwilling to pay for it. A pervasive feeling among customers is that the engineer comes free with the server. Dubai-based CAD Gulf, an experienced integrator, finds that education works best with businesses that are initially unwilling to pay for services. “We try to make customers understand that we are in IT and we know our job,” says Vivian Madtha, CAD Gulf business development manager. “We tell them: ‘You pay a little bit more because you are assured that what is done is done properly.’ I am not asking them to hire the engineer but they have to pay more to utilise his services. Sometimes it works, sometimes not. As it is Dubai, we have to discount. We can end up doing the hardware sale and get nothing for the engineer. But more businesses are seeing the importance of services and paying for them.” Changing customers’ mentality is key to moving away from simply providing a box and software in a single deal to signing a contract for services over a fixed duration. But this can be a difficult prospect, as Madtha at CAD Gulf points out: “The Middle East is a peculiar market, unlike Europe or the US. In this region businesses look to tomorrow, and do not think about a few years down the line. In most cases when I go to a client, I meet the financial officer first. I tell him about storage and clusters, and he only asks me about the price as he doesn’t have a clue about storage. This scenario is changing and clients do now bring in IT professionals as consultants. But I have to put it to them, ‘what is the value of your data?’, and ask them why they cannot spend thousands of Dirhams to protect information worth countless times what they will spend.” Poor business planning and explosive data growth greatly affects the storage market. Companies have not been aware of how much their data needs rise, and many now find that their current infrastructure is not sufficient. When businesses come to upgrade, the size and cost of the task shocks them. “Most businesses are not aware of how much data growth they actually experience and this requires additional budget and money to be allocated from their side,” notes Ammar Ayyesh, senior product manager at International Turnkey Systems (ITS), a solutions provider in the Middle East and Africa. “Businesses also do not understand that they will have to get more people in to manage multiple databases and applications, servers and platforms. They end up in a vicious circle of trying to maintain a complex environment. They lack awareness. Most organisations do not know that there are solutions to handle their data problems.” Past experience is a major issue for businesses when it comes to storage. Those who have had previous problems are much more willing to plan and commit resources to establishing a storage network. Bahraini storage provider National Computer Services has benefited from how past events have shaped companies knowledge. Mona Rajab, general manager, says: “Several institutions were targeted for their data during the first Gulf war and now you see that many institutions are happy and willing to accept storage solutions because of past issues.” ||**||Vendor assistance|~|storage-3-AHR.gif|~|"If you sell a small solution to 200 customers, then 200 customers will all become very important customers to you and you want to make sure you have the proper support staff to address these customers,” says Allen Renno, GM at MATCO|~|While there is a temptation to go for every deal in the market and rapidly increase customer numbers, integrators should be wary of not spreading themselves too thinly. Increasing customer numbers drives revenues, but it increases costs even more — a concern for those who are looking at the SMB sector. Allen Renno, general manager at MATCO, a storage provider in Saudi Arabia, explains the predicament: “I would like to get into the SMB area now, but we fall into the same category as global organisations. If you sell a small solution to 200 customers, then 200 customers will all become very important customers to you and you want to make sure you have the proper support staff on the floor to address these customers and help them out.” The SMB market is a difficult area for storage. There are plenty of SMB customers in the Middle East but their needs are small in comparison to enterprise-size businesses. Costs and knowledge are significant barriers for SMB sales and integrators have had to develop techniques to gain share in the SMB market. Some have introduced hourly service charging while others go for the initial sale and then push for opportunities later on. “Customers still need hardware and so if we switch to services, there is a chance we will lose that customer,” says Thomas at Pinnacle Computer Systems. “We follow the hardware sales up at a later date and identify additional services and software that are required by the customer.” Vendors have responded to the SMB dilemma by offering affordable solutions for SMB needs. “What vendors have realised is that the SMB segment is asking for storage,” says StorIT’s Suryanarayan. “SMBs have been asking for storage but prices for large solutions do not suit their budget. So vendors have brought in products to target the SMBs that are more solution and services oriented than just servers. So even the SMB space will shift from hardware to services.” What would help the channel is to see local case studies and learn from them. Channel partners need vendors to provide case studies on how solutions have been sold in the past, to give both the reseller and the customer confidence that the system will work. “Sharing actual customer implementations vis-à-vis the business requirements, examples of which solutions are right for certain problems, is a very significant issue for us and for our customers,” explains Bhattacharya at Gulf Computers. “Vendors need to pass on this information more frequently so that current and future customers will say, ‘This has been done, so there is no risk in going down this particular route’.” Looking to the future, storage opportunities are aplenty. There are emerging markets for the channel to move into such as Iraq and Libya. The uptake of mobile computing should provide integrators with a plentiful supply of business as customers look to consolidate storage systems across multiple devices. “There are lots of pockets of information on different devices which need to be backed up and protected,” comments Bhattacharya. “Take an executive laptop for example. These laptops have a 20Gb or 40Gb hard drive, probably privy to a lot of sensitive information such as proposals, documents and data. It normally doesn’t get downloaded into the central company server or is not backed up or even both. Awareness of these issues will fuel a huge boom in storage.” Vendors should be praised for responding to their partners and providing scalable solutions that channel partners find much easier to sell and to implement. There is more interoperability between products, allowing integrators to find the best solution for their customers instead of being forced to sell only one vendor’s offerings. This in turn has driven prices down and customers are able to upgrade with a minimum of fuss. Storage players need to realise that while margins are good now, they will decline as more resellers enter the market. Their costs will rise as they have to pay for more training and certification. Storage is a long-term commitment, not a market for resellers to jump in and out of. Selling the long-term benefits of storage solutions to clients may provide the breakthrough that many need to switch from selling servers to providing services. This is the challenge facing both integrators and resellers, but there are plenty of channel players ready to take up the mantle. ||**||

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