Selling Servers

Vendors introduce blade technologies and fight for the best channel partners as server sales continue to climb across the region

  • E-Mail
By  Andy Tillett Published  July 24, 2005

Amazing growth |~|serverindex200.jpg|~||~|Middle East server sales are ramping up at a phenomenal rate and a bevy of major vendors are looking for a slice of the action. According to IDC, first quarter 2005 server revenues in the Middle East and Africa (MEA) rocketed 15.4% year-on-year to US$288m. The bulk of these sales remain in the volume market dominated by industry standard x86 units, but top vendors are already promoting the latest server technologies including hot hardware built on dual core processors and blade form factors. These solutions are now targeted at the SMB sector and specific partner programmes promoting these cutting edge technologies are opening up new opportunities for resellers that really want to add value. The humble server has become an integral part of an efficient IT infrastructure. The rise in the use of e-mail, the growth of website hosting needs and increased demand for data processing power have pushed servers high up on the IT shopping list. Simultaneously, server prices have fallen making them an affordable option — even for SMBs. “Two years ago a server cost US$5,000 to US$7,000. Now it is much more cost-effective and also much simpler. Every company has its own website and its own e-mail and so it needs servers to manage these,” says Nimer Al Attal, managing director at DTK Computer Middle East. The server vendor landscape is highly consolidated with A-brand vendors such as HP, Dell, Fujitsu-Siemens, IBM and Sun dominating the market and accounting for over 90% of unit sales in the Middle East according to channel sources. Of these heavyweights, HP continues to stand out in the Middle East with more than 50% market share. The enterprise account market has been buying servers for a long time and many of these companies now have predictable upgrade and replacement cycles for their hardware. Many enterprises also have long-standing relationships with specific vendors and channel partners. Dislodging an incumbent supplier in the enterprise space is a tough task, so it is little wonder that many vendors and partners are prepared to invest resources to chase new market opportunities. In the world of server sales, one sector stands out: SMBs ||**||Channel programme lowdown |~|newD'Souza.gif|~|Ryan D’Souza, product manager, industry standard servers technology solutions group at HP|~|To introduce server technologies into this fragmented customer landscape, vendors need skilled partners that can sell and install servers. Getting partners on board means setting up a dedicated channel programme that not only encourages partners to learn new skills, but also shows them the benefits they will see from both a top line and bottom line perspective. Margin is king and server vendors need to look beyond pure technology and show partners the opportunity for value-add that their channel programme actually offers HP has pushed hard into the channel with its ProLiant industry standard server range. With approximately 70% of ProLiant business now in the SMB sector and hundreds of partners selling the servers in the Middle East, the HP channel programme has clearly hit the right buttons with resellers from around the region. At this point, it is important to draw a distinction between the volume and value channel that exists for server sales. At the low-end of the market, servers have commoditised to such an extent that they are now an ‘out-of-the-box’ ready-to-go solution for smaller customers. This simplicity lends itself to a standard two-tier distribution model. However, as the needs of the customers become more complex so the opportunity for skilled channel partners to add value grows. As well as its two-tier channel, HP also works closely with sales and services partners (SSPs) that have a direct relationship with HP and can choose to purchase either from HP or from the distribution channel. SSP partners are split into two tiers, basic and select. Select partners have more qualified personnel than basic partners, and enjoy higher rebates and more support from HP. Becoming an SSP requires a real commitment from resellers in terms of building up internal sales and technical skills. Once on board the SSP programme, resellers are then able to enrol on a product specific ProLiant server programme, allowing them to specialise in selling a certain type of server technology such as blade solutions. Ryan D’Souza, product manager, industry standard servers technology solutions group at HP, explains: “We are working on programmes to develop our partners to sell specific solutions sets. It makes sense to make sure the channel is aligned with the developments in technology and I am putting together training programmes and offers that our partners can then take to their customers to encourage them to go with the best technology they can afford.” A typical ProLiant training programme from HP includes personnel training, customer case studies, marketing templates and solutions guides. HP also gives marketing assistance with activities such as roadshows to raise customer awareness. When a partner has gained knowledge of a specific product set, HP claims that this is transferable across different vertical markets. ||**||Priming partners|~|Bouchrara,-Habib2002.jpg|~|Habib Bouchrara, VP international sales region at Fujitsu-Siemens|~|Rival server vendor Fujitsu-Siemens operates a similar channel policy through its Primergy partner programme, which now contains 120 members across the Middle East. The Primergy programme has two levels: one that give partners a basic knowledge of its server platform and a second that aligns partners with specific vertical markets rather than a specific product set. Fujitsu-Siemens claims that its Middle East server sales are outstripping the overall market growth rate, citing 20% year-on-year growth in the region. The vendor also marks out the SMB sector as a growth hotspot and is putting in the necessary resources to capitalise on the opportunity that exists. The message to partners is simple: skill up and start adding value to build the margins that your business deserves. Fujitsu Siemens claims that adding value is the difference between making 10% and 40% in margins, but this message may not be getting through in the Middle East. “I don’t see that much initiative from partners in terms of creating value add,” says Habib Bouchrara, VP international sales region at Fujitsu-Siemens. “In Western countries partners are getting more specialised in verticals to take full advantage of end-to-end solutions. We are still in training mode here. If a set of partners will invest seriously in value add properties they can make a real difference in this market.” Pushing the volume channel to add value and encouraging the existing corporate resellers to focus on vertical solutions is a common theme among the big boys of the server space. However, there is a third way of boosting server sales according to the team at Big Blue. For IBM, volume and value channel partners are now complemented by a channel of independent software vendors (ISVs). IBM appoints ISVs to write software for its specific server technologies and these then sell IBM servers integrated with their own software. “We look for very wide and effective coverage,” says Wael Abdoush, manager at IBM systems group, Middle East and Pakistan. “The channel concept has been evolving over the last few years and we have strong alliances with ISVs. We believe they are a key channel that we are using to maximum potential. In a lot of cases the entry point is the software, so our best channel to market is through ISVs.” While the A-brands have placed big channel bets in terms of structured partner programmes for server sales, they are not the only players chasing resellers in the Middle East. Vendors sitting just below the big five — keen to point out that low-end servers have now commoditised to such an extent that there is no real difference between products — are also courting the channel. “We have to play it on a different level, we have to indicate to customers that what is being offered from other vendors is in no way different to what we are offering,” says Samer Atassi, sales manager at DTK computer. “You have to make customers aware of the management issues surrounding servers. Channel partners have a very big role to play in that. They have to show customers how our servers fit into their setup.” At present, there is a fundamental shift occurring in the server sector. While the box itself is becoming a standard commodity, the notion of selling a server solution that comprises hardware, software and services is strongly promoted to ensure that the potential for value-add is not totally eroded. “Margin is directly equated to value,” says Hein Van Der Merwe, client solutions manager at Sun Microsystems UAE. “Any partner that deals with Sun has to go through a training programme and the main reason for that is the margin issue. We want our partners to provide added value to end users — this is where the margin for everyone comes from in the end.” ||**||Bringing in Blades |~|Hein-Vandermerwe2002.jpg|~|Hein Van Der Merwe, client solutions manager at Sun Microsystems UAE|~|The introduction of blade servers in the Middle East market is one way that major vendors are looking to maintain the channel’s value-add capability. Previously classed as an enterprise solution, the price points attached to blade servers have now reached a level where they are also a viable option for SMB customers to consider as well. Major vendors reckon that blade server solutions are now cost-effective for even relatively small IT infrastructure implementations. The total cost of ownership (TCO) argument, which looks at server lifespan, up-front cost and maintenance contracts, has become much more compelling for blade server solutions. “When you look at the advantages, blades let you manage your IT assets in a more refined way, especially in a data critical environment. Indirectly there are a lot of advantages for the customer: high manageability, better rack management and low power consumption. We can also do remote deployment far faster — it is now a matter of minutes,” says Rajesh Deepchandani, product marketing manager enterprise products at Fujitsu-Siemens. While servers typically have a five-year lifespan according to major vendors, the rapid pace of technological evolution coupled with falling price points, means that customers are showing a greater propensity to upgrade and replace systems within that timeframe. However, new technologies are not adopted instantaneously and some vendors reckon that the hype around blade servers is not yet producing the level of sales that some vendors had expected in this region. “The interest is there — every request for purchase considers blades, but the actual adoption rate is a lot slower and the number of customers is low in the Middle East,” claims Jim McMahon, enterprise business manager at Dell Middle East. “People act like it is a new technology, when it’s the same server technology just in a different form factor.” McMahon is not alone in his belief that blades are not quite cutting it yet in the Middle East market. For many, the real sales action remains focused on the standard server boxes that still account for the vast bulk of units sold. “There is new technology such as blades, but what percentage of businesses would benefit from having these technologies? We are capable of making them but we haven’t phased them in, as we don’t think the market is ready. I think that in the future this technology will come, but DTK doesn’t want to introduce servers just to say we have them. It has to be put in use, it is a learning process from partners and the customers and it takes time with them both,” says Atassi at DTK. ||**||The chip factor|~|Uli-Dxb2002.jpg|~|Dr. Ulrich Knechtel, enterprise programme manager, Europe Middle East and Africa (EMEA) at AMD|~|If form factor alone does not convince SMBs to invest in new servers, vendors may have to look at other technological advances. The introduction of servers based on dual core processors could be the sales pitch that maintains sales volume in the Middle East. AMD’s dual core processors have been well received and are already carried in servers produced by HP, IBM, Fujitsu-Siemens and Sun Microsystems. The dual core dream is currently making its presence felt in the enterprise server sale space. “In servers and workstations we target the enterprise, and this is where we have a good presence. At present the majority of our sales are to high-end users, such as in the oil and gas sector,” says Dr. Ulrich Knechtel, enterprise programme manager, Europe Middle East and Africa (EMEA) at AMD. Intel is also now in the dual core world, but understands that the real sales volume continues to exist at the low end of the market and focuses its resources accordingly. “At the very high end of the scale, we see competition there with AMD. But it’s difficult to measure. We sell most of our servers in the Middle East at the low-end. There is a lot of volume growth from the low to mid range, rather than the high end,” says Ferhad Patel, marketing development manager Middle East, Turkey and Africa at Intel. The move towards server solutions in the midmarket has been kick-started by vendors keen to broaden their business outside of core enterprise accounts. They are keen to recruit more partners and offer strong programmes and incentives, while also creating demand-pull from the customer side. The SMB market will eventually follows the enterprise in terms of technology and this means the adoption of new technologies like blades. Resellers now have a golden opportunity to get involved with server programmes while vendors are willing to invest so much in their partners. Demand for servers will continue to accelerate across the Middle East and the race is on for major vendors attempting to build channels capable of selling to the fragmented SMB customer space. Today’s SMBs could well be the enterprise accounts of tomorrow and building relationships with these customers early is seen by many as a strategic advantage. Channel partners that can reach this market and demonstrate solution-selling skills and post-sales service capabilities are in a strong position to make the most of vendors’ desire to get them on board. ||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code