Zzzzz: Storage VARs Asleep At The Services Switch12:00 AM EST Mon. Apr. 16, 2007
Broadleaf Services is living proof that offering storage services is a smart bet for solution providers. Last year, this small provider of data storage, business continuity and disaster recovery services grew its total revenue to the tune of 150 percent thanks to an increasing number of distress calls from customers drowning in data.
That's good news for James Tenner, president and CEO of Burlington, Mass.-based Broadleaf. Tenner says the company's good fortune rides on offering services for a range of storage disciplines, with implementation and data migration services happening to be in highest demand. "We do the design and engineering for SANs and help customers implement [them]," he says. "Many rely on us to come up with data migration strategies."
It seems a no-brainer, but storage VARs that add services to their businesses pave an avenue for growth and recurring revenue beyond that achieved through point product sales alone. Yet not nearly enough are seizing the moment, according to the results of the recent VARBusiness State of Technology Survey of 250 resellers.
Missing the Boat
According to the survey, storage solution providers of all sizes generated an average of only 18 percent of total revenue from storage-related solutions and services in 2006.
So, what gives? For many, the investment in training and hiring additional staff can be a deal-breaker. And then there's vendor enablement, which many VARs cite as lacking. Even storage vendors themselves acknowledge that they haven't sufficiently enabled VARs to make the transition to services. That's changing however, as some say they're retooling their partner programs to better enable solution providers to get into the higher-value services game.
NEXT: Lending a hand.
Hitachi Data Systems, for example, this month is rolling out the "2.0" version of its certified partner program--aimed at enabling storage resellers to sell more services along with its products, says Karen Sigman, vice president of global channels for HDS. The program includes training and certification, as well as sales aids such as design and operational guides, best practices tips, pricing models and test plans, although partners are not required to use the methodologies provided.
"This is all about helping partners develop a repeatable services model," Sigman says. "To be competitive in the midmarket, partners need to be able to sell complete solutions." Partners can also apply their MDFs toward training, Sigman says.
HDS will provide free implementation support via phone for certified partners and post-implementation support for partners that have a maintenance and support contract with their customers. Certifications and training tracks are based on three solution disciplines: basic storage management, data replication and advanced storage management.
Besides its Certified Solution Provider track, HDS also has two other tiers for service partners--a basic level for partners that perform installation and configuration, and a high-level track for authorized service providers that tend to be large VARs with their own call centers and trained service professionals and sell their own installation and maintenance services. The tiers are designed to help partners make revenue along the way as they gain new certifications and competencies.
Network Appliance, too, will roll out an initiative, called the Professional Services partner program. While the storage vendor already provides its own services for resale through partners, this would help partners develop their own professional service businesses and sell under their own brand, says Rick Deturck, senior director of services marketing at NetApp. The program also will include a training curriculum for certification, and the vendor will provide tools such as service methodologies and statement-of-work contract templates.
HDS and NetApp say they hope such programs will help them gain loyalty among their VARs. "If they build their own services, they have the opportunity to double the margins they would receive as opposed to selling NetApp services," Deturck says.
NEXT: Managing conflict.
Although VARs found such program enhancements encouraging, they said that vendors need to do more to back up that enablement out in the field.
"Vendors often present two different faces to their channel partners: On a corporate level, they talk about enabling partners to deliver services, and they set off on a path to enable us to do [that]," says Scott Robinson, CTO of Datalink, Chanhassen, Minn. "On the other side is their field interaction and how their people get compensated. They need to work more on that."
Meanwhile, smaller storage vendors that don't have large direct services businesses maintain that they're more suited to provide the support resellers need, as they aren't competing with them.
"As a vendor, you can't offer competing professional services if you're following a true channel-centric business model," says Bob Skelley, vice president of channel development at EqualLogic, which makes an iSCSI storage solution for IP SAN environments. Before joining EqualLogic in 2005, Skelley was director of U.S. distribution and VAR channels at Microsoft.
EqualLogic, Nashua, N.H., now has 250 active channel partners and does more than 90 percent of its business through the channel, Skelley says. In the VARBusiness survey, the company was the most frequently mentioned alternative storage hardware vendor in response to a question asking which storage hardware vendor is best able to deliver needed products and technologies.
Despite their differences in how to motivate partners, vendors agree it's critical for resellers to make that transition into offering higher-value services beyond just installation and break-fix.
"Low-value services--configuration, installation and performance tuning--may be necessary for some storage products, but they don't win the VAR any loyalty with their customers," Skelley says. "When a VAR can offer a customer higher-value services around improving data protection, disaster recovery or virtualized infrastructure, customers are willing to pay for the VAR's expertise and time because there's tangible customer value, such as business continuity or cost savings."
Netsolus Consulting, for example, is selling off-site replication-based disaster recovery services built on top of EqualLogic's PS Series storage arrays.
"Instead of selling people two arrays, we can get them in with a single SAN, then leverage the SAN we have," says Bryan Ballard, CIO of Netsolus. "It provides a nice recurring revenue."
VARs responding to the survey cited pricing and integration difficulties as the biggest obstacles to selling storage products and services by VARs. Training and certification expense, poor vendor support and lack of standards were also cited as major pain points.
But despite those obstacles, half of all VARs are planning to add storage products and solutions to their line cards in the next 12 months, with demand especially hot among midsize VARs, of which nearly three-quarters are planning to add new offerings, the survey found. Product quality and reliability were top features that drove decisions among SMB resellers adopting new technologies, followed by price, while larger resellers placed more of a premium on a product's ease of integration.
Regulatory requirements were cited as the largest driver for storage solutions by large VARs, while midsize and smaller VARs cited expanding infrastructures and loss prevention.
While traditional areas such as backup and recovery technologies remained the top storage products resellers of all sizes plan to sell in the coming year, fewer than half of smaller resellers said they plan to sell NAS, RAID and DAS products, and fewer than one-quarter plan to sell more advanced solutions. Midsize and large VARs plan more of a diverse product mix in the coming year.
One technology on many VARs' radar right now is deduplication, better known as dedup. Last year, EMC drew attention to the market when it acquired Avamar Technologies for $165 million. NetApp, too, will soon enter the dedup game and also offer its product through IBM.
Ultimately, storage is a hot area for a vast majority of well-rounded VARs. But based on the survey results, it's still underexploited in a number of areas. Newer technologies, along with lucrative service offerings, are out there for the taking.