Networking Outlook: "Signs Point To Yes"
According to a Channel Group Profitability Study conducted earlier this year, top-line sales of VoIP products and services increased by more than 30 percent year-over-year, essentially doubling the 18 percent pace of sales growth seen the year before. Networked storage deals also grew a handsome 52 percent to an average of $51,200, as sales cycles tied to storage decreased about 25 percent. Though not quite as dramatic, 2007 also saw some increase in the level of customer interest in mobile technology solutions as well.
Compare these gains with the hard-hit networking infrastructure market, where the size of the average networking deal and year-over-year sales growth both toppled about 30 percent. Yet, despite these paltry statistics surrounding networking infrastructure sales, solution providers continue to carve out a fair share of work in the way of smaller installations and tweaking existing infrastructures. Vendors and resellers report that network simplification and notable effort to save on energy costs are also spurring some sales.
"Solutions focused on greater utilization and simplified management will continue to thrive in a slower market," predicted Hayes Drumwright, president of reseller Trace/3, who noted increased interest in network management and other products, including server virtualization and data de-duplication technology, which pares back the level of redundant information stored on a system.
Indeed, customers uninterested in adding infrastructure must still step up network capabilities to match business demands, said C.C. Fridlin, director of product management for infrastructure management vendor Avocent. "Business demands are not letting up. IT staffs are going to be challenged to deliver those services without adding infrastructure," he said.
Network virtualization is now a popular avenue for stepping up network capabilities. The technology allows IT staffs to split bandwidth into different usable channels and assign traffic and devices as needed, many vendors and resellers say.
"Customers are facing poor asset utilization, complex storage management, a lack of business agility and a rise in total cost of ownership. Channel partners can address these challenges with storage virtualization technology that simplifies management and reduces cost, as well as replaces the cumbersome management procedures of conventional arrays," said Leonard Iventosch, vice president of global channels for storage vendor Network Appliance.
Enterprise customers also want to ensure that equipment already in place is well-utilized. "Better network visibility and the ability to quickly isolate network-related issues that could be application-specific are the business drivers we are seeing," said Paul Langway, principal and co-owner at solution provider PVP Sales, Randolph, N.J. Langway noted increased interest in Network Address Translation (NAT) technology. NAT solutions help corporate IT staffs to spread traffic over multiple hosts using a single IP address.
Along with better network management, corporate buyers are looking hard at solutions that promise to cut back on energy bills.
"Power consumption has been one of this year's 'hot-button' issues, with enterprises requesting specific details regarding how a network vendor can assist them in reducing their energy costs," said Paul Hooper, chief marketing officer at vendor Extreme Networks. Hooper said Extreme has become incredibly focused on making its various lines of switches more energy-efficient.
Networking hardware that cuts back on power bills is not the only option attracting customers interested in environmentally friendly solutions that save money. Network storage solution companies are pitching tactics such as thin provisioning--solutions that allow a company to allocate only storage capacity the customer will use immediately--as a way to cut back.
"Customers save on energy consumption. They also save on data center space consumption," said Mike Beach, vice president of sales operations at Compellent, a network storage vendor that partners extensively with Cisco Systems and others.
Data centers are not the only areas customers want to make more efficient. Enterprises are also taking a hard look at networking options associated with disaster recovery and business continuity.
"Our consultants are being asked to help with building disaster-recovery solutions for our customers. We are seeing more and more people seeking help to attain lower operating costs in terms of storage automation and solutions that require less power consumption," said Sanity Solutions CEO Jason Cherveny, a Compellent partner.
Without question, storage solution sales and customer interest remain high.
"Cost-effective and easy-to-manage solutions are a big hit right now. Companies are also being forced to retain more data for longer periods of time, which is really driving this market," noted David Hiechel, president of Eagle Software, a reseller of EqualLogic solutions. Hiechel noted particular growth in storage solutions to accommodate medical-imaging applications, which tend to usurp major amounts of network storage space rather quickly.
As storage requirements soar, corporate customers are eager to dump the use of tape as a primary means of backup and recovery, said Bud Stoddard, president of data protection vendor AmeriVault. "The main drivers we see continue to evolve around the shortcomings of tape. Frustrated small and midsize businesses are looking for alternatives," he said, advising channel partners to shore up knowledge and skills required to move customers away from tape.
"The channel can white-label our backup service and immediately provide disciplined backup and off-site storage to their clients while they maintain full control over access, maintenance and online restore functions. There is no need to require clients to swap tapes and physically move data off-site," Stoddard counseled.
Next: VoIP: A Leap Of Faith VoIP: A LEAP OF FAITH
Enterprises are moving not only from tape. Many are contemplating moving from legacy infrastructures to wireless and IP-based architectures. While momentum in both markets is healthy, customers are playing it safe and exploring options before making the leap, said Scott Sobers, program director of the Service Provider Industry at IBM's Tivoli Software.
"Next-generation services like VoIP are more complex to support. Carriers are acutely aware of how easy it is to lose customers with increased competition and low exit barriers, if calls are dropped or quality is poor," Sobers said. "Carriers continue to see the need to drive down operating costs and find new sources of revenue. Those needs are driving their behavior, and, therefore, many service providers are looking at service quality as a competitive differentiator and an area where they need to invest," he continued.
While the need to proceed with caution is undisputed, customers are definitely moving forward on VoIP, said Paul Lopez, general manager of marketing and services for NEC Unified Solutions. "We believe IP communications and mobility are the major drivers for the short term, and new applications and software-based voice architectures will create new opportunities in the long term," he said. Lopez cited unified messaging, presence-based solutions, mobility and Instant Messenger as applications that are now gaining ground.
The push for unified communications has strongly materialized in several verticals, including health care, education, retail, hospitality and financial markets, said Doug Michaelides, vice president for global marketing at communications vendor Mitel. "In particular, we are seeing growing demand for hosted and managed services that offer an alternative model to outright system purchases, especially for SMBs," he said.
In fact, many companies have been poised for some time to make a move to hosted IP options, noted Greg Royal, founder and CTO of vendor Cistera Networks. "I think in some ways the market has been holding its breath in terms of deploying hosted business VoIP, and waiting for a more compelling proposition than just feature parity and low calling minutes. Now that there is real integration between IP communications and the contact center, quality assurance, compliance systems and event notification, the big 'ah-ha' moment has come to this market," he said.
Enterprise Wireless Local Area Network (WLAN) adoption is also on the rise, many in the industry agreed. Major manufacturer Motorola expects this market to soon hit $2 billion.
"Enterprise WLAN is moving beyond small deployments in conference rooms to enterprisewide deployments running business-critical applications," said Manish Rai, Motorola director of product marketing, who added that RFID tagging, the use of Wi-Fi for asset tracking, and voice and video over WLAN are just a few applications driving this market.
WLAN vendor Extricom has seen a 25 percent jump in customer interest in wireless adoption, a demand that has spurred resellers to scramble for wireless expertise.
"For too long, solution providers have found WLAN a difficult and discouraging technology to propose and deploy. The demand is there, but the confidence and profitability of wireless projects has been hindered by this complexity," noted David Confalonieri, vice president of marketing at Extricom.
Indeed, resellers are wise to get up to speed on wireless and other emerging technologies, because sales of traditional networking products and services may continue at a slower pace--not so for newer networking applications, said Joe Rymsza, president of mobile applications provider Vettro. "Lead quality through our channels is accelerating on a quarter-over-quarter basis. More important has been the lead quality, meaning decision time lines, budgets and commitment has improved," he said.
With those leads coming down the pike, most agreed that channel partners need to anticipate the busier areas of network sales and shore up staffs accordingly.